From an Ex CEO: Why John Schnatter's comments about a 20 cents add on are laughable.

[grantcart]

Last edited Fri Aug 10, 2012, 12:30 PM - Edit history (3)

Last week, John Schnatter, the founder and CEO of Papa John's Pizza, announced that the Affordable Care Act will raise the cost of his pizza 11 to 14 cents each, or 15 to 20 cents per order.

In 1988 I cashed in my retirement account and started a factory making leather furniture in Thailand and within 2 years we had grown the company to 450 employees and dominated the discount leather furniture market in Europe, replacing cheap discount production in Italy with better quality and lower priced product. IKEA was our largest, but not only customer and Ingmar Komprad came to visit our factory. We had Thai and Japanese shareholders, shipped more than $ 10 million a year, paid our workers 30% more than the market and had zero turnover. A few years later they took down the Berlin Wall and IKEA took our model to Poland where the inflated post liberation currency made labor virtually free and they could ship directly to their European stores, saving a 20% warehousing fee. We had signed personal guarantees on our loans we lost everything, house, retirement account. But I really enjoyed it, everyday was a different problem solving exercise.

I did learn however to look at markets like a CEO and I am continually shocked how idiotic statements by American CEOs are allowed to stand. Now I am not talking how their are idiotic from a public policy or morals point of view, as this one is, but how they are idiotic from a CEO point of view. I keep waiting for somebody with some business background to make the points in the national media but they never do.

Putting aside all morale, ethical, human issues regarding the wisdom of adding of dimes to a pizza so that the employees can have access to a doctor there are numerous reasons why they are just plain stupid from a CEO's point of view.


1. Marginal increase in costs are completely irrelevant.

The only thing that is relevant is are you going to get a cost disadvantage versus all of your competitors. Is Papa John's going to have to pay an additional 20 cents a pizza that other pizza makers are not going to have to pay? Of course not. So where's the harm? To think of it another way the direct cost of gasoline that goes up because say "President Romney attacks Iran and with 1/3 of the oil going through the Persian Gulf gas prices would go to $ 6.00" would have a much greater multiplier effect on Papa John's per pizza cost because not only would his raw material costs, direct energy costs and delivery costs would go up much much more than the lousy 20 cents he has mentioned. But Schnatter doesn't really care about this because he knows that if those costs go up for him then they will also go up for all of the other Pizza makers.

For this reason marginal increase in costs are completely irrelevant if they are applied to all the manufacturers equally, there is no competitive advantage or disadvantage, they are irrelevant to the manufacturer's position in the market place.

2. It eliminates one of his major benefit nightmares

Now Papa John's doesn't have to fight it out in the benefit wars where a competing company poaches his workers by offering better benefits. Working as a management consultant my first task was to ask the CEO what his major problems were. They were never the real problems but you had to let the guy ventilate. Sometimes they would say "unions" and this was never the case. Most of the time they were in prevailing wage bids so that the union rate had to be paid whether they were union or not. I would ask "since you are costing and paying on prevailing wage set by they government and your union now becomes responsible for discipline (if you had a problem with a particular worker he could simply notify the shop steward and they would send that pipe fitter back to the shop and get another one) where is the disadvantage? None.

By having a universally defined benefit Papa John's is spared the headache of trying to compete in the market place trying to convince workers that his companies health benefits are competitive with another company, they are now all going to be more or less equal.

3. It puts more disposable income into his customers pockets

What is Papa John's major problem? Disposable income in his customary base is declining. The Affordable Health Care Act will mean that when the working Mom has to go to the doctor and get breast examination or a new prescription her monthly budget isn't going to be wiped out. Now when she is on her way home from the doctor and doesn't have enough time to make dinner, she can order a pizza rather than feeding the kids breakfast cereal.

There is a famous story about how Ford increased his daily labor pay to $ 15 per day even though he had plenty of workers willing to work for half of that. He wasn't being generous, he needed them to be able to make enough money to buy a car.

