Friday, November 16, 2012

Papa John's and Obamacare

Today is the Support Papa John's Pizza Day. The owner of Papa John's Pizza, John Schnatter, has been an outspoken critic of Obamacare because of the impact it would have on his business. The chief of his complaint is that to comply with the law to provide health insurance for his current full time employees (over 30 hours) would cost him $5 to $8 million. Or in practical terms it would force him to raise costs by 11-14 cents per pizza. His solution is to cut back hours on corporate owned stores. Some of them are owned by franchises who of course will make up their own minds. Cenk Uygar takes him to task however, I think toward the end his rant about the wealth that John Schnatter has was way out of line. So I wish to respond to that.

First it should be noted that the Forbes article Cenk is quoting from can be found HERE.

He also brings up the fact that John Schnatter is giving away 2 million free pizza's this year at an estimated cost of $24 to $32 million. Well it should be noted this is no different than standing in front of a store front giving away free samples. The idea is not to give away free food, rather it is to get new customers. It is simply part of the advertising budget. So I myself am going to discount that.

Even though Forbes did an analysis of the numbers and projected a much lower expected price increase of 3 to 4 cents per pizza, I am going to use John Schnatter's numbers. After all he owns the company, it is theoretically possible he knows something that Forbes doesn't. Still a 11-14 cent increase on the price of pizza is NOT a deal breaker. Especially when you consider Dominoes and Pizza Hutt (the two of Papa John's main competitors) have to incur the same cost.

So restaurants who typically employ low wage earners are bearing the largest percentage of overhead for their employees. This is because it costs money to provide health insurance. The other option is to either pay the fine, or reduce hours of your workers and convert them to all part time. This of course will add to your overhead as well. You still have the same work load but now you need more employees to do them. So managers will have to chose to incur the costs of having full time workers or incur the cost of more part time workers.

Many are choosing to pay the fine, others are simply incurring the costs and passing them off to the customer, then a few like John Schnatter are planning on cutting hours and having more part time workers. Now it get's to be interesting.

A few months ago, conservatives rallied around Chick-Fil-A for their outspoken support of groups that oppose gay marriage. While I disagreed with those who supported this, at least I could understand it. A business owner has the right to spend the money as he or she sees fit. Those who view those decisions as immoral also have the right to protest and boycott.

Now we have a group of people rallying around a business for their decision to cut employee pay. It is very difficult to live on a part time salary. In many cases these people will be forced to get second jobs. Those with families will have to sacrifice family time for sleep as jobs may not line up back to back. Despite your views on Obamacare, it puzzles me how any one can cheer for John Schnatter's decision to line his pocketbook instead of maintaining his current level of full time employees who depend on those hours for their living.

Cenk Uygar then goes off the deep end chastising John Schnatter for living in such a huge house and having so much money as his employee's suffer.

This is his house

It is not a crime to be rich and successful. John Schnatter started out delivering pizza's and worked his way up. Papa John's Pizza pays a comparable wage. You will never get rich working in a pizza joint for someone else. You are not supposed to. It is entry level work. If you work hard you can make more money as a manager or even save up to buy a franchise. You can also simply do what John Schnatter did, sell your car, and build a business. If you succeed then you can afford a nice house.

I was right up with Cenk until he attacked John Schnatter's wealth. This is one problem I see far too often. The demands to tax the rich, the rich need to pay their fare share. There is an anti-rich mentality in our country right now and I think it is harmful to our society.

That being said, I don't think 11-14 cents extra is to much to pay for a pizza. Prices go up all the time as the price of gas continues to climb and other things we use everyday.