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.
Continues:
http://www.forbes.com/sites/calebmelby/2012/11/12/breaking-down-
centi-millionaire-papa-john-schnatters-obamacare-math/
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