I predict that eventually the management of Walmart will become big advocates for increasing minimum wages. They are coming quickly to the point where there are not that many quality locations to build new stores. They are trying to expand the range of quality products and services that they provide to get in more customers. But as the disposable income of the middle and lower class continues to disintegrate they will see (and I believe that they are already seeing) that the per trip ticket for their customers start to decline. In the stock market they are competing against other companies for investment and they are required to find ways to increase profits. For their domestic market they are fast approaching the point where the only way that they can increase profit is to increase the per ticket total of their customers buying and that can only happen if the minimum and working wages at the bottom increase.

4. Communicating a negative message to your employees

In addition to all of the above is the callous, heartless point that John Schnatter is communicating to his employees. He is saying I will not provide and I do not care if you have access to medical services and he is putting his lack of care with a price tag, 20 cents a pizza. Businesses can only be successful on the long term if a) their suppliers win b) their employees win and c) their customers win. If any of those three are threatened then the long term viability of the business is uncertain. Papa John's has now communicated to all of their employees that they are nothing more than cannon fodder and are completely disposable. This puts Papa John's at a competitive disadvantage in hiring and attracting the best workers, or keeping morale up. And he created this disadvantage without gaining any comparative bottom line advantage. It doesn't help your bottom line to alienate your employees, especially when you do it without actually increasing your bottom line performance, it is an unforced error.



Of course there is the whole moral, ethical and public policy point of view as well. But looking at it strictly from a business point of view Schnatter's comments rise to the level of a junior high school business class. If I was a major shareholder in Papa John's I would be worried about how competent a CEO was managing my investment.

The fact that the media simply passes on statements like this without challenging them simply shows again that they are becoming less and less professional with each election cycle and are completely intimidated by business people no matter how senseless their comments are.

[MannyGoldstein]

1. Great analysis - thanks for sharing nt

[Roy Rolling]

24. All good points

Maybe "Papa John" is following in the footsteps of his mentor Mitt Romney by putting his foot in his mouth on an issue as the very first step along the journey to no credibility.

[JaneQPublic]

37. Papa John has held Romney fundraisers at his KY mansion.

Romney attended, of course.

Big Ed showed video clips of Romney complimenting Papa John on scoring such a cushy estate.

Yes, it's clear to anyone that Papa John's pronouncement of a price hike had more to do with a lame attempt to help his bud Mitt than anything at all to do with business finances.

[grantcart]

57. thanks Manny

[myrna minx]

2. Thanks for posting this analysis. K&R

[rfranklin]

3. Especially good because it makes the point in "business" talk...

This guy knows what he's talking about because he's done it. Of course, as he mentions, the CEOs are as irrational as anyone else (despite their aspirations to cool and objective, steely-eyed analysis) and will insist that it is unions that are the source of all their problems.

It comes down once again to the screwing of the middles class in terms of wages. By starving us of wage increases commensurate with the increase in productivity, management has screwed themselves. It just takes a long time for them to realize what that uncomfortable feeling in their rear end is due to.

[unblock]

6. actually, ceos are more irrational than most.

the stupid standard construct has a single person being at the top of a power pyramid, which then requires the ceo to make many, many quick decisions based on limited information and limited time to digest that information on a broad range of topics.

most people decline to make decisions on such a basis because they know they'll screw up out of haste or lack of expertise.

not ceos.

they arrogantly make those calls, typically after getting support from a subordinate for the position taken so they can blame a bad outcome on their bad advice.

except for very small companies, the modern concept and implementation of the ceo role is itself entirely irrational.

[grantcart]

9. Actually CEOs are usually very rational in the area that they first progressed in

If they came up through Sales then they are usually very rational on Marketing, if it was on manufacturing then it is on production, if it was accounting then it is on the accounting side.

One of the main problems is that more and more CEOs come up from the accounting side and are completely lost when it comes to the human dimension of their business, either with customers or employees.

That is why a good board of directors is critical to a well rounded business, but of course if the board is full of accountant types then the problem is magnified.

Steve Jobs is a rare example of a CEO that came up on the design side and it shows that APPLE continued to out innovate their competition. He was a strong enough leader to get and listen to other strong executives on the finance and accounting side so that they continued to have a well balanced business model. Most entrepenuers don't.

