11/20/2012 8:04 PM ET|
Why restaurants freak out over Obamacare
Papa John's, Denny's and others are as worried about employee pay as health insurance.
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.
More from Top Stocks
Well thank Justice Roberts for stabbing all workers in back for allowing this fool obamacare be law! He was the swing vote--workers loose again and rick insurance companies and the rich period win again!
Then there is the obama reelected issur by welfarers! Watch obama give all welfarers big bennies, workers get screwed again. But you voted for obama.
I am an electrical contractor in Ca. and have 22 employees. I have a mortgage on my home, rent payments on my shop space, insurance, workers comp. payroll taxes, weekly payroll, fuel for work trucks, etc.etc.etc . I have a banking line of credit which is backed up by all of my assets as colladeral. Like many small busineess owners, things have been especially tough for me over the last 4 years. When you look at the hours I put in, In can honestly say that my emploees make more money than I do. Now Obamacare wants me to provide health care coverage to my employees? Who is going to pay for that? I will tell you who- 4 of my emploeyess will be laid off and the remainder of my work crew will have to pick up the slack-
It's not coming out of my pocket . Hope and change ? HA HA
so your telling me that having to add $2000 per year per employee wont hurt a business bottom line? 50x2000 is $100,000 and thats not alot to a company?
to a company with 50 employees, a contract worth $100,000 is alot, they mainly depend onn alot of little contracts.
this is just an FYI, a typical years worth of work is 2080 hours at 40 hoursx52 weeks.
take that 2080 and divide $100,000 and that cost a comapny and EXTRA $48.08 A WEEK to employee that person.
i personally dont want to give up $50 a week in anything.
Full time workers...are on notice,soon to be part time because of Obummercare.
WAIT TIL THE REAL OBAMA CARE WITH SERVICES CUT HIGHER RATES TAXES PENALITIES AND DEATH PANELS!
IF YOU THINK CAUSE YOUR A DEMO OR LIBERAL AND OBAMA IS JUST GIVING YOU FREE HEALTHCARE YOUR A BIGGER
DOPE FOR VOTING FOR THIS SOCIALIST PIG THAN BEFORE! STUPID LIBERAL MORONS! THOSE WITH US WHO PAY FOR
OUR INSURANCE ARE ALREADY SEEING CUTS AND RATES GO UP CAUSE OF YOUR LAZY FREEBIE DUMBUTTS!
It sure is funny how you would never have found a report on Obamacare before his reelection. Just praise and how he parted the clouds. Typical NBC crap. They wait until after the elections to rant about the savior. Well good job, Obama is going to put more small businesses out and people will wonder why prices skyrocket. It's coming. Third world status here we come.
Obamacare should worry more than just restaurants! Just remember you voted for this fool!
Copyright © 2014 Microsoft. All rights reserved.
Despite its size, the IPO will create just two new members of the 10-figure club from its executive ranks. A few others could net hundreds of millions.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.