Papa John’s CEO: Health Care Law Will Add to Pizza Price
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Too often when talking about the health care law, the Patient Protection and Affordable Care Act (PPACA), we get lost in abstraction and miss the real-world costs this law will have on businesses and the economy.
Let's continue the edible theme around health care that started with my post on lessons to be learned from The Cheesecake Factory. Now, let's talk pizza.
There are those like Slate’s Matthew Yglesias who brush it off [via memeorandum]. It’s easy to do when you’re not running a publicly-traded company, but a few cents on every pizza adds up. Let’s do some back-of-the-envelope calculations. Three billion pizzas are sold yearly according to the National Association of Pizza Operators. Since most pizza shops are roughly the same in their cost structure, let’s assume that Papa John’s increased cost per pizza from health care law will be the same across the entire industry.
$0.11–$0.14 times three billion pizzas equals $330–$420 million yearly because of the health care law. And that’s just from pizza.
Recently the king of fast food, McDonald’s, estimated that the health care law will cost each of their U.S. restaurants $10,000-$30,000. Based on a little over 14,000 restaurants in the U.S. as of 2011, that means the health care law will cost McDonald’s (including franchisees) between $140 million and $420 million.
That might not mean much to some people (I don’t know how), but it’s real money. Will it crush Papa John’s and McDonald’s? Not likely, but this is millions of dollars that won’t go into innovation, investment, or hiring. All to fund a health care law that won’t deliver on its promises.