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article imagePapa John CEO Schnatter says Obamacare will increase pizza price

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By JohnThomas Didymus     Aug 8, 2012 in Business
Papa John's CEO John Schnatter, says Obamacare will force a $0.11 to $0.14 price increase per pizza or $0.15 to $0.20 per order because the company, the third-largest pizza chain in the US, will have to offer coverage to more of its 16,500 employees.
The Huffington Post reports that the National Restaurant Association had pointed out, following the Supreme Court approval of the health care law, that it may have an adverse effect on restaurants' abililty to make profits because it will require companies with more than 50 employees to provide affordable health insurance.
According to The Huffiington Post, a Papa John's franchise owner in Texas, Judy Nichols, says the law could affect adversely her ability to open more restaurants. She said: “I have two options, 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.” She said the law may cost her between $20,000 to $30,000 in extra taxes. She said: “Obamacare is making me think about cutting jobs instead."
Schnatter, however, has indicated that his company intends to pass the health care costs to customers. The Atlantic Journal Constitution reports he said at a conference call: "If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect our shareholders’ best interests."
He told Politico: “We're not supportive of Obamacare, like most businesses in our industry. But our business model and unit economics are about as ideal as you can get for a food company to absorb Obamacare."
According to The Huffington Post, Schnatter is supporting the Republican presidential candidate Mitt Romney, and he has hosted a campaign fundrasier at his Louisville-area mansion in May. The Los Angeles Times reports Romney was deeply impressed by the grounds of the mansion and said: “Who would’ve imagined pizza could build this. This is really something. Don’t you love this country? What a home this is, what grounds these are, the pool, the golf course... This is a real tribute to America, to entrepreneurship."
The Los Angeles Times reports reactions on Twitter to Schnatter's statement:
"*switches to Pizza Hut*," wrote one user. "*calls Dominoes*," wrote another.
"I really wish businesses would stay out of politics," tweeted user mikedavis824.
The Atlanta Journal Constitution reports that Business Week says McDonald's also expects Obamacare to cost each of its 14,000 franchises between $10,000 and $30,000 annually. Other restaurant chains such as Burger King, Quiznos and Dunnkin' Donuts have expressed concerns that the law may hurt business, The Wall Street Journal reports.
According to Politico, this is not the first time a pizza chain's executive is warning a sitting president that his proposed health care law will affect the fast food business. Former GOP presidential candidate Herman Cain, reportedly issued a warning to Bill Clinton during a town hall meeting in April 1994 when he was CEO of Godfather’s Pizza. Cain reportedly said: “Your plan is simply a cost that will cause us to eliminate jobs."
The Christian Science Monitor, however, believes that Schnatter's comments are being widely misconstrued as a political statement in support of Romney. The website points to a headline by the "liberal" site Daily Kos that says: “Vote for Romney or we'll raise our prices."
CSM comments that Schnatter had only been responding to a question about the impact of Obamacare on business during an Aug. 1 conference call with reporters and analysts to discuss the chain’s second-quarter results.
According to CSM:
"Several points stand out: The 15 to 20 cents he’s talking about are costs, not prices. If he was making a political statement, would he really make the point that delivery charges, based at least in part on fuel costs, are 10 times the size of the hit from Obamacare? And he is promising to cut or 'shallow out' the costs of healthcare before passing any price increase to the consumer.
"Is that a threat? Really?"
The website concludes:
"Schnatter is certainly no fan of the president or the health-care law. Who knows? Perhaps he’ll cut health-care costs by shafting his employees. But he deserves to have his words quoted in context, before another battle of the culture war is fought over fast food."
According to the Los Angeles Times, Papa John’s has nearly 4,000 restaurants operating in every state and in 33 countries. Net income for its second quarter, ending June 24, rose 22.3% to $14.8 million. Same-store sales soared 5.7% in North America.
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