Food Fight: America's Restaurants Raise Concerns Over Healthcare Reform

BY: ON SUNDAY, AUGUST 12, 2012

Many Americans and small business owners alike are waiting to see what President Obama's healthcare legislation may bring, whether it be burden or relief.

Some huge American companies, however are already playing the “what-if” game when it comes to the Affordable Care Act, and the results are a mixed bag.

John Schnatter, the CEO of American pizza titan Papa John's, recently made remarks about how forthcoming healthcare legislation will result in a 11 to 14 cent price increase per pizza. This translates to roughly 15 to 20 cents per order. Papa John's will have to offer healthcare to it 16,500 total employees or face a government penalties; and many large American firms are in the same boat.

While the price increase may not seem like much, many major companies in the food industry been treading a thin line when it comes to profits. Right now, a price increase is not particularly desirable for everyone.

Their situation is not unique, either. Ultimately, a number of small business owners may forced to decide; provide healthcare or cut jobs?

“I have two options,” Papa John's franchise owner Judy Nichols said. “I can stop offering coverage and pay the $2,000 fine, or I could keep my number of staff under 50 so the mandate doesn't apply.” Nichols also noted that the law may cost her between $20,000 to $30,000 more in taxes annually “Obamacare is making me think about cutting jobs instead," she said.

Fortunately for Papa John himself, business has been relatively good. Despite Schnatter's opposition to Obamacare, it appears that he's willing to pass the incurred health costs onto customers.

“We're not supportive of Obamacare, like most businesses in our industry,” Schnatter stated. “But our business model and unit economics are about as ideal as you can get for a food company to absorb Obamacare."

Schnatter's remarks paint a bigger picture of America's biggest food companies folding their arms toward Obamacare; but is this really the case?

“Many franchisees of big chains hover around the threshold at which they will be required to start insuring workers or pay the penalty,” Louise Radnofsky said of the Wall Street Journal stated. “With high turnover and a large percentage of part-time and seasonal workers, restaurant and retail operators must juggle several variables in figuring out whether they will cross the threshold.”

Arguably the biggest name in the fast food industry, McDonald's, is remaining relatively optimistic; and this is despite of the current estimate with healthcare legislation could impact each individual restaurant from $10,000 to $30,000. According a representative, McDonald's is doing what they can to “be as educated as possible around what’s happening, so that they can start to anticipate and make any changes if they have to try to minimize the impact of this.” Taking into consideration that a $10,000 to $30,000 increase increase in price isn't uncommon for the fast food juggernaut simply due to commodity costs, McDonald's is well-prepared to weather any sort of cost incurred by Obamacare.

Needless to say, many small business owners may not be as fortunate as McDonald's when it comes to profits. As a result, many franchise owners have been providing less hours to employees in order to avoid providing healthcare; a tactic that may help cut costs, but unfortunately leaves employees hanging in the balance when it comes to healthcare.

The Obama administration is well aware of the concerns of the restaurant industry, but are overall concerned that employers offering coverage is crucial to making Obamacare work. In other words, no cutting corners. With the proposed offer of providing businesses reasonably priced insurance, some employers may shop for coverage, with smaller businesses will be offered tax credits to offset the cost of covering lower-wage workers.

The healthcare debate continues as companies brace themselves for better or worse. As many small businesses play “wait and see” when it comes to healthcare reform, what do you think is in store for your company?

About the Author

Brent Barnhart

Brent Barnhart is a freelance content writer specializing in topics such as Internet marketing and content marketing for small businesses. His goal is to help business owners find their voices online and improve their content strategies. You can reach Brent or find out more at brentwrites.com.

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