Will the restaurant business survive a second Obama term? Can it? Since the president’s reelection earlier this month, four large restaurant chains, Papa Johns, Applebee’s, Denny’s and Darden Restaurants (the company that owns the Olive Garden, Red Lobster, and LongHorn Steakhouse chains) have all recently released statements about their companies’ plans to respond to the increased costs of complying with Obamacare regulations. According to the healthcare law, every full-time employee must be provided with comprehensive medical coverage if the company employs more than 50 full-time workers. If a company refuses to comply, they will be faced with fines of $2,000 per year, per employee, as of January 1, 2014.
The announcements from companies grappling with the increased costs of Obamacare have, expectedly, been met with disbelief and consternation by the left, still seemingly unaware of basic economics. Appearing on Fox News Business early last week, Applebee’s CEO Zane Tankel explained the steps his business would have to take in order to stay in operation:
The costs of fines or healthcare for dozens of employees per restaurant have the potential to bankrupt individually owned chains across the country. The Applebee’s in New York City would face fines of $600,000 per year if insurance isn’t provided for full-time staff, and estimates for offering federally approved insurance would cost “some millions” across the Applebee’s system. Both scenarios, according to Tankel, “[would] roll back expansion, roll back hiring more people. In the best case scenario [it] would only shrink the labor force minimally.” The restaurant industry, already operating with razor thin margins, doesn’t have the ability to absorb tens of thousands more in healthcare expenditures without a considerable increase in sales. It’s a basic realty of economics: more has to be coming in than going out.
The only solution for restaurants that want to stay open and maintain competitive pricing would be to cut employee hours to part-time status. This is the conclusion already reached by several large chains–companies that provide jobs to tens of thousands of working class Americans. Two of the four companies went public after the election, and thus cries from the left about companies and their CEOs “playing politics” ring empty. Despite the fact that these provisions don’t go into place until January 1, 2014, with the reelection of President Obama and the control of the Senate in Democratic hands, the future of Obamacare is now all but certain as businesses across the country are planning for their companies’ futures.
If workers are moved to part-time status, the onus for paying for insurance would then be placed on employees who have suddenly seen their incomes reduced drastically. Another provision of Obamacare is the requirement for Americans to purchase insurance or face a financial penalty, a tax as defined by the Supreme Court. Some of these employees may qualify for Medicaid and would be exempt from the tax specifically designed to compel Americans to purchase insurance, regardless of their desire to do so. Cash-strapped states would then be on the hook for expanding Medicaid in order to fulfill the needs of the estimated 11-17 million Americans newly enrolled on Medicaid thanks to Obamacare. These workers, directly pushed further into poverty by Obamacare via reduced hours would then be enrolled in a system with the worst healthcare outcomes in the country, including the ranks of the uninsured. The costs of providing millions more with insurance would then be passed on by states unable to afford the Medicaid loads they already have. As a result, residents should expect fewer services from their states or higher taxes, if not both.
In anticipation for January 1, 2014 restaurants are already cutting staff hours in order to classify themselves as companies with fewer than 50 full-time employees. As we saw with regard to Hostess Brands, left-wing groups’ perception of how much companies can afford to give to employees while still maintaining a healthy business doesn’t always align with companies’ bottom lines. Just because liberals think that companies should be able to provide more in compensation and benefits doesn’t mean they can. Hostess was the first company to throw in the towel in the face of unreasonable demands for worker compensation and benefits, and unfortunately, given the burden Obamacare is placing on businesses, it may not be the last.
Please stop mentioning Hostess Brands in the same context as how restaurants will cope with Obamacare. n nHostess Brands is a case study of how private equity games lead a company to multiple bankruptcies. Unions are not the sole source of stupidity in post-industrial America.
I'm old enough to remember when the question was, "Will the [Fill In The Blank] Industry survive Medicare? Will the WORLD survive Medicare?" n nWhat a yawn, hearing it all over again.
The whole story has not been written yet.
