Why I Predict Papa John's Pizza is Going to Start Tasting Nasty

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This week, Papa John's CEO John Schnatter announced that if the Patient Protection and Affordable Care Act rolls out as planned in 2014, his strategy is “of course … to pass that cost on the consumer." Other chains, like White Castle and Burger King (where the lettuce-stomping pictured here took place), along with the National Restaurant Association, have criticized the healthcare legislation for what they see as an impediment to restaurant growth.

The cost to Papa John's for providing health insurance for all its full-time employees will, in Schnatter's estimate, result in an increase of .15-.20c per order. It's interesting to consider what the fallout would have been if Schnatter had simply passed what seems like a miniscule amount of money onto consumers, without announcing it. But, putting that aside, it's also worth speculating about how many employees at Papa John's this really affects since the law only pertains to full-time employees and to employers with 50 or more (most of Papa Johns restaurants are franchised, and it's not likely that franchisees will have many full-time employees). And, I'm figuring the Papa John's corporate office already offers health insurance to full-time employees.

In any case, it seems to me that Mr. Schnatter had two options. As is clear in interviews with him and a number of Papa John franchise owners, he's chosen the former, but it's worth considering the options in any case:

At all costs, avoid offering health insurance to full-time, previously not covered employees.

• Make sure all existing part-time employees work an average of less than 35 hours a week.
• Fire all existing full-time employees and divvy their jobs up among two or more part-time workers.
• Pay the $2,000 fine per employee (after the first 30 employees) to whom you would otherwise be offering health insurance.
• Reduce store hours.
• Only hire employees with other sources of health insurance (under age 26, over age 65, former military, etc.)

Or, leverage the health care requirement to drive sales and service.

• Embrace the fact that consistent employment (e.g., full-time, in many cases) and healthcare benefits, together, position companies to hire and retain the best employees.
• Build an employment brand and attract candidates - or build an internal messaging campaign - around an organizational culture focused on employee health and wellness.
• Retain the best employees through, among other things, a robust healthcare benefit offering. According to a Towers Watson report on Healthcare Reform, "Health care reform presents unprecedented opportunities for employers to press the reset button on their total rewards proposition."

I've read a lot of commentaries suggesting that healthcare reform will have no impact whatsoever on talent attraction and management. But logic tells me: if a company is truly going to take dramatic and highly visible steps to ensure they do not have to offer healthcare to select employees (e.g., cutting their hours, eliminating full-time jobs, reducing business hours, etc.) - then they better be prepared to deal with an even more disengaged and demotivated workforce. Not to mention publicity that could create a firestorm among a certain half of the country.

It would be particularly ironic for companies in the service industry - whether or not the CEO's income and lifestyle borders on the obscene.

So there you have it. It's undoubtedly a highly political discussion. But I thought I'd add my two cents nonetheless. Comments?

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