[unblock]

33. sure, most ceos have some area of competence, even expertise.

my issue is that they're called upon to make decisions on too many things in too many areas, and it's impossible to be sufficiently expert in all of them, unless it's a very small company (and even then it's a remarkable feat).

then again, many ceos quickly fail to realize how quickly their expertise can become obsolete. it's quite easy for a programmer who eventually becomes ceo of a software shop to fail to realize that coding practices have changed, the engineering trade-offs that were present "back in the day" are no longer at play, etc.

just as an example, when i used to program i'd spend quite a lot of time optimizing code and databases to speed things up. nowadays memory is so dirt cheap the better solution often is to simply buy more memory. not the greatest example in the sense that most ceos can easily figure that one out, but there are other changes that are harder to grasp.

good ceos adapt and evolve, but many ceos don't.

[happyslug]

53. Studies have shown, the better CEOs do almost no work.

The Key is setting up an organization that basically runs itself. The CEO coordinates the various parts, but most times once set up, the parts work together. Lets look at GM for example, does the CEO decide what model to build? Marketing does. Does he decide HOW the car is to be built? No. his engineering department does. Does, he decides how many cars are made? No that is up to distribution, based on how many are sold. Does he determine the pay of his union workers? No that is done by his personal department and the UAW (and for NON-union workers, set by the Personal Department based on input from the various other parts of the company). Does the CEO determine what to pay for material? No that is done by purchasing, based on what the factories making the cars need.

So what does the CEO do? First he makes sure the above interactions are going as smoothly as possible, and if not why not. The CEO does this by making sure he hire people who know what they are doing in their job AND can work with others. Another thing the CEO does is to watch the market, to make sure the system he is the head of can produce what the market wants, but again he is assisted in this by various parts of GM, from marketing to production to distribution to design.

Now, in smaller companies many of the above jobs the GM CEO hires people to do are done by the CEO, but the main thrust of the CEO is to make sure the system in working. That is his main function. Sometime the CEO may look into some detail of his business but only if it is important to the business as a whole (An example of this Stalin's decision to revert to bolt action rifles after the German Invasion, NOT that the bolt action were better, he was looking at how to produce the most rifles for the most men, once that was achieved he left the Red Army re-start work on going to an Automatic weapon).

My point is the better CEOs rarely makes rush decisions, generally because the Company they are heading is set up in such a way such decisions are very rare. Does Lordstown go to a Tripe shift? That is up to Lordstown and Sales, Sales pointing out it can sell more Cars if it had cars to sell, Lordstown to produce those cars (I bring this up for doing the 2008-2009 car slump, Lordstown was producing the Cobalt, the GM car with the best fuel mileage that sat 4, the rest of GM was cutting back, but Lordstown went to a triple shift, this was NOT decided by the CEO, but by sales working with distribution, Lordstown and other supplies).

Now, the CEO gets to decide what is built where, but often only after into from purchaser (Where parts and other materials used in the cars comes from), sales, distribution and other department have had their say (and often the decision is made by these departments acting together, with the CEO only resolving any disputes between them).

Thus the CEO rarely makes any decision, let alone rush decisions. A Good CEO set up a process that makes most decision itself, even most "rush decisions". What the CEO is concerned about is the general direction of the Company, seeing what sells and what does not, directing the company in ways to make money, but the day to day, or even month to month work done by others.

[justiceischeap]

4. When I read his comments, I thought, I'd gladly pay an extra 20 cents

so his employees can have affordable health care because it saves me more money in the long run. I used to work in an independent pizza shop (a mom & pop) and loved working there delivering pizza but they couldn't afford to insure us. If the owner had to raise the price 20 cents on all his orders so he could insure his people he would have done it gladly.

