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Papa John's CEO Says Obamacare Will Up Pizza Price - Why Burger King Doesn't Like Obamacare

The CEO and founder of Papa John's pizza wants investors to know that when the president's health care law takes effect, the price of pizza is going up with it.

According to "Papa" John Schnatter, the cost of providing health insurance for all of his pizza chain's uninsured, full-time employees comes out to about 14 cents on a large pizza. That's less than adding an extra topping and a third the price of an extra pepperoncini. If you want that piping hot pie delivered, the $2 delivery fee will cost you 14 times as much as that health insurance price hike.
 
"We're not supportive of Obamacare, like most businesses in our industry," Schnatter said on a conference call with shareholders last week, as reported by Politico. "If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect our shareholders' best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."
 
The pizza place's Facebook page was soon littered with outraged pizza lovers proclaiming they would be "happy" to pay an extra 11 to 14 cents so Papa John's employees could have health insurance.
 
"I lose more than that in a week under my sofa cushion," one Facebook commenter wrote. "I'd gladly pay 20 cents for a child to go to a doctor when they've got a cold, rather than have them show up at the ER."
 
Another said she's taking her money to another pizza restaurant, "one that doesn't begrudge their employees the ability to seek a doctor when they're ill."
 
The company sought to clarify Schattner's comments on Wednesday, telling ABC News in a statement that Schnatter's remarks were in direct response to a question about the costs of complying with President Obama's health care law.
 
"We certainly understand the importance of healthcare to our customers, our employees, small business owners and their employees," the company said.
 
But despite the pizza price increase, many of Papa John's employees may still go without employer-provided health insurance after the law takes effect in 2014. The company would not say how many of its employees are uninsured, but in 2010 the service industry had one of the lowest rates of insured employees, with 33 percent of the workforce uninsured, according to the Kaiser Family Foundation.
 
Large businesses, those with more than 50 employees, are the only ones on the hook for providing health insurance under the health reform law. While Papa John's as a whole employs 16,500 people, 80 percent of the company's restaurants are independently owned franchises. As long as a franchise owner does not employ more than 50 people, he or she does not have to pay for employee health insurance.
 
The Affordable Care Act only requires employers to offer health insurance to full-time employees, almost 90 percent of whom at large businesses like Papa John's corporate offices are already covered, according to a Treasury Department official.
 
If the pizza company decides not to cover any full-time employees who are not currently insured, it will be hit with a $2,000 fine for each employee beyond the first 30 workers.
 
But part-time employees are not required to be covered under the law. While Papa John's would not disclose how many of its employees were part-time, in the food and beverage industry as a whole, half of all workers were part time in 2010, according to the Bureau of Labor Statistics.
 
Where Papa John's and other restaurant chains may run into costs from the health law is under a new definition of "full-time" employees. Anyone who works more than 35 hours, the average weekly hours of a part-time restaurant employee, is considered full-time under the law and will thus have to be provided with health insurance.
 
The "bulk" of the costs for complying with the Affordable Care Act will stem from restaurants being required to give health insurance to their previously part-time employees, said Angelo Amador, the vice president of Labor and Workforce Policy at the National Restaurant Association.
 
Steven Wojcik, vice president of Public Policy for the National Business Group on Health, said he expects that rather than pay for these employees to get health insurance, restaurant owners will cut back hours to keep the majority of their workforce part-time.
 
"What's going to happen is restaurants are going to have to make a choice," Wojcik said. "My full-time employees, I'm going to have to move some of them to part-time. I'm definitely not going to go out and hire more restaurant employees to stay under the 50-person cap and I may scale back some of the hours of the ones that currently work more than 30 hours per week."
 
Wojcik said that while some waiters, cooks and pizza makers who are already full-time may score health insurance from their employer, "we will not expect a lot more coverage of restaurant employees unless Americans are willing to pay a lot more for a meal."
 
That's the same sentiment that former Godfather's Pizza chairman Herman Cain expressed 18 years ago when President Bill Clinton was trying to reform health care.
 
Cain, who ran a failed bid for the GOP presidential nomination this year, said during the 1994 health care fight that he would either have to make his pizzas far more expensive or eliminate jobs to comply with Clinton's plan and provide health insurance to more employees.
 
"Employers who do not cover employees do not for one simple reason, and it relates to cost," Cain said in 1994. "If you force me to cover those employees, I may not be in the position to provide those jobs."
 
Why Burger King Doesn't Like Obamacare
President Obama’s health-care law will force businesses to buy insurance for their employees or get slapped with a fine. But one category of employers will be spared that expense: businesses with fewer than 50 workers. Many of the roughly 4.5 million businesses that employ fewer than 50 workers are familiar restaurant franchises: Burger King (BKW), McDonalds (MCD), Subway.
 
These companies use lots of part-time workers and are unlikely to pay them full health benefits, given the high cost of providing insurance. Many of these part-time workers are poor enough that the government is already subsidizing their health care through Medicaid. Obamacare expands that support: Medicaid will cover more people, and families earning up to 400 percent of the poverty line will get a lot of subsidies to help them buy insurance on state health exchanges.
 
But now franchise owners with more than 50 employees will have to chip in, and many shudder at the thought. Subway, Burger King, and Dunkin Donuts, the Wall Street Journal reports, went to Capitol Hill last week to complain to lawmakers about the added costs. McDonald’s chief financial officer said that the law will add $10,000 to $30,000 in costs to each of the company’s 14,000 franchises.
 
Franchisers whose staff at one or more restaurants hovers around that 50-worker mark are wrestling with a tricky set of choices. If you expand a little, will the new profits be sucked up by health-care bills? Maybe it’s worth staying under the 50-worker mark and avoid triggering the requirement? Maybe you should cut workers’ hours so they won’t qualify as employees that must be covered?
 
The Journal cites an owner of two Quiznos restaurants who did just that. After Obamacare passed, he abandoned plans to buy more restaurants. He thinks the tradeoff might not be be worth it. And he’s probably not the only one.
 
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