Papa John's just one of many restaurants not liking Obamacare - KAIT-Jonesboro, AR-News, weather, sports

Papa John's takes heat for healthcare remarks, but many restaurants agree

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Papa John's operates more than 3,500 restaurants in 30 countries. (Source: Ildar Sagdejev/Wikimedia) Papa John's operates more than 3,500 restaurants in 30 countries. (Source: Ildar Sagdejev/Wikimedia)

(RNN) - When Papa John's CEO John Schnatter said his pizza chain would have to raise pizza prices and cut employees' hours in order to deal with the Affordable Care Act, also known as Obamacare,   many people online called for a boycott, claiming the millionaire pizza baron was just plain greedy.

It didn't help that Schnatter has recently maintained a high-profile by giving away millions of pizzas for NFL promotions and hosting fundraisers at his castle-like mansion for former Republican presidential candidate Mitt Romney. 

But despite what people might think of Schnatter's political and economic views, he's not alone in his management theory. Restaurant workers around the U.S. are among the least insured and least paid workforces in the country - no matter who they're working for.

Big industry, small benefits

The total projected 2012 revenue for the U.S. fast food industry is $195 billion, according to statistics by IBISWorld, a market research firm. By 2016, revenue is expected to increase to $210 billion. 

The fast food industry is also one of the nation's largest employers, with slightly more than 4 million full and part-time workers in 2012 who make an average of around $12,000 per year.

Despite the big revenue and low pay, few of the largest restaurant chains offer adequate health insurance.

Subway - the world's largest restaurant chain in terms of number of locations - does not offer a health insurance option for its franchisees' employees, according to a representative for the company. But individual owners are free to offer a plan if they choose to do so.

McDonald's - the world's largest restaurant chain in terms of dollars - offers different levels of plans, the most affordable being a limited-benefit, or "mini-med" plan, which charges employees $727 a year for only $2,000 worth of coverage, according to CNN.

These limited-benefit plans are popular among large chains in the fast-food and retail industries, and most of the nation's top 10 largest food chains, including Burger King and Dunkin Donuts, offer them.

With low wages and benefits, not many employees choose to participate in them since the cost is not really worth it.

The National Restaurant Association (NRA), a lobbying group that represents restaurant owners, conducted a survey in 2007 that found 75 percent of workers choose not to participate in employer insurance programs when such programs are offered.

In a letter describing the restaurant industry's views on the Affordable Care Act, the NRA says that if an employee gets sick and needs coverage, "she can simply wait until her employer's enrollment period reopens to purchase insurance," but adds that it is more likely the employee will "simply change jobs" and get on the new employer's health insurance plan.

Low pay and minimal or no benefits for employees in the fast food and restaurant industry should not come as a surprise. But what is different is how hard the industry's biggest companies are fighting for their right to offer none or minimal insurance.

Not all chain restaurants will be required to offer health care

In June, shortly after the Supreme Court ruled that the individual mandate section of the Affordable Care Act was constitutional, the heads of several restaurant owner lobbyist groups voiced grave concern.

"The [Affordable Care Act] imposes heavy mandates on employers using punitive penalties for noncompliance," said Rob Green, executive director of the National Council of Chain Restaurants, according to Nation's Restaurant News. "The law will particularly damage the chain restaurant industry, which operates on thin margins and cannot support costly government-imposed mandates.

In August, representatives of Burger King, Subway, and McDonald's met with lawmakers in Washington to complain about the new healthcare law.

"Many of our franchisees will struggle with how to reconcile the financial implications…and will likely take other measures to reduce costs," said Steven Wiborg, president of Burger King's North American division, according to the Wall Street Journal.

And more recently, both Papa John's and Darden Restaurants, the corporate group that counts Olive Garden and Red Lobster as part of its restaurant stable, said the healthcare ruling will cause employee hours to be cut.

The Affordable Care Act requires businesses of 50 or more full-time employees to offer a health insurance plan or pay a $2000 a year fine for each employee they have after 30. Therefore, not only mom and pop restaurants won't be required to offer health insurance unless they have more than 50 employees, but some commercial franchise owners won't either, since it is an industry that mostly relies on part-time employees.

Since volumes of franchises differ wildly depending on location and volume, as well as personal style of owners, it is difficult to determine exactly how many employees franchise owners will need to cover. But on average, a Papa John's franchise has 26 employees, including eight full-time and 18 part-time, according to WorldFranchising.com.

In order to be required to provide healthcare, an owner will likely own at least five or six franchises and have to offer insurance to about 50 employees.

Subway restaurants have even fewer employees: each franchise operates with an average of 12 workers, including two to three full-time and six to ten part-time. With the 50 full-time employee minimum, an owner will likely have approximately 10 Subway restaurants in order to reach the 50 full-time employee level.

McDonald's made headlines in 2010 when it publicly criticized the Affordable Care Act's possible effect on its business, claiming the health insurance mandates would cost each restaurant between $10,000 and $30,000 a year.

The average annual profit of a McDonald's franchise is around $1 million.

Despite the concerns of chain restaurants, the industry is expected to grow by several billions of dollars over the next four years, according to IBISWorld and the Bureau of Labor Statistics.

In addition, the companies that have voiced the loudest concerns about healthcare requirements have also announced plans to grow substantially in the coming years.

Darden restaurants announced in October that it plans to open 500 new restaurants and add 50,000 new jobs over the next five years.

And Papa John's plans to open 1,500 restaurants worldwide, including 300 in North America

Copyright 2012 Raycom News Network. All rights reserved.

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