Be that as it may. I call on Obamatrons to demand the nationalization of every single company that either folds or fires a significant portion of its workforce. If they're not willing to stand shoulder to should with the Ed Schultz' of America and sing the praises of lockstep civil service unionization as the cure for everything then they are, simply put, hypocrites.
The fake protests at Walmart were organized by unions. The news isn't prying too closely, but that their are far fewer protests and that the protesters "spokesmen" seem strangely articulate for the average Walmart employee would indicate this is a union organized protest using Thanksgiving as a wedge issue. I just wish some enterprising reporter would ask those protesters if they are familiar with what happened at Hostess.
tankel mentions "skipping dinner" and he runs a restaurant! what a missed opportunity for some cheap p.r. ntankel questions whether they can expand, bottom line – does the world need another applebees?
Really, you think that is all it is? A nickle? What alternative reality do you live in?
I will gladly pay an extra nickle per pizza to give the employee's health care.
Here's is what will happen to many workers. They will become contract labor. Their designations will change from people receiving W2's to those receiving 1099's. As independent contractors, employers can have you work at will. In addition to your regular taxes, as a contractor you will have to pay self-employment taxes normally paid for by employers. This will also put the costly burden on the now independent contractors to select and pay for their own insurance. No more paid vacations, you are an independent contractor. No more sick pay, no more safety net provided by employers. The total burden of the mandates from Obama will now become the responsibility of those who work. This will force a push for unionization, but it will come to nothing because the lesson of Hostess will demonstrate that you can only push so far. Remember, most of their unions accepted contracts because they would have gotten part of the company in exchange. Only the bakers insisted on more. Now some other company, probably Grupo Bimbo, will buy the Hostess brand and move operations to Mexico. If you don't think this is what will happen, then you are naive. Restaurants have the biggest business failure rate of all types of businesses. They run on thin margins. And this is also true for fastfood. My son's a manager at ChikFilA. His owner operator is concerned and will cut hours for all except management employees who will have to work extra hours to fill in the gap. Those of you used to rapid service will see service slow. You will also see prices rise across the board because the basic lesson of economics has never been learned by the Obama administration. That lesson is this-every penalty, every tax, every fee imposed by government on business is paid BY THE CONSUMER as higher prices. If the business cannot expand pricing, it has to cut staffing. That means fewer jobs, not more, which means more people on the dole, not less. Congratulations liberals, this is what you voted for. Those phony Walmart protests were not many real workers, but an attempt to organize unions. There are many who would be overjoyed to find $12.00 an hour jobs.
Gets better. My manufacturers have already told me to expect AT LEAST a 5% price hike. I'm expecting something around 7%. Take that across the board for American made products and see what that does for the economy.
Please….. n nThis is pure hyper-bowl. As someone who has worked in the "Industry" for many moons, trust me when I tell you that at least when it comes to the front of the house staff, almost EVERYONE is already part part time! n nThat's the best part about being a food server and why it works so well for students and starving artists, actors, writers, dancers, yoga teachers and on down the line; work 4 hours and go home (in a good house) with $100.00 or more. The back of the house employees usually DO work full time and get the short end of the stick on pay, unless you are a chef which actually puts you in management. n nBut Corporate giants like Darden who claim to offer insurance have been messing with hours to avoid having to offer it for quite some time. (Darden does offer Insurance for everyone but the co-pay is so high it's not worth it.) The restaurant industry is notorious for not having benefits and now they will have to comply, which is just a bummer for that pesky corporate bottom line..Whaaaaa!!! n nWill they go out of business from having to offer insurance? The big corporate places wont and the small ones rarely have more than 30 employees so this is really about the big players and this whine about biz is just a joke. n nPapa Johns? The raise on pizza cost will not only cover cost it will produce a profit! (Damn, where is that link?) Truth is, a restaurant is a bad gamble in the first palce and the odds of making it in the first year are slim to none' it's a vanity issue and you better know your stuff if you plan to survive, The public is a tough critic and with social media, one can get buried with too many bad reviews. n nThe big fellas? Whatever, they've been passing off crap as food for a long time, sucking in the public with deals, and giving back tasteless plastic additives. Obamacare won't kill them, but if they ate their own food, that might not be the case. n nObamacare rocks! Get over it…We won!! n n
The Democrats voted for us and our families a health care plan that they don't want for themselves and their families. That fact alone displays how bad 0bamaCare & RobertsTax will be. The Democrats didn't want for themselves what they votes for us. It is called tyranny. I get this good plan and you get this beauracacy
That's all fine and good, but a lot of innocent folks will get hurt because of the scum that voted for Obama. I would have absolutely no problem with companies firing people or moving them to part-time status to protect themselves against the pillaging of ObamaCare as long as those businesses would make a reasonable effort to identify Obama voters in their midst and target the lay-offs/part-time upgrade specifically at them.
