Pizza is just one kind of food that could have higher prices at restaurants because of the U.S. health-care reform law that largely goes into effect in 2014.
In a recent survey, Mercer reported that 46 percent of the hospitality sector predicts health-care costs to increase three percent or more in 2014. It’s because restaurant chains plan to pass the added costs onto consumers through higher prices.
For example, Papa John's International CEO, John Schnatter recently told shareholders that “our best estimate is that Obamacare will cost 11 to 14 cents per pizza,” according to a report from Crain's Business Insurance. That works out to 15 to 20 cents a typical order, Pizza Marketplace said.
Obamacare is formally known as the Patient Protection and Affordable Care Act of 2010.
In addition, a recent Papa John’s financial report warned the healthcare reform “could negatively impact our domestic system in future years as our company-owned and franchised restaurants may have to provide health care coverage that was not previously offered to certain part-time employees.”
Under expected provisions of the law, employers will have to pay $2,000 an employee if a single full-time employee (defined as someone who works at least 30 hours a week) is not offered healthcare coverage starting in 2014, according to news reports. It applies to employers with more than 50 employees so smaller franchises try to stay under the 50 employee limit. Restaurants and retail sector employees are the most anxious about the impact of the new law, according to news reports.
There is an added concern. Judy Nichols, a Papa John's franchise owner in Texas, says the provisions of law may keep her from opening more restaurants – which comes at a time when the United States has a lingering problem of unemployment. “I have two options, I can stop offering coverage and pay the $2,000 fine, or I could keep my number of staff under 50 so the mandate doesn't apply,” Nichols said in a statement published by the Huffington Post (News - Alert). In fact, the provisions of the law may cost somewhere her between $20,000 and $30,000.
Some franchise owners are also cutting back on employee hours to avoid having workers meeting the definition of full-time employees.
In a related matter, McDonald’s said Obamacare will cost each of its 14,000 franchises between $10,000 and $30,000 per year, according to
Bloomberg (News - Alert) Businessweek.
Burger King, Quiznos and Dunkin’ Donuts each have warned the provisions of the law may hurt its business.
The Journal also reported that some restaurant owners will drop their limited health-benefit plans and pay penalties instead of paying for the more expensive health insurance plan.
For franchises, it’s not clear if federal authorities will identify the number of employees based on the total number at all establishments or consider each establishment as a separate business unit, The Journal said.
In a related matter, under the health insurance reform, medical device makers must pay an excise tax of 2.3 percent from 2013, according to a recent report from TMCnet.
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Edited by Brooke Neuman