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I don't think that those are the only two solutions. Off the top of my head you could

1. Reduce expenses in other areas

2. Accept the reduced profit

3. Find that the cost is offset by more productive employees either through morale increase or improved recruiting

Profit in most industries is a few percent, esp. retail/food which are often c. 1%.

The markets are highly competitive, and consumers will compare two stores: A, B and choose the cheaper.

I think there's a lot more that goes into where someone chooses to eat than price, otherwise Taco Bell would be putting Chipotle out of business.

As explained above, I don't take it as a given that increased employee wages require increased prices.

It's 15% "profit" on paper, but a franchiser is typically in debt for the first 12 years of the store before they make any "net profit".

So we're talking an industry where most of the so-called "capitalists" are in debt.

This is a hyper-competitive market place, and one play only adding on %s to their products will be a hit to their competitiveness.

They dont decided prices, the market does.