Minimum-wage increases and employment in franchised fast-food restaurants

Card and Krueger’s (1994) result that employment is unaffected by an increase in the minimum wage in the franchised fast-food restaurant industry appears to be inconsistent with conventional economic analysis. I take a closer look at the franchised fast-food industry and argue that the presence of brand-name capital does not allow franchisees to substitute away from labor or decrease the level of services provided to customers — employment levels in franchised fast-food restaurants are closely tied to sales.