Hollek said the distinction will hurt.
"In three years, my wages will be up by 60%, but the sandwich shop next door won't have to do it yet. I'll have to charge more, and he can charge less than me," said Hollek, who has been a franchise owner since 1997.
Seattle's city council approved a timetable earlier this month for how the $15 minimum wage would be phased in from its current wage floor of $9.32. Businesses with fewer than 500 workers get until 2021 to phase it in.
Companies with 500 or more employees must begin paying $15 in 2017. Chains like Subway, McDonald's (MCD) or Burger King (BKW) are in the latter category, even if many of their restaurants are run by small business owners.
Franchisees are up in arms over this. The International Franchise Association has sued the city of Seattle, charging that the ordinance unfairly penalizes franchisees.
The average franchisee at the association employs 11 people.
Related: Subway leads fast food industry in underpaying workers
Hollek said that as a franchise owner, he has the advantage of purchasing ingredients through Subway. But he points out that he is already paying a percentage of his earnings to Subway for royalties and advertising.
Kathy Lyons, a plaintiff in the suit against Seattle, said the new plan could put her out of business. She and her husband employ 22 workers at their franchise of BrightStar Care, which supplies nurses and personal attendants for in-home patient care.
Lyon said the cost of her franchise not only eats up her margins, but that non-franchise competitors will inch her out of the market when she's paying $15 an hour and they're not.
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