Papa John's and Obamacare

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Papa John Schnatter is no fan of Obamacare. The CEO of Papa John’s International has occasionally railed against the reform for months. Leading up to the election, he was a Mitt Romney supporter and fundraiser. Now that the election is over, he’s doubling down on his claim that the health care reform will force his company to increase pizza prices by 10-14 cents a pie. He estimates that Obamacare will end up costing his company $5-8 million annually.

The issue: the Affordable Care Act dictates that full-time employees (30 hours or more per week) at companies with more than 50 workers need to be provided health insurance. Schnatter has further claimed that some employers will cut employee hours to avoid providing them with healthcare.

His remarks have sparked anger on the internet, one thread on social news site Reddit, titled “There are plenty of places to get cheap s***** pizza in the world- Anyone else on reddit ready to boycott Papa John’s?” has captured more than 21,000 up-votes and 4,500 comments. A host of Facebook groups with the same idea have cropped up in the past 48 hours.

Meanwhile, shares in Papa John’s International have been tumbling since last Thursday, falling from $51.70 at market close Wednesday to $49.22 on Monday, a 4.2% drop.

Checking Papa Schnatter’s Math

Last year, Papa John’s International captured $1.218 billion in revenue. Total operating expenses were $1.131 billion. So if Schnatter’s math is accurate (Obamacare will cost his company $5-8 million more annually), then new regulation translates into a .4% to .7% (yes, fractions of a percent) expense increase. It’s difficult to set that ratio against the proposed pie increase, given size and topping differentials, but many of their large specialty pizzas run for $16. Remarkably, a 10-14 cent increase on a $16 pizza falls in a comparable range: .6% to.9%. But the cost transference becomes less equitable if you’re looking at medium pizzas, which run closer to $12, meaning a .8% to 1.15% price increase.

For the sake of argument, let’s say that Papa John’s sells exactly half medium/half large specialty pizzas. Averaging the ranges for both sizes, then averaging that product yields a .86% price increase — well outside the range of what Schnatter says Obamacare will cost him.

So how much would prices go up, under these 50/50 conditions, if they were to fairly reflect the increased cost of doing business onset by Obamacare? Roughly 3.4 to 4.6 cents a pie.

In September, the company announced that it would be giving away 2 million free pizzas. That was, of course, a promotion designed to increase brand awareness and to invite consumers to try the brand — with the ultimate goal of selling more pizzas. Those giveaways can’t really be cataloged alongside sales that would have been made otherwise. But just in case you’re curious, that would be the equivalent of $24 million to $32 million in pizza revenue.

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A pizza restaurant employee with health care? I wouldn't expect to find any.

...and you think that is okay? As in good for society...?

I've known a few people who delivered pizzas. The job tends to attract high school and college age kids. I think they were usually already covered on their parents medical plans or had a college plan.

In any case, the job of the restaurant is to make a profit. If they can't make a profit, then they close down and that is just more people looking for work.

You're missing the whole point. High school and college kids are not working 30+ hours/week and would not be eligible for coverage anyway.

Times have changed. In the new service economy, more and more breadwinners are taking jobs at pizza joints because that's all there is.

For 15cents a pizza, those breadwinners and their families can have health insurance. Or Papa John can throw a butt-hurt tantrum and you and me and the rest of society can pay for his employee’s healthcare via Medicaid or unpaid emergency room bills.

I say 15 cents a pizza is the better bargain and the right thing to do.

Otherwise, I think Papa John's needs to shutdown and not create a burden on society.

Kaiser’s 2009 survey found that employer health insurance premiums were $13,375 for a family and $4824 for a single person.

capitalists just see the rest of us as their cattle, and their ranch help as utterly disposable. i would no sooner eat anything by papa john's than i would eat a slug.

Where do you get this 15 cents a pizza? I'd bet it would be more like $1 a pizza.

From Wikipedia:



At 15 cents per pizza, that would require him to deliver nearly 90,000 pizzas a year or nearly 250 pizzas every day of the year. At $1 per pizza, that would be nearly 37 pizzas every day of the year, a more achievable target. How many pizza's does each deliveryman deliver per shift?

I'll tell you what. Why not start a campaign to get people who buy pizzas (I don't) to throw in an extra dollar on every pizza to cover medical insurance for the guy who delivered it? And if you do that, you might as well add another dollar to help cover the other employees at the pizza restaurant.

Now that the election is over, he’s doubling down on his claim that the health care reform will force his company to increase pizza prices by 10-14 cents a pie. He estimates that Obamacare will end up costing his company $5-8 million annually.

What do you bet that is the cost of paying the penalty, not the cost of providing insurance.

I'm more willing to bet that, faced with reality, you cannot cope.

The penalty is not designed to be cheaper.

I'm paying for an "Obamacare" insurance plan out of pocket right now and it costs me less than $100.00/month.

And my premium would be cheaper if I did not have to carry deadbeats like Papa John!

Where do you get insurance for less than $100 a month? I'm looking at $804.30 a month just for myself.

I'm buying it through my student's association (United HC). I have a fairly high deductable $2500.00, but I get free office visits and stuff at the med school. I get cheap meds too.

Just wait 'til the Federal exchange is set up. You should get much cheaper rates.