The Truth: Papa John's and Obamacare (Financial breakdown)

Recently Papa John's founder John Schnatter made a claim that he would have to cut back his workforce hours and charge 23 cents per pizza to account for providing full workforce health insurance under ObamaCare. We are going to take a moment to dissect his claims and examine his claims. During the fiscal year of 2011 Papa Johns reported a gross income of 1.22 billion dollars, with a gross income of $454.13 million in profits after all debts and expenses are settled.




Papa John's has reported that it would cost the franchise $5 to $8 million dollars to cover employees under the new law. Papa John's as a chain has shown steady profit increases every year dating back to 2007, when they first crossed the billion dollar mark for yearly sales. Considering the scale wage the average Papa John's employee earns makes this a revolving door of a business, one where there is very little incentive to remain employed there. The cost of hiring, screening, training, and replacing are astronomical. Health insurance coverage has proven fruitful for companies who often cannot afford to pay their employees much money per hour, a case example of this is Starbucks who has good employee retention rate. This eliminates the expenses of the aforementioned, and actually makes a company more profitable. On average corporations state it costs them on average between $1500 and $4500 per employee to go through the entire process. So let's do some math, lets say Papa John's hires 1,000 new workers per year and 700 leave, that means they wasted exactly $1,050,000 (At the low rate of $1500 per) on those employees who did not stay with the company long. Now with a perk such as insurance coverage lets say only 300 leave per year they save $1,050,000 on hiring expenses. Following the strategy and numbers in this case of others such as Starbucks it makes sense to have this perk. 1,000 being an example which is considerably on the low end considering each Papa John's chain has per average shift a total of 8 to 12 employees and 3,900 stores the number could be considerably higher. If the case was they lost 4,000 employees per year whom they had to replace it would easily cover the cost of this healthcare plan just to retain those same employees. The fact remains that Papa John's does not have to cut it's workers hours, nor raise it's prices. $8 million (their high number) to cover the health plan is 2% of it's net profits per fical year, hardly worth the claims made by Mr. Schnatter. The fact remains most companies shouldn't be complaining about the cost because the alternative in raising the minimum wage in the U.S. would cost them considerably more.

Numbers provided by MarketWatch, click here to view them
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