Monday, November 26, 2012

PAPA JOHN'S POSTAL SERVICE-PART 1


By now, we have all heard about John Schnatter's (Papa John's CEO) "Obamacare" comments. 

First he complained this August over the projected 11-14 cents per pizza pie he says it would cost to give his employees the required healthcare under the Patient Protection and Affordable Care Act ("Obamacare"). As reported by Politico, Schnatter offered the following comments to his shareholders:
"We're not supportive of Obamacare, like most businesses in our industry. But our business model and unit economics are about as ideal as you can get for a food company to absorb Obamacare,"1
Schnatter added:
"If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect our shareholders best interests,"1


Then the day after President Obama won re-election, Schnatter stated some employees' schedules may get cut to under 30 hours/week.2 Under the new law, employers are exempt from the requirements of providing healthcare to part-time workers, which the law defines as less than 30 hours/week.

As a CEO, it is generally bad business to politicize your brand. You are bound to offend millions of potential customers. The optics here with Schnatter's Papa John's are even more dangerous. Politicizing "Obamacare" over complaints that it will cost 11-14 cents per pizza to give healthcare to your workers, while simultaneously running a promotion to give away 2 million free pizzas is nothing but bad publicity.

Look at the lavish mansion Schnatter lives in, complete with private golf course and 22 car garage. The aerial photo of his estate is making the rounds online faster than cats asking for cheeseburgers. Contrast that image with Schnatter's complaint that up to 14 cents per pie is such an unreasonable burden to ensure healthy workers, and even Mr. Burns wants to boycott Papa John's.

Even worse, consider that Schnatter's mansion was the site of Romney's fundraiser where Mitt offered a slew of financially elitist statements including the now infamous 47% quote. The embedded video here includes the question to Romney that set him up to give his 47% soliloquy.
"For the past three years, all everybody's been told is 'Don't worry, we'll take care of you.' How are you going to do it, in two months before the elections, to convince everybody, you've got to take care of yourself?"
The video is both filmed and purposefully obscured to ensure no identities are clear beyond Mitt Romney's, so we don't know who actually asked the question. The one person we do know was there besides Mitt however, is John Schnatter. The very real possibility that it was John Schnatter himself who asked this question is undeniable.



Regardless of who asked the question, consider that the 11-14 cents per pie is Schnatter's assertion, with no math offered to support that claim. Forbes' staff writer Caleb Melby does the math for us.3 Surprise. His results show far less cost per Papa John's pizza pie to fully implement "Obamacare". About 3.4 to 4.6 cents per pie.

Either way, when considering just how burdensome "Obamacare" really is on Papa John's business, recall Schnatter's quote from August:
"We're not supportive of Obamacare, like most businesses in our industry. But our business model and unit economics are about as ideal as you can get for a food company to absorb Obamacare,"1
There is no doubt that despite all the tax breaks in the Affordable Care Act for small businesses that provide healthcare to their employees, insuring more employees will certainly not be free. Yet wherever the true maximum costs for Papa John's lays in between the two assertions of 4.6 cents and 14 cents, we cannot overlook that Papa John's has a history of gaining more money from customers, yet hiding those price increases through mislabeled "fees". Again, recall Schnatter's statement from August:
"If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect our shareholders best interests,"1
Try ordering a Papa John's delivery. They tack on a "delivery fee" of usually around $2-3. Sounds fair enough, only that "delivery" fee does not go to the delivery driver.4 It is instead a tactic to shallow out costs and pass that onto consumers in order to protect shareholders' best interests. 

Note the effect this "delivery fee" tends to have on the delivery drivers when customers refuse to tip them, thinking that the fee added on to their bill has already taken care of that. So is it unrealistic to think that Schnatter would simply use "Obamacare" as an excuse to somehow raise prices and/or cut costs?

No. Of course not. He's already been blaming others for mislabeled price increases for many years.

Put all that together and no wonder there has been great backlash against Papa John's.  

The irony here is that over the last 4 years, Papa John's has experienced tremendous growth. Since President Obama's inauguration, the stock price has more than tripled! Yet since Schnatter's talk of potential cutbacks in employee hours to get around the "Obamacare" requirements, the backlash has already done damage equal to the entire 8 years of Papa John's stock growth under President Bush. The specifics are laid out here.5 Graphics and all.

Granted, that stock price drop now has two drivers. First there is the consumer backlash to Schnatter's comments and priorities. There is also now worry over a $250M lawsuit against Papa John's for illegal text message spamming of their customers in 2010. Even though the lawsuit is likely to fail because it was a third-party company that Papa John's hired to do the ads for them, the fact that this lawsuit has already passed it's first hurdle only acts to hurt Papa John's stock price. As Schnatter offers concerns that 14 cents per pizza pie is too heavy a burden, compare that to the effects (both best case and worst case scenario) of this lawsuit.


