Subway CEO says don't worry about Obamacare

He argues that while it will make his industry less competitive, at least all operators are facing the same problem.

By Jonathan Berr Feb 27, 2013 4:09PM
A Subway shop in New York City (© Ben Hider/Getty Images)Subway CEO Fred DeLuca, who founded the sandwich chain 47 years ago at the age of 17, has urged his franchisees not to "worry about" Obamacare, according to Nation's Restaurant News, a trade publication.

"It’s going to affect the food business and it’s going to make it less competitive, compared to eating at home, for instance," he said. "But probably every operator will have to deal with this. It will be an extra cost on the average hour that you have to pay for. And probably people will raise their prices and pass it on to the consumer."

Dunkin' Brands (DNKN) and other companies that depend on part-time workers are lobbying the Obama administration to relax requirements that they provide health insurance for people who work as little as 30 hours per week. Employers with 50 or more workers are required to offer what's known as "minimum essential" health insurance. Critics say the mandate would create onerous financial burdens on many businesses.

For Subway, Obamacare would apply to franchisees with multiple locations becaues the typical store has about 12 employees. The closely held Milton, Conn., company is taking a more measured tone toward Obamacare than others in the restaurant industry with good reason. As NBC News recently noted, Papa John's (PZZA), Denny's (DENN) and Applebee all saw their reputations suffer among consumers because of critical comments their executives made about the Affordable Care Act.

Speaking later on CNBC, Deluca said Obamacare was the "biggest concern of our franchiees because they don't have enough information" on its potential impact. Their unease understandable. A company spokesperson could not be immediately reached for further comment.

As my colleague Aimee Picchi recently noted, employers pay about $4,664 to insure a single worker and $11,329 for a family on a yearly basis, which is far more expensive than the $2,000 per worker penalty companies face for not following Obamacare starting next year. Many critics say business will find it financially sensible to pay the penalties rather than provide health insurance.

According to data from the Congressional Budget Office cited by the Heritage Foundation, a conservative think tank, Obamacare will result in 6 million fewer Americans enrolling in employer coverage by 2016. However, the nonpartisan FactCheck.org disputes the idea that Obamacare is a "job killer."

"As we’ve said before (a few times), experts project that the law will cause a small loss of low-wage jobs -- and also some gains in better-paid jobs in the health care and insurance industries," FactCheck says. "Furthermore, some small businesses with fewer than 25 employees are already getting tax credits under the new law to help defray the cost of providing worker coverage."

The debate over Obamcare's impact on the economy won't be over for a long time.

--Jonathan Berr doesn't own shares of the listed stocks. Follow him on Twitter @jdberr.
666Comments
Feb 28, 2013 7:14PM
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The three happiest countries in the world are Denmark, Norway, & Sweden. But, oh my gosh, they're socialistic, how scary is that? Healthcare from birth to death. The person that has to charge $.25 more for a donut should get out of the business, my family owned a bakery. We didn't have over 50 employees though and I doubt the donut man has either. If there were more family wage jobs perhaps business wouldn't have to be involved in health care, but as long as people shop at Wal-Mart, the largest private employer with the most employees on public assistance, what choice is there? As long as there are employee contractors businesses can get around paying for benefits. 132 business related lobbyists for every single legislator, what chance does the working person have?  
Feb 28, 2013 1:29PM
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No problem. Subway can just tweak another half inch off their 'foot longs' to recoup the cost..
Feb 28, 2013 1:15PM
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Personally the health care law is great though has flaws.. if the govt is going to mandate everyone to be insured with health coverage then tin return must put caps on what insurance can charge for premiums and also medical facilities must also have their price capped and in uniform set prices.. for example if  person comes with no coverage has to pay up to 4 times fo what insurance and other coverages pay including medicare.  Ever since Obamacare has been inacted it also gave teh insurance company the green light to raise their premiums to an exorbant amount which makes it impossible for most americans to afford. I would be willing topay a  higher income tax to recieve a free govt national health coverage rather then pay 3 or 4 times the premium I was paying a few  years ago.

all hospitals and medical doctors must  make their prices equal to all patients regardless fo coverage plans like teh uninsured are often over charged 3 to 4 times of those who have coverage and with those who have coverage it also depends on which plan you have that dictates how much or how less a person has to pay out of pocket

But overall I do believe this law is a good law dispite flaws that still need to be worked out. to make fair and equal to all person of america.

