Papa John's vs. Obamacare: A Primer

With the recent re-election of Barack Obama as President of the United States and majority control in the Senate going to the Democratic party, it has become clear that the Patient Protection and Affordable Care Act, known colloquially as Obamacare, is here to stay. Despite being upheld by the Supreme Court, a number of popular business and restaurant chains are expressing their distaste over the law for a number of different reasons. One of the most vocal has been John Schnatter, the CEO and eponymous “John” of popular pizza delivery restaurant Papa John’s.

Schnatter came under scrutiny when he expressed his disdain for the law, citing an increase in costs for his pizzas, as well as the scaling back of employee hours. The new law states that if a company has more than fifty employees, anyone over full-time (30 hours or more per week) has to be provided with an option to purchase employee-covered health insurance. Schnatter has stated that as a result of this part of the law, the cost of his pizzas will have to rise ten to fourteen cents. Seemingly not that much money, but Schnatter estimates that this will cost his company $5-8 million a year.

A number of other restaurants have followed suit, including Denny’s and Applebee’s, most of which are franchise owned and operated. Some, such as Denny’s franchisee John Metz, believe that paying the $2,000 fine per employee for not offering the health insurance is more cost effective than paying the $5,000 per year per employee it would cost to cover each individual on the payroll who works full-time.

While Obamacare has received a ton of backlash in recent months from numerous entities, Papa John’s has remained in the spotlight for a variety of reasons. It’s the third largest pizza delivery chain after Domino’s and Pizza Hut, and in the last four years, the company has experienced record profits. Then there’s the matter of Schnatter and his company giving away two million free pizzas to Papa John’s Rewards members during this year’s NFL season. Many are also citing Schnatter’s personal wealth, valued at approximately $600 million, as evidence that the company is doing well off financially and that raising prices, however meager the amount, and providing health care shouldn’t be that big of an issue.

Or you could just look at the numbers. According to CNN, the majority of Papa John’s employees are already part-time, and with most stores being franchises, it’s likely that most don’t employee fifty employees. Beyond this, concerns over costs seem unwarranted when you look at the actual revenue of the company, the annual report of which showed revenue of $1.22 billion in 2011. For all intents and purposes, his backlash against Obamacare seems incredibly unfounded.

But others don’t think so. 17,000+ Facebook members declared November 16th National Papa John’s Appreciation Day, sparking a movement reminiscent of Chick-Fil-A Day, an event organized by former governor Mike Huckabee to show support over founder S. Truett Cathy’s publicly-made anti-gay remarks this past summer. The Papa John’s event is organized by Rebooting America, a conservative group, and seeks to show support for a company that many feel has been demonized by those on the left.

Even if John Schnatter chooses to raise his prices by upwards of fourteen cents, it’s likely that not many would notice, or rather simply wouldn’t care. It’s a meager sum, and for many completely worth the extra cost if it means full-time employees, some of which are engaged in one of the most dangerous professions in the country, received employee provided health care.

Schnatter is just one of many who have chosen to take the implementation of Obamacare and pass what he perceives as its problems directly onto his employees. One might recall the story of Westgate Resorts CEO David Siegel, who sent out an e-mail to his employees threatening to downsize his company if Obama is re-elected. You might recall that Siegel is the subject of the documentary “The Queen of Versailles,” which chronicles his quest to build the largest home in America. In a surprise twist, however, it was recently revealed that Siegel didn’t fire anyone, and instead gave all of his employees a five percent raise to offset the intended costs seemingly associated with Obama remaining President.

What will happen with Schnatter, his company, and his newest high-profile association with Broncos quarterback Peyton Manning, who recently announced that he has become the owner of 21 Denver-area Papa John’s restaurants, remains to be seen. Some are calling for the NFL to end the sponsorship, while others support Schnatter and his decisions 100%. Whatever the case may be, you can rest assured that this isn’t the last you’ve heard of Papa John’s - or other restaurants - and Obamacare in the news.

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Posted on November 20, 2012 at 9:00 AM