Why restaurants freak out over Obamacare
Papa John's, Denny's and others are as worried about employee pay as health insurance.
Since President Barack Obama was re-elected earlier this month, the harshest criticism of his Affordable Care Act and most pointed threats about its implementation have come from the Papa John's pizza chain, the Jimmy John's family of sandwich shops, and franchisees for Applebee's and Denny's restaurants.
Why are chain restaurants so disproportionately disturbed by "Obamacare?"
The standard answer is that it's going to eat into restaurant franchises' bottom line. The Affordable Care Act's casual food critics have taken a highlighter to the law's stipulation that businesses with 50 or more full-time-equivalent employees that do not provide health insurance coverage must pay a penalty of $2,000 per full-time employee in excess of 30 full-time employees. There's a bit more to it than that, but why clutter up a perfectly good rant?
Papa John's (PZZA) founder and chief executive John Schnatter proclaimed immediately after the election that his franchise owners may have to raise prices and cut worker hours to adhere to the rule. Almost a month earlier, Jimmy John's sandwich shops founder and chief Jimmy John Liautaud said he would cut employee work weeks "down to 28 hours" in order to meet the law's requirements. Both men openly supported Obama's opponent, Mitt Romney, during the election.
Since Obama's re-election, though, restaurant opposition to his health care plan hasn't been nearly as top-down. Zane Tankel, who owns 40 Applebee's franchises in the New York metropolitan area, said he would freeze hiring and cut worker hours because of the Affordable Care Act. Applebee's parent company, DineEquity (DIN), issued a statement almost immediately asserting that "It's certainly our hope that our guests recognize and realize that Mr. Tankel's views are not representative of the broader Applebee's brand."
John Metz, who owns 30 Denny's (DENN) locations in Florida, proposed tacking on a 5% Obamacare fee to each bill and told Huffington Post, "Customers have two choices: They can either pay it and tip 15 or 20%, or if they really feel so inclined, they can reduce the amount of tip they give to the server." That didn't sit well with Denny's chief executive John Miller, who scolded Metz into an apology on Monday for putting Grand Slam Breakfast-sized words into the company's mouth as Denny's managers in Florida dealt with falling sales and angry customer phone calls.
All of this wailing over employee numbers and hours obscures the aspect of the Affordable Care Act that may be concerning chain and franchise owners most. Under the new law, health insurance premiums charged by employers to employees can't exceed 9.5% of an employee's household income. The largest franchise group in the world, the International Franchise Association, issued a report stating that as many as 38% of employers may be at risk of violating that particular provision.
The group estimates that the act will add $6.4 billion in costs to franchise businesses. Based on feedback from International Franchise Association members, the report estimates that both the employer responsibility and employee pay provisions could cost about 3.2 million full-time franchise workers their jobs.
But hidden in that report is some language that speaks right to the core of this issue for restaurant franchises. The report found that in 2010, 50% of restaurant employees worked part-time "i.e. under 35 hours per week." Under the Affordable Care Act, once an employee puts in 30 or more hours a week, he or she is "full-time equivalent." That means they'd have to be insured as a full timer or, at the very least, paid like a full-timer to offset the cost of buying insurance.
If customers jonesing for an appetizer special, a cup of melted garlic butter for their crust or a big pile of all-day breakfast wonder if the new health care law is really going to hurt restaurant franchises -- or if surcharges really help -- Slate's Matthew Yglesias has pointed to San Francisco as an example. The city passed universal health care legislation that meant increased costs for employees in the restaurant industry. Restaurants tacked on surcharges, but much of that money just ended up in the pockets of business owners.
That isn't going to be news to anyone who reads a site with the word "Money" in its name. Shipping fees, baggage fees, ATM transaction fees and myriad other fees are revenue creators and an accepted -- if often grumbled-about -- part of the consumer experience. Restaurants' threatened Obamacare surcharges may or may not be tied to actual, associated costs of the new health care program, but as AdAge pointed out last week, they could give confused consumers some idea of what the money on their bill is buying besides hastily assembled sandwiches and cheap french toast.
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I would be interested to know how many supporters of Obamacare (as a percentage) have ever or currently own and run a business.
It is not just the health care cost increase. Add up workmans comp.,osha costs, unemployment insurance, etal. It is cumulative. It is very difficult to pay all these costs and survive even in a good economy, much less a weak one.
Regardless of how you cut it, these costs will be paid by someone and in addition to all the other imposed costs will have a negative impact borne by someone.
That is reality. Philosophy does not trump math.
A lot of restaurants many places pay low wage scales, not necessarily by State, Casinoes the same thing...Several places make it up the differance in tips or are suppose to; (?) I'm not going to boycott anyplace for 50 cents more a meal or 10 cents a drink....
