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 27, 2013 6:30PM
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Folks, insurance is very simple. It costs money. Who has through their employer FREE coverage? I and my wife are retired and on medicare. Our cost for medicare, supplemental and drug coverage in 2012 was $8,996.00. that amount was 21% of our total income. Eldest son, wife and 2 children with company coverage out of pocket including dental and eyewear was $12,422.00. That amount was 23% of their income. Our daughter, husband and one child with company coverage out of pocket including dental was $9,012.00. That amount was 18% of their income. Youngest son, wife and 2 children with company coverage out of pocket including dental and eyewear was $10,311.00. That was 20% of their income. Every company who provides health insurance, sick days, vacation days, education reimbursement, day care and other benefits passes these costs along to the consumer. If any of you don't know this, please be informed. Before retirement I was a cost controller for a major auto manufacturer. For your information and this is for all auto manufacturers the word profit is not a dirty word. The average markup from build to retail is pretty close to 66%. Simply put, a forty thousand dollar sticker cost a little over $13,000.00 to produce. Now do you think healthcare is expensive?
Feb 27, 2013 5:57PM
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I would rather pay a little more for my fast food than pay a lot more for my health insurance because of having to pay for those who go to the ER who are not insured.
Feb 27, 2013 5:48PM
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 The idea of everyone from CEO down to minimum wage getting good healthcare is a noble idea and worth pursuing. However, the way I see this plan working out  for the average person is as follows:

 

(1) Fast food (any minimum wage type industry) raises prices to offset cost

(2) Middle income to low income stops eating out

(3) Fast food jobs disappear due to lack of demand

(4) More people on loose jobs

 

For the upper class - nothing changes- They are not going to own a company in the US just to provide jobs. They will invest outside the US and retain their level of income. This is true from the most liberal to the most conservative, from Obama to Romney

Feb 27, 2013 5:27PM
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Liberals don't get it it is simple physics every action has a reaction .If you make companies pay more to conduct business they  will pass it on to you .simple .
Feb 27, 2013 5:31PM
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Obamacare was built on lies, false information and passed by being pushed through a democratic controlled majority.  They had a chance to do it right but failed.  Now we the taxpayer will take another

one for the unions, illegal's and brainwashed.

Feb 27, 2013 6:12PM
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In Hawaii, small businesses that employ someone for over 20 hours are required to provide healthcare...as a result.everyone has two jobs because each job only provides 19 hours of work. Thanks Democrats. 
Feb 27, 2013 6:47PM
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I wish this would go away. There are changes that need to be made to healthcare but this is not the answer.
Feb 27, 2013 4:34PM
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Anything Obama touches turns to dust!!!
Feb 27, 2013 6:23PM
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It's unfortunate that health insurance ever became a means of compensation from an employer.  We go down a slippery slope when the government goes beyond establishing minimum wage in how a company compensates its workers.  What's next?  The establishment of a maximum wage?  We wouldn't want people to get too rich, because that's unfair.  Is this the next step for America?  I worry.  What happened to the America where people pull themselves up by their bootstraps and make something of themselves?  My parents' generation would have sooner died than go on the dole.  Now we have a government that acts like a benevolent parent, shelling out allowances to the children, regardless of whether or not they did their chores.
Feb 27, 2013 5:12PM
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As the blossom of Obama care unfolds it's petals each new petal reveals gentle reminder that it is going to cost a little more here and a little more there. It is getting to the point that some are willing to pay a fine instead of buying insurance. Obama and his band of merry followers missed one little item on the cost of health care. IT COSTS TO MUCH.  Shush we would not want that tidbit of info to be common knowledge. One of my big clues was for a 24 hour hospital stay there was a $12,000 miscellaneous room charge.
Feb 27, 2013 5:00PM
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Sure companies are going to pay the $2,000 per worker penalty because it is a tax and deductible on the income taxes the company pays.
Feb 27, 2013 5:31PM
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Not to worry , they'll just make sure nobody gets more than 29.5 hrs. a week. Most every store is franchised and has less than 50 employees on average, so the operators just incorporate each store as a separate entity. There are so many ways out of having to go along with Obamacare.
Feb 27, 2013 7:22PM
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Obama, Biden, Pelosi & Reid said over and over ... Obamacare will not cost ANYONE a single dime.

 

Well .. it has cost over a trillion and still going and it hasnt even kicked in full speed yet much less all the related cost and damage it will do .... Obamacare will lead America into Failure and turns us completely into a socialist state of welfare and gov control over our entire lives

Feb 27, 2013 6:29PM
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All the more reason for health care to be completely divorced from employment. They are totally separate issues.
Feb 27, 2013 7:07PM
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if obama care is so good why doesn't he have it?
Feb 27, 2013 7:00PM
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We have to pass the before  you can see whats in.it. Yeah,  that  was pelosey, Ried, and Bo.. Like those  3,  know what s best for everyone.  
Feb 27, 2013 6:58PM
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MSN couldn't tell the truth if someone put an assault weapon to their heads. 
Feb 27, 2013 6:08PM
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No problem.  Here in the president's birth state we already have the SIX dollar 11 3/4 inch subway specials.  With Obamacare and a new minimum wage hike the "foot long" subs can be conveniently priced at an even TEN DOLLARS (plus tax)!
Feb 27, 2013 6:52PM
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Gee, you think the title to the story on MSN's homepage was a little misleading?
They made it appear that Obamacare was no problem for a CEO. When in fact, the CEO was not endorsing it at all. he was pointing to the fact that the "problem" will be felt by everyone....
Feb 27, 2013 7:56PM
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Reading the comments from Liberals below is a total joke because these morons really DO believe the hype from their "leader" their "father" their "hollywood junkie."  Liberals believe this president and all his mumbo-jumbo.  But, his kingdom WILL crumble and it is a shame that we will all fall with it.  And just remember "oh ye silly obama fans"...he won't fall..........you will, and he won't care at all.  He will move on to build his library in Hawaii and make his millions, and write a book and blame Bush over and over again because this man can never think of any other excuse when his plan fails .  His awkward wife and his daughters will "live the life" and... WE... will all pay for it.  So, you Liberals out there, you fake "do-gooders" with no brains.........we just want to tell you............your stupid and there is no fixing stupid!
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