 

Feb 28, 2013 1:13PM
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i am a small employer. i believe my company employs 13. two people opted out of the health insurance and are paid the difference. our montly premium is about 6,000 or 72,000 per annum. premiums have increased about 11% for the last 10 years. on average, our claims made are about 60 percent of premiums. unfortunately, as a small business we get no consideration for being responsible. our p and c claims are virtually nil over the last decade.
Feb 28, 2013 1:10PM
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I see a new trend coming.  Everyone in the fast food business will be limited to 30 hours with more people hired to cover the difference in hours, who will also be limited to 30 hours.  If you have 50 workers working 38 hours each equals 1900 hours.  Those 50 workers will each be cut back to 29.9 hours for a total of 1495 hours.  Leaving a difference of 405 hours.  So the company has to hire 14 more workers all of which will be kept to 29.9 hours.  Look at the plus side shorter work week and unemployment will go down.  Of course none of these workers will have Obama care or be able to pay for a policy of their own.  Struggling workers could work two of these 30 hour a week jobs at the same time. 
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The Health care Insurance companies take in $1 and spend only 60 cents paying health care costs

 

the rest 40 cents out of each $1 made goes to pay their executives $300,000,000 a year each.

 

Huge profit margins in the insurance companies.

 

Same is true of the hospitals and doctors offices.

 

Only about 5 cents of health care dollars spent really go to treatment of sick people the rest is taken as profit by executives paying themselves $300,000,000 a year.

Feb 28, 2013 12:52PM
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I'm sorry, people here in the US are simply stupid when it comes to informing themselves before voting for something or someone who's feeding him/her lies and ocean beaches in Nevada...  I've seen when government control over health care does to an entire country, and let me tell you, it's not pretty...  I have the luxury of leaving the U.S.A. or pay for extra health care, but many Americans will be stuck with a Health Care plan they cannot use, because of lack of resources, mainly doctors.  It's going to be a B . I . T . C . H, but all the media propaganda and inept politicians sold it to a majority of Americans who don't know they head from their ****!   I love this country as my own, but I've seen things in the last two decades that truly saddens me, what the hell happened to this beautiful country, where is common sense anymore?  :(
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fast food workers are not real human beings due to the fact everyone thinks they deserve to be pay mininum wage with no benefits.

 

They might as well be economic slaves.

 

Gee people think over 80 percent of the new jobs last year were these types of minimum wage jobs.

 

Hmmm CEO's of fast food companies making millions of dollars a year due to the fact they work people for no money and give them no benefits. Capitalism at it's best.

 

What happened to making jobs for people that pay $125,000 a year with benefits ???

 

The whole fast food industry would be better off gone so people could start making more healthy food for themselves.

 

Our country is so wrong right now.

Feb 28, 2013 12:39PM
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May be insured but there will not be Dr's around to take care of you

Feb 28, 2013 12:32PM
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I am amazed at the lack of logic on this thread. I can only assume that all of you have health coverage of some type. So you have no ideal what it's like to not be able to see a doctor when you are sick, or get a flu shot prior to getting the flu. I am blessed to have excellent health care but I know that not everyone does, so if I have to pay a little more so that those without can have I don't mine. The Reps. claim to be the party of Christian beliefs but they sure do not act like it. Ask yourself WWJD. Then do likewise. Be blessed.   
Feb 28, 2013 12:16PM
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How much are you willing to pay for goods to cover employee benifits?  Would a Big Mac or a Whopped sound as good at $11.00 for a meal deal?  Or how about a large Pizza at your local shop (you pick your favorite) for $20.00.  I was in Europe durning the late 80's and early 90's with all of their health care, unemployement and other benifits...a Big Mac wasn't that bad but a Pizza Hut large pizza was $20.00 and change, a draft beer was $11.00 in places.  So do you think these shops are in for hard times or do you think they will employ more people to stay under 30 hours?  Just sayin'
Feb 28, 2013 12:07PM
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I make my own subway with better ingredients at 1/3 the cost. It gets done in 5 minutes like they do it subway. Whatever happened to simple thriftiness of him economics.
Feb 28, 2013 12:03PM
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My own idea about health care reform is as follows:

(1) I will import 100000-200000 doctors from overseas. Give them six months training

     to acclimate with out system. I will also import more than 25000 nurses. This will create

    competition and reduce cost

(2) I will want Government to pay for overseas education for doctors, nurses, dentist. We

     can have doctor trained for 50000/doctor vs. 500,000. Particularly we need to target

     black and hispanic students who have qualification but could not make it to schools for

    one or other reason.

