John Schattner, CEO of Papa John's pizza, has made a splash in recent weeks by deriding "Obamacare", and threatening higher prices and/or lay-offs as a result of it. Schattner has said if he doesn't lay people off, he'll need to make up the difference by increasing pizza costs by 10-14 cents per pizza. This because, by his math, new regulations imposed by healthcare reform will cost his company $5-$8 million dollars a year. Specifically, Shattner points to the Affordable Care Act provision which stipulates full-time employees (30 hours or more per week) at companies with more than 50 workers need to be provided health insurance.
While there has been much philosophical discussion about this, the numbers themselves haven't been discussed with much detail. A recent article in Forbes magazine sought to remedy that, and delved into the mathematical implications of Shattner's claims. Channeling Bill Clinton, we'll call it the Schattner arithmetic model.
While the article itself highlights some interesting points regarding Schattner's alleged necessity of a 10-14 cent per pizza price increase due to Obamacare, it was very difficult to move beyond one of the first mathematical points the author (Caleb Melby) makes. Specifically, this:
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.
Yes, that's correct. Arbitrarily taking as 100% accurate Schattner's assumption that Obamacare will cost his company $5-$8 million dollars a year, that $5-$8 million dollars represents less than a 1% increase in the company's yearly expenses. And, further it represents less than 10% of the company's profits (profits of course being money leftover AFTER salaries, occupancy, materials, production cost, etc.).
This is the parasitic mindset which continues to hamstring the business sector. The well-being of the employees whose hard work has made possible nearly 90 million dollars in annual profit isn't worth investing less than 10% of that profit back into. Nevermind the potential kickback benefit of a healthier, happier workforce; the linear numbers themselves are more than enough to make one's stomach churn. Employees are assets to be embraced by a company; not liabilities the cost of which should be be mitigated at every possible turn.
One has to wonder: could Schattner maintain his absurdly extravagant lifestyle if his company were *only* making 80 million dollars a year? Imagine the spoils Schattner would have to give up in order to further ensure the well-being of the employees who've helped him build his fortune.
And, not suprisingly, Schattner's using Obamacare to rake in even more profit, raising the cost of pizza substantially more than what is needed to cover what he says Obamacare will cost him:
So how much would prices go up, under these 50/50 conditions, if they were to fairly reflect the increased cost of doing business onset by Obamacare? Roughly 3.4 to 4.6 cents a pie.
And, while better supporting one's employees is obviously a deplorable use of money, giving away free pizzas apparently isn't:
In September, the company announced that it would be giving away 2 million free pizzas. That was, of course, a promotion designed to increase brand awareness and to invite consumers to try the brand — with the ultimate goal of selling more pizzas. Those giveaways can’t really be cataloged alongside sales that would have been made otherwise. But just in case you’re curious, that would be the equivalent of $24 million to $32 million in pizza revenue.
This is the place we've reached in American business. Flithy rich business Executives falsely blaming healthcare reform to become even more filthy rich, while throwing their employees under the bus to do it.
Funny: I haven't heard Pizza Hut, Dominos or Little Caesars claiming they'll have to lay people off or raise prices to continue doing business - I wonder why not?