Ownership, Agency and Wages: An Examination of the Fast Food Industry

Abstract

This paper examines the determinants of wages and fringe benefits in the fast food industry- The focus of the paper is on exploring differences between company-owned and franchised restaurants because agency problems are likely to affect the management and operation of company-owned restaurants- Empirical analysis of two data sets finds that total labor compensation for non-management employees is slightly greater at company-owned outlets than franchisee-owned outlets, all else held constant. Furthermore, workers’ wages grow more rapidly over time at company-owned restaurants than franchisee-owned restaurants- In addition, the results suggest that wage differentials for race, sex and marital status are small in the fast food industry relative to other industries.