Don't Drink the Tea. Think With the WE.
Nov
2012
14

PEPPER-OWN-I: Papa John’s CEO Threatens Employee Hours BECAUSE OBAMA.

Bad pizza. Worse math.


Speaking in a college auditorium, Papa John’s CEO John Schnatter claimed that the Affordable Healthcare Act would result in employees’ hours being cut.

Schnatter is part of a growing group of Romney supporters/losers who in the days before and after electoral defeat began threatening their employees’ jobs and blaming their decision on “Obamacare.” Schnatter said that the implementation of the ACA would raise the cost of his pizzas by “10 to 14 cents.” He claims to not be for or against the law but argues that “the worst entity in the world for running the thing is the government.”

Schnatter argues that because the law requires companies of 50 or more employees to provide health care for full-time employees (G*d forbid!), many franchise owners are likely to cut hours to below that threshold.

That’s probably what’s going to happen,” he said. “It’s common sense. That’s what I call lose-lose.”

Schnatter tried to paint himself as ambiguous on the law, but against the costs that citizens will accrue.

The good news is 100 percent of the population is going to have health insurance. We’re all going to pay for it,” he said, estimating the new law would cost the business $5 million to $8 million annually.

What’s more, Schnatter’s math is being challenged. Here’s Forbes:

Last year, Papa John’s International captured $1.218 billion in revenue. Total operating expenses were $1.131 billion. So if Schnatter’s math is accurate (Obamacare will cost his company $5-8 million more annually), then new regulation translates into a .4% to .7% (yes, fractions of a percent) expense increase. It’s difficult to set that ratio against the proposed pie increase, given size and topping differentials, but many of their large specialty pizzas run for $16. Remarkably, a 10-14 cent increase on a $16 pizza falls in a comparable range: .6% to.9%. But the cost transference becomes less equitable if you’re looking at medium pizzas, which run closer to $12, meaning a .8% to 1.15% price increase.

For the sake of argument, let’s say that Papa John’s sells exactly half medium/half large specialty pizzas. Averaging the ranges for both sizes, then averaging that product yields a .86% price increase — well outside the range of what Schnatter says Obamacare will cost him.

So how much would prices go up, under these 50/50 conditions, if they were to fairly reflect the increased cost of doing business onset by Obamacare? Roughly 3.4 to 4.6 cents a pie.

Shares of Papa John’s have been falling since Schnatter’s comments.

Papa John’s now joins other chain restaurants such as Applebee’s and the Darden Restaurants (Red Lobster, Olive Garden, similar franchises) in threatening employees while claiming Obama is the cause. Zane Tankel, chairperson and CEO of Apple-Metro, a New York area Applebee’s franchise, told Fox Business last Thursday that the ACA will raise costs to a point where they will not be able to build more Applebee’ses (yup, Applebee’ses). Darden Restaurants claim the ACA would force them to increase their levels of part-time workers.

These threats, which many consider to be the rants and raves of sore losers, would have more impact if they didn’t come within days of a major political defeat. Yet, they show an interesting trend that may result from the ACA: large corporate entities seeing their massive profits slightly chipped away at as they finally have to do the right thing by providing health care. This, in turn, may give smaller, family-owned restaurants a chance to grow and ultimately create better jobs locally and in the long run.

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