A call to political action was sounded in the opening minutes of the 2010 Multi Unit Foodservice Operators conference Sunday by a restaurateur and trade and lobbying group officials who have studied the new federal health care reform law.
“This law clearly raises the cost of employees,” David French, of the International Franchise Association, said of the Patient Protection and Affordable Care Act, or PPACA, during the presentation, “Health Care Reform: What Does it Mean to Your Company?”
The panel moderated by French was one of four first-day educational sessions at MUFSO, a Nation’s Restaurant News conference held this year at the Gaylord Palms Resort in Orlando, Fla. More than 750 executives are expected to attend.
Other sessions at MUFSO Sunday covered restaurant makeovers, menu engineering and a lively discussion among executives of the companies that were the 2010 winners of NRN’s Hot Concepts! awards.
Health care reform forces a call to industry action
That the new federal health care law is going to increase payroll costs is one of only a few things clear about the measure, according to French, who is the IFA’s vice president of government relations. His fellow panelists included Rick Berman, president of the lobbying firm Berman & Co., and Scott Womack, president of Womack Restaurants, a 12-unit franchisee of the IHOP family-dining chain with units in Indiana and Ohio. They said the provisions within the 2,700-page PPACA are not fully understood because tens of thousands of pages of regulations are still to be written to fulfill the stated mission of expanding health care coverage for Americans through the law being phased in over four years.
Womack said his analysis suggested it will cost him about $8,000 a year per worker to insure the estimated 400 employees across his company that apparently will be covered by the new law. He indicated that he might have no choice but to pay the annual penalty for not providing insurance, which amounts to about $2,800 per worker, if tax is included, or about $56,000 per store per year.
“That’s a huge number,” Womack said. “That accounts for all of my free cash flow."
He earlier pointed out that the industry was particularly vulnerable to harm from the new law because it is a low-margin, high-labor business with relatively low average revenue per employee of about $58,593.
“We’ve got to get engaged politically,” Womack said.
Lobbyist Berman said that without a change in political power, he did not believe there is a likelihood of significantly modifying the law, such as by removing employer mandates to leave a more modest package of consumer-sought reforms, or requiring insurers to cover people with pre-existing conditions.
“But I think there could be a different Congress and a different president [before 2014], which is what I really think Scott was talking about when he said we need to get more politically active,” Berman said.
French, who started the presentation by painting a picture of annual political wrangling for some time to come over implementation or funding issues tied to the new law, agreed about the need for “mobilizing” industry resources and political will.
“We’re headed for fights over resources with folks who do a better job in the mosh pit” of political lobbying, French said.
Hot Concepts! award winners talk financing
During a panel discussion among 2010 Hot Concepts! award winners, Mark Begelman, chief executive of Pizza Fusion, and Randy Dewitt, chief executive of the Twin Peaks casual-dining chain, both said that while the recession technically is over, it remains a challenge to find financing for some franchisees.
Begelman noted that financing is available, but with much higher qualifying requirements, which could make it difficult for the small chain to realize its goal of opening more than 200 restaurants by 2015. He indicated that the chain has landed some heavy hitters for large deals, such as former Quiznos president Stephen Shaffer, who he said has signed a 192-store deal. But the overall difficulty of getting funding for smaller or less experienced franchise group has prompted the franchisor to rethink its growth strategy and start opening corporate restaurants.
DeWitt said that his chain’s positive store-level economics, aided in large part by its strategy of converting existing restaurants at about half the cost of ground-up development, aids it in its hunt for franchisee financing.
The other Hot Concepts! winning chains were Cooper’s Hawk Winery & Restaurant and Shake Shack.
Contact Alan Liddle at [email protected].