The smell of waffles wafted through the lobby at Rita's Franchise Co., the water ice and custard company headquartered in Trevose.

It was heavenly, all in the name of science, research and the development of a possible waffle cone in the company's test kitchen across the hall.

Franchise companies such as Rita's face lots of important issues, particularly in the employment realm. Jeffrey A. Moody, 56, the chief executive, encounters a more personal challenge every day on the job.

For a guy who works around water ice, custard and gelato daily, you look pretty svelte.

Oh, man, I'm fatter than I look. I've got to get out and run more.

I don't know where you get the self-restraint.

We have new franchisees, probably 200 every three weeks, doing training. When they're in, every Friday we have treats for everybody [so they practice]. I'm always over there eating stuff. When they do the fudge brownie one, I'm a sucker for that.

Were you familiar with water ice before you came to Philadelphia?

Water ice is unique to Philly and the tightly surrounding areas - even the name. Italian ice is known more broadly, but typically you buy it in a supermarket, and it's not quite the same consistency. I'd had Italian ice but I had never had water ice until I actually started looking into this company.

What do you think about raising the minimum wage? Fast food workers say they want $15 an hour.

I'm an economics major, so I'm kind of a purist in that supply and demand takes care of most everything if it's left to work right. In this business, in particular, you've got a balance between how many people want jobs and what you can afford to pay them. If wages go up, then you've got to raise the prices because the restaurant business doesn't make a ton of money. The margins aren't there.

What are typical margins?

It's a dangerous question, [depending on if] franchisees have borrowed money. Food, in most categories, is 30 plus percent. At Rita's, we're lucky because what we manufacture doesn't have protein in it. So we have a lower food cost. But the treat business doesn't have as high of a volume as McDonald's.

Any other factors?

We have smaller-footprint stores, lower rents and so forth, and they're pretty easy to operate. We can operate with two or three skilled people. They're not having to cook and create recipes. We make all the Italian ice fresh in the restaurants. There's fresh fruit added to some. Generally, after you've got labor, rent, utilities, food costs - the big-picture things - there's some accounting for variable costs. If you're down to 10 percent at the end, that's good. [Rita's] has 600 locations. All have a somewhat different profit and loss based on hours they're open.

Back to the minimum wage.

Minimum wage-wise, we don't have lots of extra room to move. Any cost goes up, if the food cost goes up - because in our case, butter fat that goes into our custard, when that goes up - then there aren't many places you can move to cover the costs. So if the minimum wage goes up, prices will go up. If prices go up too much, customers stop coming.

Then there's the question of who the employer is - the owner of the franchised restaurant, the overall company or both. It's a big issue with McDonald's.

Because of that, we purposely don't give much guidance to our franchisees on employment practices. And, frankly, some of them could [use] it, because they're not [all] sophisticated business people. They represent our brand, but they run independent businesses.

What was one lesson you had to learn the hard way?

If you've got people that are the wrong fit, you don't do anybody any favors by keeping them around. You're better off making a move quickly as opposed to waiting. I learned that the hard way because I had to fire a friend.

jvonbergen@phillynews.com

215-854-2769

@JaneVonBergen