- WHITE PAPERS
Papa John's second quarter earnings report last week stirred up conversation beyond financials. During the call, CEO/founder/chairman John Schnatter responded to an analyst's question about how the Affordable Care Act would affect his business when it goes into effect in 2014.
"From our point of view, Obamacare will cost about 11-14 cents per pizza, or 15-20 per order, from a corporate basis ... 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. Ergo, we have a high ticket average, with high frequency of order counts.
"Let's say fuel goes up – as it does from time to time – and we have to raise delivery charges. We don't like to raise delivery charges, but price of fuel is out of our control, as is Obamacare. If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect shareholders' best interest."
Those comments have since gone viral and many of Papa John's 2.4 million Facebook fans aren't happy about them. The page's wall is full of negative reactions about Schnatter's comments, calling them greedy and elitist.
"You've just lost a household of customers," wrote one fan. "How dare you try to play politics. Absorb the cost and deal with it."
"If you don't think that 15 - 20 cents per pizza is worth giving thousands of people health insurance, then I don't think your pizza is worth purchasing. You've just lost more customers," said another.
"Thanks for making that clear. Do you and your shareholders really not understand that taking care of the customer (and your staff!) protects your profits and builds your business' goodwill? Schnatter's declarations are just bad business and apparently he's too busy campaigning for Romney to notice that. So stupid," another wrote.
Although Papa John's has a few supporters within the majority of negative posts, the company was compelled enough to release a statement Wednesday evening on its Facebook page about the call.
It reads, in full:
"There's been a lot of buzz about some comments made recently by our founder regarding the potential impact of the Patient Protection and Affordable Care Act on our business. We certainly understand the importance of healthcare to our customers, our employees, small business owners and their employees.
As a publicly traded company, we were responding to a direct question from an analyst on our quarterly financial conference call about the anticipated costs of complying with the Act. When certain business costs increase – such as fuel, ingredients or employee healthcare – there is naturally an impact to the price of products and services.
The vast majority of Papa John's restaurants are owned by small business people, each of whom will be impacted in different ways by costs associated with the Patient Protection and Affordable Care Act. Papa John's remains fully committed to providing our customers with better ingredients and better pizza at the best value."
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