Moderated by Rick Badie
Higher menu prices. Fewer work hours and jobs. Zero expansion and possible closings. This, writes a local franchiser, will be the potential impact in the restaurant industry of health mandates under the Affordable Care Act. But the co-founder of a workers’ advocacy group suggests that businesses can profit by taking care of personnel.
By Aziz Hashim
More than three years into our jobless “recovery,” 12.1 million Americans are still out of work. Nearly 23 million have stopped looking or can’t find full-time work.
The labor participation rate is 63.6 percent, the same level we saw in 1981. Employers are only adding slightly more jobs per month needed to keep pace with normal labor-force expansion.
So why did the unemployment rate go down below 8 percent last month? In large part, due to an increase in part-time work. While the drop in unemployment may seem completely positive, there is an underlying problem for small business owners due to Obamacare.
As employers begin to make their growth plans for the next year, the true costs of Obamacare have started to sink in. They threaten much of the growth forecast in businesses like mine, a franchise of pizza, burger and chicken restaurants that include Atlanta-based Popeyes Louisiana Kitchen. I want to grow my business and add more locations. Obamacare penalizes me every time I add a full-time worker to my franchise.
The employer mandate forces employers to provide coverage or pay a penalty once they reach the 50 full-time-employee threshold. Employers face a decision of closing a business, eliminating jobs, or shifting workers from full- to part-time to avoid the law’s penalties. We are likely going to choose the latter option.
In the franchise industry, there are thousands of multi-unit franchises like me who are put at a competitive disadvantage by the law’s employer mandate. This threatens growth in our industry. In cases where a franchisee owns and operates multiple locations, the law treats these firms as one company for tax and health-care purposes.
Suppose a multi-unit franchisee owns four establishments with 15 full-time employees each. Under the law, this multi-unit franchisee will be treated as a single firm with 60 full-time employees. The employer will be required by law to provide health care benefits for all employees or pay a fine of $2,000 per full-time employee per year. If these four establishments were owned and operated separately, they would be exempt from the health care requirement.
If these four separately owned businesses choose to offer health insurance, they would in many cases be entitled to a tax credit, making this an even further disadvantage for multi-unit ownership.
Businesses cannot operate at a loss for an extended time. That is the choice this law may force companies to face. Another often-overlooked factor is that many businesses will have an added incentive to become more automated and employ fewer workers. Utilizing automated check-out counters and purchasing new machinery are options we must consider to reduce the number of employees and remain profitable under these mandates.
Business owners like me who want to continue to expand would feel more confident about expansion and hiring plans without Obamacare. The only way to change this is by repealing Obamacare in its entirety and starting over with market-based solutions.
Aziz Hashim is president and CEO of Decatur-based National Restaurant Development, Inc.
Health care can help stabilize workforce
By Saru Jayaraman
There’s been a lot of talk about the recent announcement by Darden, the world’s largest full-service restaurant company and owner of Olive Garden and Red Lobster, that it would reduce workers’ hours to avoid having to provide health coverage when the Affordable Care Act goes into effect in 2014.
None of the coverage mentioned the impact on one key stakeholder group: consumers.
The Affordable Care Act (ACA) is a great step to ensure that people who touch our food are not sick, making sure that we don’t get sick as well. Darden claims the ACA is forcing the company to reduce its employees’ hours to stay afloat.
Moreover, the National Restaurant Association would have you believe the industry is going to collapse if it actually provides workers with genuine health-care access. There are plenty of great employers in America already providing benefits.
For the last three decades, Zingerman’s Community of Businesses in Michigan has been providing up to 80 percent of workers’ health care premiums on a comprehensive health care plan. Zingerman’s started as a two-employee deli in 1982. It has grown to an award-winning company with nine businesses that employ 575 workers and realize more than $40 million per year in revenue.
How? Zingerman’s was committed to working benefits into its business model from the start and heard workers’ input in choosing the plan.
Says Zingerman’s founder Paul Saginaw, “What do you get from it? You get a stable workforce. You get a workforce that can stay healthy. You get someone who feels good about the company and is out there trying to help the company be successful. The benefits are enormous. So now you figure out how to make it work.”
Everyone agrees health care costs are high. Saginaw believes a government-funded plan would be best. Without that, Saginaw needs and wants his employees to be healthy, for the sake of his workers and customers, and for his own bottom line. His workers say their customer service is better because they feel secure.
In fact, restaurants in the whole city of San Francisco have had to contribute toward a health care fund for their workers since 2008. Business is booming.
The organization I direct, Restaurant Opportunities Centers United, puts out a consumer guide on which restaurants provide benefits like paid sick days and which don’t at www.rocunited.org/dinersguide. We should support restaurants that do and let others know they shouldn’t cut corners because we put our health in their hands every time we eat out.
Saru Jayaraman is co-director of Restaurant Opportunities Centers United in New York.