Click here to see the math


Schnatter is not the only food chain CEO to politicize "Obamacare" and announce they will do anything to ensure any "Obamacare" related costs come from employees and customers and not their profits.

Take Jimmy John's Gourmet Sandwiches CEO Jimmy John Liautaud. In an interview with Neil Cavuto on Oct. 15 this year, these extracted quotes follow the same talking points as Schnatter's comments, only he is first upfront about how well his business has done in the last 4 years:6
"the last four years have been very good to us"
"60,000 hourly workers"
"bring 'em down to 28 hours"
"there's no other way we can survive it"
"we think it will cost us 50 cents a sandwich"
Given what we already know about Papa John's, these statements from Liautaud sound awfully suspicious, especially the "no other way we can survive it" and "we think it will cost us 50 cents a sandwich" comments. However, without any math being shown, all we can do for now is be suspicious.

Given that these men are the CEOs of their franchises, they deserve more scrutiny over their entire brand name, as they generally have the power to pass policy down the chain from their minds to implementation by individual franchisees.

Already "experimenting" with the no full-time employees approach is Darden Restaurants.7 Among others, the company operates the Red Lobster, Olive Garden and Longhorn Steakhouse chains. They are now testing a 28 hours/week policy for all employees at "a select number" of restaurants in four markets.

Consider though the drop in labor costs they have already squeezed out. In 2010, Darden's labor costs were 33.1% of sales. It has steadily dropped to 30.8%.

3 out of 4 restaurants surrounding this mall are Darden restaurants.


But did they gain that extra profit through unethical labor practices?8 It's possible. Especially if you consider the charges and practices covered in this July article about another one of their restaurants, Capital Grille. They discuss underpayments, forcing workers to work off the clock, denial of overtime, and using servers' tips to supplement the pay of other non-tipped workers. Will such practices be pushed to the limits to squeeze every last penny from labor costs across all Darden restaurants? If so, will they then blame it on "Obamacare"?

Note that other individual restauranteurs are jumping on the "I'll cut employees' hours" bandwagon as a protest to "Obamacare".

Zane Tankel runs 40 Applebees franchises. While not CEO of the entire Applebees franchise system, Tankel is CEO of Apple-Metro, managing 40 New York area Applebees restaurants. He has publicly noted that he is considering the reduction in worker's hours for the Applebees restaurants he operates, but has yet to make any decision.9

It is fair to note that in the same interview, Tankel also offers a swirl of conflated comments over unions. He says that when he saw the President of the United Steelworkers Union speak, he likened it to him having just invaded Benghazi and won. He goes on to summarize that it was "truly a declaration of war", repeating that the Union President said he won.

Additionally, Tankel spoke of President Obama. "I think he's got to sit down and he's got to get in a closet, a dark closet.... Forget about dinner with Malia and his wife and all the kids. Invite the various parties over to the White House...Have them for dinner instead of quitting and going to dinner with family."9

Now I've heard the saying many times about locking differing parties in a room until they hammer out a compromise. But I've never heard someone proclaim that anyone, let alone the President of the United States, has got to get in a closet, let alone a dark closet. Is this a New York colloquialism I am not familiar with, or is the statement something else? I honestly cannot say.

Then there is John Metz, a Denny's franchisee. He openly commented about adding a 5% Obamacare surcharge to every bill, suggesting that customers could accordingly reduce their tip to their server.

Immediately afterwards, other Denny's locations saw drops in sales and got angry phone calls about Metz's comments.

Denny's CEO John Miller was not too pleased about that. In a Huffington Post article 10, he says:
"...his [Metz's] comments suggesting that guests might reduce the customary tip provided to their server as an offset to his proposed surcharge are inconsistent with our values and approach to business throughout our brand."
Currently, no such surcharges exist, nor are there any plans at the moment for any such Obamacare surcharge at any Denny's. Especially given the immediate backlash at the very mention of it by Metz, the idea is not likely to resurface.

This highlights the complicated interplay between corporate brand as a whole and the individual franchisee. Metz's Obamacare surcharge comments hurt other Denny's franchisees, even though they had no connection to Metz or his comments. Even Schnatter as CEO of the whole Papa John's brand has done damage to franchisees, many of whom ironically, are already exempt from providing healthcare to their employees by being small enough to have fewer than 50 employees.

But as the handful of restaurant companies and franchisees have been making headlines with their threats of surcharges and cutbacks in employees' hours all in the name of protesting "Obamacare", so has the backlash against such politicized actions. The backlash has been growing faster than the rate of business owners jumping on the anti-Obamacare bandwagon.