(3) Those who cannot get insurance should be charged certain percentage of Paycheck tax

     and provided insurance for which Government will pay premium to private company or

     enroll them in medicare.

(4) End of life reform to reduce cost should be considered. We should have national dialogue

     that takes into account cost and benefit. I would like to have a steak in fancy steak house but it

     it is beyond me and I do to have it. We need national dialogue that deals with affordability issue

     even when conventional moral dictates we should meet the need.

America was founded in realism, competition, hard work and thrifty lifestyle. Those are American values. When we try to outdo Jesus, we are digging a hole for ourselves.

Feb 28, 2013 11:46AM
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Papa Johns said Obamacare was raising the price of pizza. The finincial hit was so bad they decided to give away 3 million pizzas for free. I wouldn't believe everything these greedy CEO's say. If everyone would work for $3.00/hr we could all have a job.  Prices and labor will continue to be set by competition, even if it means a little less advertising and reduced corporate profits. Healthcare spending is dropping under Obamacare and as this happens, people will have a little more money to spend at Subway.
Feb 28, 2013 10:57AM
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I hope the grunts of society are paying attention to the words spoken by the companies that praise you for your menial service.

 

"we will do everything in our power to seek out every loophole and dark corner to make absolutely sure we have no obligation to your health. Live, die or suffer, we do not care. Just don't do it on our dime"

 

Hogwash? Let's see how many American employees get 29 hour workweeks.

Feb 28, 2013 10:08AM
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If i have money [rather job] i will go to restaurant or do shopping. If no income then no

spending. Money making people will spend surely,hence economy will start rolling.that's

the simple theory of economics. You donn't need Pundits to explain that. Higher wages

means more money,hence more spending.Corporations and CEO's make more money

on huge turnover. Everybody is happy.

Feb 28, 2013 9:50AM
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The local Omaha City Council placed a 3% sales tax on dining on top of the usual 7%. Now that makes Subway less competitive as Omaha strives to become Little Detroit. So Obama is not the only one screwing the little guy.
Feb 28, 2013 9:49AM
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I am all for healthcare reform just not caring for Obamacare has it is written. The reform did not address the real problems and now there is a growing number of groups being exempted from it. If its good for one it should be good for all.  The reform did not address the causes of rising healthcare which is why we still see insurance rates increasing. My rates went up another 9% this year with no claims in the past three years. Not even a doctors visit.

 

Many of you are focused on just the fast food industry that this article refers to. Fact is though everything will go up to cover cost. Wages will remain stagnant until employers can figure out how best to pay for this and companies will run very lean. The premise behind Obamacare sounds good until you look at all the cost. No doubt the reform has some great things in it but overall the bill is a job killer.

 

The overall cost to the worker will be greater than you think. First the workers wages will remain flat. The cost of services and products will increase has employers start to pay for the requirement. This means you make the same and will be able to pay for less. I am not saying get rid of Obamacare but rather overhaul some of the provisions and go after the causes that create the increases in insurance.

Feb 28, 2013 9:22AM
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Face it - Everything's going to cost you more to pay for this. There is no free ride, except for the Demoncrap takers.
Feb 28, 2013 8:49AM
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The way I see it, is we need more jobs, good paying jobs, with benefits, like INSURANCE so people can actually go to work and get insurance.  People on minimum paying jobs or retired people don't stand a chance.  I think all of congress should have to live on minimum wages and pay for insurance out of thier pocket.  Let them live like we have to live and see how quickly they make changes.  I can't vote in a raise for me, heck, I got 26 Cents and then insurance went up, taxes went up, etc, etc...now Obama wants us to pay more out of pocket ...People its time to wake up, we are already a socialist society.  We are told what we can have, what we can do, and like it.  Did we get to vote on this Obama care?  No, I don't believe so...Wow when I turn 60 they will probably decide I don't need any more meds and my life is over...  I feel sorry for my kids and grandkids,  I can't believe our country is going down so fast.  Sad thing is, we let it, we do nothing but complain.  Won't be long and he will pass a law so he can just stay in the white house and make us a muslim nation.  If China doesn't get us first!
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