[unblock]

5. great article, though point #1 is overstated.

it's very likely to be correct in practice. the papa john's ceo is playing on the common misperception that marginal cost increases necessarily result in marginal product price increases. the article is correct in pointing out that the relationship is not so direct.

we've all heard stories about the huge markup for coca-cola syrup -- like it costs them three cents a gallon to make but they sell it for many, many times that. if costs went up to four cents a gallon, would they really increase their price? hardly, it would just eat into their huge profits.


businesses set prices to maximize profit. generally speaking, that means maximizing revenue. so you set prices as high as you can such that if you increased them any further, the customers you lose would outweight the revenue you gained from the higher price. and similarly, lowering prices wouldn't attract enough customers to make up for the lower revenue from lower prices.

marginal costs per pizza shift this calculation because given two similar price points, you'd prefer higher price because it means fewer pizzas for similar revenue and therefore fewer employees and therefore lower costs -- meaning greater profit even if from slightly lower revenue.

so in theory, the papa john's ceo have a point. if a 3% increase in pizza prices means only a 3% drop in pizzas, then the revenue would be similar but the cost would be less. in practice, however, this is too small a change to result in a noticeable savings in labor costs. individual stores are unlikely to be able to reduce headcount even by one person from such a small decrease in demand. moreover, papa john's is a franchise business, so these costs are borne by franchisees, not corporate. corporate has no need at all to raise their prices, and many of the franchises would be exempt because they have fewer than 50 employees.

so in practice, this is a valid critique, even if it's glossing over some relevant details.

[grantcart]

7. no point #1 is not overstated

so in theory, the papa john's ceo have a point. if a 3% increase in pizza prices means only a 3% drop in pizzas, then the revenue would be similar but the cost would be less. in practice, however, this is too small a change to result in a noticeable savings in labor costs. individual stores are unlikely to be able to reduce headcount even by one person from such a small decrease in demand. moreover, papa john's is a franchise business, so these costs are borne by franchisees, not corporate. corporate has no need at all to raise their prices, and many of the franchises would be exempt because they have fewer than 50 employees.

Your point would be valid only if the increase is to only Papa John's and not to any of his competitors.

Here we are talking about a marginal increase in cost and all pizza manufacturers will bear the exact same cost increase so there is no particular disadvantage to Papa John's. The only argument he could make, and it is not the argument that he is making is that the increase would be destructive to the entire pizza industry.

When gas prices go up, for example, they don't go up for Papa John's and not for his competitors, they go up equally for all. In the same way his comments have absolutely no relevence in establishing Papa John's market share and every CEO knows it and they chuckled when he said it.

[unblock]

28. no, there are certainly industry-wide cost increases that can lead to industry-wide price increases.

the main point is that in practice, the increase in per-employee costs due to aca is tiny and by the time it translates to a per pizza price increase, the rise should be trivial, probably less than a single cent.


however, if an entire industry were facing massive raw material cost increases, then it certainly is possible that a price increase is a logical outcome. at an extreme, if the cost increases were so massive as to make producing a single widget unprofitable, then the price would become infinite as the industry would shut down.

[barbtries]

8. this was a great read.

it should be published elsewhere. my take on the quote by the papa johns guy was that it was a transparent attempt to get people to vote for romney. your comment regarding the media is a grotesque understatement imo.
thank you.

in the penultimate paragraph you have an incomplete sentence. i say this not to be a grammar fiend but because the piece is so good, i thought you may want to edit.

[grantcart]

10. I noticed it as well but thought that most people would drop out before getting there lol

its fixed now.

[barbtries]

16. nope,

you had me all the way to the end. you have "moral" spelled "morale" also. i repeat, you should publish this elsewhere. it's a damn good read.

[grantcart]

40. thanks, I only have a few minutes a day to go on to DU so I won't have time to place it elsewhere

If there are places that you think it should be posted you or anyone else is free to repost it anywhere.

Thanks

[Egalitarian Thug]

11. K&R but some of us were pointing this crap out when he was just getting his business up

and running.

[LynneSin]

12. If I was a Papa John's employee I would have been PISSED

What that CEO said was a basic FUCK YOU to his employees. He thinks so little of them that he's angry he has to *gasp* help keep them healthier.

That comment he made was like 'IF you get sick just die, it'll be cheaper'.

But I do love the concept that if healthcare was made more affordable then people would have extra cash to spend on things like Pizza

Crazy

[Bonhomme Richard]

13. I started my business in 2000 and, like you, I...

did it cashing in my retirement account and took the tax hit.
It frustrates the hell out of me that so few actually understand how a business operates and, more important, that the myths are allowed to stand.
One of my all time favorites (besides the Job Creator meme) is decreasing corporate taxes so that companies can invest in R&D. Whether you call it R&D, or just the guy in the back room, the bottom line is that updating older products or developing new ones is the lifeblood of any business. In business if you are not moving forward you are dying and any CEO, in his right mind, will always be looking for a market edge whether they got a tax decrease or not. It's just the way things are.

