Why restaurants freak out over Obamacare

Papa John's, Denny's and others are as worried about employee pay as health insurance.

By Jason Notte Nov 20, 2012 4:04PM

Impatient waitress waiting to take order copyright Brand X Pictures, Brand X Pictures, Getty ImagesSince 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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Nov 21, 2012 8:31AM

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.

Do you really want sick people making or serving your food?
Nov 20, 2012 11:07PM

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.

Nov 20, 2012 11:05PM


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!



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.

Nov 20, 2012 10:32PM
Big chains that don't care about employee retention are scared because of their profit-hungry mentality.  The owner of a small family restaurant in my town said he is happy to provide health insurance because (1) it will be subsidized by the Affordable Care Act and (2) his employees are more likely to stay with him rather than move to larger businesses that provide healthcare.  Savvy restaurant owners know that it takes time and money to train good help, and the longer they can keep employees the more efficient it is for their business.  This person has been in the business a long time, and he's no dummy. 
Nov 20, 2012 10:02PM
Papa Johns and other restaurants are pretending this is a big deal. They are using this issue as an excuse to make a lot of noise and get a lot of free advertising.

Papa Johns owner said that the health care mandate would require him to raise the price of each pizza by about 14 cents. And that is an inflated number. A more accurate estimate is about 3-5 cents per pizza. Cry me a river!

And he will use it as an excuse to jack up prices beyond what is really necessary. Consumers, already prepared for the "inevitable" increase in prices caused by Obamacare, will not even blink. 

Jon Metz, an owner of 30 Dennys restaurants in Florida, is proposing a 5% surcharge be added to each customer's bill just for health care. 5% of gross receipts? Get real.

We are all being played by these clowns.
Nov 20, 2012 9:29PM
Did you know that in some right to work states, restaurants and other places where customers normally pay a tip; that establishment does not have to pay minimum wage.  The owner only has to pay about $2 an hour.  Slave labor don't you think?   
Nov 20, 2012 9:15PM

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.

Nov 20, 2012 9:12PM

@ 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.

Nov 20, 2012 7:17PM
More people will be forced into part time - More will be layed off so the companies drop below the 50 employee cutoff - More people will lose their jobs as corporations simply move jobs overseas - More people will pay more for food and other services because companies will pass on costs to consumers - Idiots - Can't see more than what you desire !
Nov 20, 2012 7:14PM
Many of the good doctors have plans on leaving the health insurance fields altogether since they are forced into 27% paycuts under obama health tax. That will leave many with nothing but waiting in long lines for the quacks that are left - what kind of health care system is that? Now only the rich will receive quality health care - Idiots - Can't see beyond their own desires !
Nov 20, 2012 6:23PM


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.

Nov 20, 2012 6:17PM

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. 

Nov 20, 2012 6:16PM

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.



Nov 20, 2012 6:12PM
LOL....   The same people that are for Obamacare are some of the worst tippers.

Do what I have done in my business, EXIT the insurance business.  Don't provide any coverage.  Let these people buy it on their own.  Of course you will have to raise prices just to pay the tax, but it is well worth getting out of the business.

Insurance and pensions came into being during WWI because Wilson froze pay (illegally).  Employers offered these because they could not increase pay.  Just another cause and effect caused by a democrat policy.

Once people find out how much this is going to cost they will be up in arms.  

I am looking forward to the chaos and people being really made that not only will they be forced to buy insurance, but they will also have to pay for others.

I figure for the fine of $2000 alone, the price of a meal will have to go up half a buck.   Tips probably must be in the 35% range for the poor worker to cover the cost of their new insurance.

So if you are not one of the fortunate people that contributed heavily to Obama and received the exemption from Obamacare, then you probable should drop all healthcare options for employees.
Nov 20, 2012 5:54PM
@ PRINCE     You dont eat at any of them anyway so whats it matter to you. And its a shame if someone has a differnt opinion then you then you want blood or revenge. will this is still the usa and we can agree to disagree unless something has changed
Nov 20, 2012 5:41PM

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.


Nov 20, 2012 5:17PM
There ain't no such thing as a free lunch.  Sorry, the devil made me say it.
Nov 20, 2012 5:11PM

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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