Note Schnatter's recent post Huffington Post contribution - "The Real Scoop on Papa John's and Obamacare".11 He clarifies that he never said he was going to cut jobs or close stores in response to "Obamacare". Frankly, I never saw that reported anywhere, but we all know there are many sources of really bad "reporting", so nonetheless, the clarification is not only just, but almost certainly factually true. Just as I'm sure is the following quote:
"And, we have no plans to cut team hours as a result of the Affordable Care Act."
Of course not. Even if all you did before was contemplate the idea and not plan it, it's already been shown that the potential backlash may cost even more than any potential savings.

But trying to give the appearance that the idea of reducing all employees to part-time status was never a serious consideration from his standpoint as CEO is where the offered transcription belies the goal.

When asked if franchise owners would do this, Schnatter responded:
"Well, in Hawaii there is a form of the same kind of health insurance and that's what you do, you find loopholes to get around it. That's what they're going to do."
Schnatter then clarifies that the reporter was asking him wether franchise owners would do this, not him as the CEO. The distinction is much harder to make when you as the CEO then answer "It's common sense." and offer no clarification that you as Papa John's CEO do not support the idea.

Nonetheless, Schnatter has now gone on record in his own words stating that he has no plans to cut workers' hours in response to the Affordable Care Act. That statement however does not negate the original statement he offered on "Obamacare" back in August:
"If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect our shareholders best interests,"1
If you noted the title of this piece, you may be asking by now what does all this have to do with the Postal Service. For the answer, be sure to read the next Liberal Heart, Moderate Mind post - the second half of this piece, coming soon...






2 - Jessica Lipscomb reported in Naplenews.com- http://www.naplesnews.com/news/2012/nov/07/papa-johns-ceo-obamacare-likely-to-raise-costs/

3 - http://www.forbes.com/sites/calebmelby/2012/11/12/breaking-down-centi-millionaire-papa-john-schnatters-obamacare-math/

4 - http://tipthepizzaguy.com/qna/2dollarfee.html

5 - http://www.mediaite.com/online/papa-johns-pizza-stock-price-tripled-under-president-obama/

6 - http://www.foxnews.com/on-air/your-world-cavuto/2012/10/16/jimmy-johns-founder-business-owners-unsure-future

7 - http://articles.orlandosentinel.com/2012-10-07/business/os-darden-part-time-workers-20121007_1_darden-restaurants-health-insurance-olive-gardens

8 - http://www.inthesetimes.com/working/entry/13585/restaurant_workers_target_unsavory_labor_practices_at_darden/

9 - http://www.youtube.com/watch?v=OtrcxQwdquU&feature=player_embedded

10 - http://www.huffingtonpost.com/2012/11/20/john-metz-dennys-obamacare-surcharge-_n_2146735.html

11 - http://www.huffingtonpost.com/john-h-schnatter/papa-johns-obamacare_b_2166209.html

Monday, November 5, 2012

DON'T VOTE!


I've got friends on the left, and I've friends on the right
I've got friends with a great libertarian plight
Of not having a candidate perfectly suited
To implement instantly everything rooted

In policy preferences seen as ideal
So they offer a statement that's simply surreal.
A phrase that they like to repeatedly claim -
That all of their choices are simply the same.

A rhetoric running now rampant and wild
That says 'cause our choices are too tame and mild,
A stand we should take - and the rest I do quote -
"The best choice of all is to simply NOT VOTE!"

Both candidates suffer big money donations
So surely they're equal in needing damnations
As issues exist where they both are remiss
Then everything else they will simply dismiss

But in tax codes and health care and energy sources
For millions of people the outcome of course is
No trivial matter they just can ignore
For they deeply impact all their lives to the core

Medicare, Medicaid, Social Security
Tested by ideological purity
FEMA and help to the poor through food aid
One candidate strengthens, the other would raid.

One views these programs as social contracts
The other as means to extract for more tax
breaks for status quo wealthy at any expense.
The other guy thinks this just makes no damn sense.

One will undo real accomplished big missions
And quickly return pre-existing conditions.
The other stands firm in these patient protections
Rather than health care through ER collections.

Rights of women is something that one would ensure.
The other would weaken and fully obscure
From day one all the progress that women have gained
And sign legislation to keep them restrained.

The candidate paying just 13 percent
Has balls to ask where all the tax money went.
Entitlements all - he says we must cut
As he lives in extreme economic self glut

The election DOES matter, the differences glaring
No matter the claims some are generally swearing.
For millions of people the stakes are quite high
To say any different is simply a lie.

So on who wins the ballots contested so fierce,
Illusion of similar outcomes let's pierce...
Or if you prefer this deceit to promote
Then sure, by all means, then really DON"T VOTE!

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Saturday, November 3, 2012

Women and the GOP - a poem

I just finished animating this poem I did earlier this year. In the style of Dr. Seuss, the poem expresses my disgust with Congressional Republicans' focus not on jobs, but women's reproductive choices and access to such services.




The poem

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