Coping with a $15 minimum wage in Seattle

June 4, 2014: 8:19 AM ET
New day in Seattle: $15 minimum wage
NEW YORK (CNNMoney)

Seattle business owners woke up Tuesday to a city set to have the highest minimum wage in the country, throwing them into uncharted territory.

The city council unanimously approved an increase to $15 an hour, which will be phased in over several years.

It's a significant hike, raising the rate more than $5 over what minimum wage workers currently make in the state of Washington. It's also well above the federal minimum wage rate of $7.25.

As other cities, states and Congress continue to fight over raising the minimum wage by even smaller amounts, Seattle business owners will already be learning how to survive while paying workers top dollar.

Washington business owner David Jones planned to open an additional location of Blazing Onion Burger in Seattle, but now he's going to wait to see how the new law plays out.

"I would love to come to Seattle, but I have to do it responsibly and wait until I have more information," Jones said.

Related: Washington state defies minimum wage logic

One point of controversy prompted the International Franchise Association to threaten to sue the city within hours of the bill's passage.

Under the law, businesses with fewer than 500 workers are given more time to comply. That would be fine with the franchisees, if they were considered one of those smaller businesses.

Instead, the law states that a business owner has to count all employees in the U.S., likely putting those affiliated with a national franchisor in the large-business category.

Franchises are independently owned even though they use a brand name, said Steve Caldeira, the IFA president. But under the new law, a Subway shop that has eight workers will have to pay a $15 wage years before a non-franchised sandwich shop with the same amount of workers.

Some small business owners are embracing the change.

"Anytime the workers in a city get a raise, they're going to have more money in their pockets, and they're going to eat more ice cream," said Molly Moon Neitzel, the owner of Molly Moon's six ice cream stores in Seattle.

Neitzel said her payroll costs will increase, but expects an increase in demand. She said she would rather her bottom line take a hit than raise prices.

That's not true for Dick's Drive-In Restaurant.

"We're all for higher wages," said Jasmine Donovan, vice president at the local burger joint that now has five Seattle locations and 200 workers.

The chain already pays starting employees $10.25 an hour, but it will have to start paying more by 2016. Plus, Donovan expects to raise the wage of other employees to preserve the existing wage structure and retain good workers.

She expects to absorb the hike by raising prices.

"Seattle wanted a higher minimum wage and hopefully our customers will be willing to pay for it in higher prices," Donovan said.

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