If some of the friggin owners are azzholes, then maybe many of these kids or others trying to make a living feeding their kids could try something else?
Remember don't be a cheap bastard, and leave a tip, if you get good service! You will probably be treated better...
The one thing that grinds me is the tips are supposed to be claimed as wages&taxed...How the hell does that work.....? But a 100 million offshore..skates.
I am certain you know if you do that, it is illegal. Secondly, you are exactly why republicans have such a bad stigma. You show your hatred, anger & ignorance by saying such stupid things. I am no democrat & you are the reason I am not a republican. There are certain aspects of republicans I like, but your arrogance, dismissiveness and distain for people who dont think & act exactly like you, (or like you tell them to) and who need help at times, just is disgusting!
Hey MG..... Looks like you fan base is rapidly declining!
AHHHH, HAAAA, HAAAAA, HAAAAA
Excellent post FLIZM!!
I think many of us here share your opinion. I'm not sure what I am either, but it DANG SURE isn't whatever he is.
Every year about 45,000 Americans needlessly die in America because they can`t afford
health insurance.Think about that when you condem Obamacare.Grow a heart.
@ Dr. Kildearheart: way too long of an incoherent rant. First sentence was longer than most others entire post. None of us read it.
@user903960: Not sure why you would think only bad quacks would be left if offices would have to close, as they wouldnt because everyone will be insured & getting treatments. If its a poorly run office they are already on borrowed time. Any MD who can decently run an office will be in good shape. If anything, it will have the opposite effect, bad MDs will be forced out b/c you can afford to go to a good one.
Wake up America!
We all listening to a late program, informing us that Boehner has selected Paul Ryan to work the necessary police changes to do the proper Medicare, and Social Security cuts or changes to be able to later prepared the work in Ryan’s future plan to modified the tax cuts for the 1%, and to considered other changes for the middle class cuts and tax deductions modifications as part of their Fiscal Cliff tax plans! The problem here is that the proposed policies changes will greatly affect the pockets of the young and the old, to make it worse they keep closed lips about all other diabolic policy changes in prospect affecting the middle class, the workers, the poor, the disable, the sick, the hungry, male, female! Are these people in House of Representatives very mentally sick? They are so strongly determined to destroy the middle class as Romney and Ryan the liar wanted to have it done post election if winning after taking the white House! We, the people for Mr. Obama won the elections, and they have a Mandate from us to increase the tax on the rich, to help the Fiscal Budget burden, and to cut tax for the middle class! No to touch Medicare, SS, and Medicaid .What is going on year after year of this resolute disregard for the people of America coming from the House of Representatives members, the Tea Party morons, the truly insurgents led as before by the indolent Ryan, wanting to decrease tax on the 1% and perhaps to keep the meager tax cut for the middle class, junking Medicare and SS? These people forget the many tax increases of President Ronald Regan, and President Clinton, but perhaps they had reasonable people in Congress that love America, and the people then, but not now, since the Tea Party came into existence with the help of Sara Palin, we have these dishonorable members of the House perpetually working against the 48%. We rejected Romney, and Ryan plans during the Presidential elections just because of the many secret ideologies they harbored against the middle class in tax cuts, and other tricks while favoring the 1%, and every other cuts they were hiding and dreaming to perpetuate the demise of the on the American people. And now, Boehner gives Ryan the privileged to get even with the 47%, because no VP job for him! We totally despised Ryan Budgeting Plans before, and now. He’s getting even with us Democrats lead by the anti 48% Boehner! We are telling our President Mr. Obama, that we are good and ready to Fall from the Cliff, but not to give the Republicans one single concession to their favor! This is a disgrace against the people of America; we won the elections, not them. Who are they to keep telling us what to do, stop this Congress Constitutional abuse of the working people of America year after year? The country is hungry and they are all rich in the House of Representatives, unless they think we have no fighting spirit in us the 47 %. Mr. President show Congress the gigantic voice of the people, we will fight until we win.
Prince of Darkness:
Your an idiot. As you boycott, the restaurant owner just cuts staff or cuts hours due to lost revenues. Either way, the only one that loses is the poor employee because of you asinine boycott initiative. Why would you even suggest something like that. Go take some business and marketing courses and maybe you will understand how the marketplace actually works.
I'll happily pay a little more when I eat out if it means my waiter/waitress isn't coughing death all over my meal because they don't have health insurance.
Yes, there is no free Lunch but I am more than willing to pay a little extra to enable my server to have Health Insurance. I do not believe that people should go broke because they get sick. Business owners that complain about minimum wage regulations and Health care costs are running sweat shops not Businesses.
For those who think Obamacare is such a good idea, don't whine to the rest of us when you notice the cost of many of the services we all take for granted will go ahead (regardless of whether it is overtly stated as a fee or hidden in the total bill).
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