"Moderate Guy?" Really? Dude, you just called me and my family and friends "scum." That's moderate to you? My wife, many friends, and I are social workers, therapists, addictions workers. At the risk of sounding naive, we do what we do for love, not money (although we are fairly paid.) The current repub party, on the other hand, is filled with religioius fanatics, greedy, control freak plutocrats, and other assorted foolish and mean spirited people. You want scum? Look in the mirror and see what you have become. Somebody who champions a so-called "leader" who believes, and is stupid enough to say out loud, that half the population are moochers.
"…social workers, therapists, addictions workers…". Not one of you has a real job, creating something? Not one of you is involved in expanding wealth of the country? Not one of you creates jobs for your fellows? Not one of you does something remotely useful? nThere is a word to describe people like you…. what is it? oh, help me out here… oh, yeah, I think you know.
mOderateGuy, after thinking about your statement's for a about five seconds, nI can roundly say, you have spoken for many of us whom believe that the nsupporter's of obuma should have to receive the brunt of his's policies….
I am just going to wade in as a Republican who has lived for stretches oversees. n nThe US spends much more per capita on health care than any other nation. And from a national perspective the health care here is really really bad. From an economic perspective, could instituting a national health care plan actually slow the ever rising health care bill? Could it actually increase the quality of health care across the US? From a global economic competition viewpoint, would decreasing our National health care bill help us economically? Is health care money basically going down a black hole, or does it increase our competitive position like manufacturing, research, infrastructure investments, etc.
really author? the “ONLY” way to pay for it is to reduce hours and labor? plenty of companies have already had to tighten up costs starting around 2007 -2008 (remember gw bush and the economic collapse? ) how a lot of them did it was by lowering huge CEO and executive salaries. how do you think these waiters and busboys pay for healthcare now? they dont. just like romney said in mass: they are sticking taxpayers with the bill in emergency rooms or by not dealing with minor health issues that then turn major. suck it up. americans need health care. just ask them. you gotta love the bushies– no memory at all.
Now imagine if restaurants were required to pay their workers a livable wage! The outrage!
Seems to me that there's a great opportunity here to "share" employees — have 'em work 3 days/week at Burger King and 2 days a week at McDonalds. Companies should be pairing up and standardizing systems to make this easy and efficient, with little cross-training needed.
Elections have consequences. Higher costs for businesses result in decreased employment. Enjoy the ride of the economy downward because of Democrats.
Well, there went my college education in Retail Mgmt., Money and time wasted for nothing. Thanks a lot Mr. President.You just killed my future and my American dream. Of course you won't care abouit us little people. Not as long as your ideaology triumphs. Guess that is what matters the most to you.
Applebee's will have to go out of business? n nGOOD! n nTheir food sucks…
It was projected that 1,000,000 Americans would lose their jobs and 50,000,000 their employer provided health insurance thanks to the ObamaCare Tax. Sounds like the projections were low.
But we live in an employer-based healthcare system. Why aren't we angry that thousands of companies employ at least 50 people full time and yet don't provide a healthcare package? I work for a small company of 9 full-time employees. No six-figure salaries, no 401k…but we do have a health package. It costs a fair amount, but not nearly as much as it would to purchase a private plan for a family of 4. My employer is exempt from Obamacare. I'm offered a benefits package because I need one, and it's the right thing to do.