Thanks for the OP.

[Broderick]

17. Bringing up R&D eh

I find it fascinating, and no I don't have the information on hand anymore years later; that pharmaceutical companies spend 6 times more in marketing and advertising than on research and development. Advertising pays.

[Fumesucker]

14. I'm not so sure about points #2 and #3

By the time someone finishes paying their premium for a "bronze" plan, their co-pay and deductible on such a plan I'm not so sure that they're going to come out financially ahead..

We are getting mandated private insurance, not single payer and most certainly not anything remotely resembling the British NHS, going to the doctor is still going to be an expensive proposition for a lot of people.

Papa Johns already does not cover anyone other than management, hourly employees don't get coverage so there's no "benefit nightmare"...

ETA: I also think that the culture of paying ordinary employees as little as possible is deeply ingrained in the corporate world, it's conventional wisdom that will be remarkably difficult to change at the CEO level.. As another poster pointed out downthread, CEOs are not anywhere near as rational as some would have us believe...

[area51]

18. +1

Too many people on this website would like to forget that the GingrichCare that we got is not going to solve the health care debacle that is this country's health care system. We currently have 100,000 people who die per year due to lack of health care, and that's unlikely to change much.

[progressoid]

23. Yep.

I don't see Walmart pushing for higher minimum wages anytime in the near future.

[Hydra]

60. They'll raid the treasury first

Oh, wait, they are already- welfare + foodstamps + making people work off the clock to make their profit margins work. They'll find ways to make it happen, like having EBT programs work for their products.

I've noticed this as a trend- when there's no disposable income to raid, they look to our tax money to keep flush.

[Warren Stupidity]

15. Papa John's major competitive disadvantage is that their pizza tastes like ass.

health care costs are the least of their problems.

[Raster]

21. Dead raccoon in the birdbath ass

[HughBeaumont]

30. Sometimes, it tastes worse than actual Papa Johns.

E.G.: I went to Six Flags in D.C. and they have a "Papa Johns" pizza there.

I bought a slice . . . . Jeno's. Not a bad version of Papa Johns, it was nasty Jeno's frozen.

Should he be allowed to rip his customers off even worse than he already is?

[Warren Stupidity]

36. worse than papa johns is actually hard to imagine.

I'm thinking ballpark or stadium pizza is *usually* worse, but only slightly, but the upside is it costs like $5 a slice and is stone cold before you get back to your seat.

[Jennicut]

38. I just don't understand why people who choose to actually eat this pizza.

Of their own free will. Unless you really were hungry and needed something cheap to eat. I ate Dominoes in college but never (ever) again. So gross.

[Lefty Thinker]

19. K & R

Thanks for putting it much more elegantly and completely than I would have. I'd already come to the conclusion that any price hike on the order of $0.20 would never stop me from buying a pizza, especially if it means the people making and delivering it have health care coverage, but hadn't considered the other implications.

[SnowCritter]

20. Bookmarked!

Good read!

Thanks!

[noel711]

22. Beyond the wider/philosophical business-speak...

the point is:

Papa John Schnatter's rant says: "Fuck you.." not only to
his employees (franchise owners, managment and pizza makers)
it boils down to all of us--

His attitude simply puts himself and his bottom line at the top
of his concern. He has no respect for his customers...
and all his nice-guy commercials are nothing compared
to his concern for his freakin' 20 cents per pie.

He can take his two dimes and stick them where the sun don't shine
coz I am never buying his stuff again.

My view:
If I want pizza I either buy from the little guy on he corner,
the family guy who owns his own business;
so what if his pies cost more than Papa JOhn's or
Pizza Hut.. or whatever.
When I buy a pizza from the local guy
I help keep him in business, and support his family
and my community. My local guy never rants about
politics... he knows how his bread is buttered.
And that goes for the whole Chick-Fila business.
I'll buy my chicken from my local folks too.

OR... I'll make my pizza at home;
then I know what goes into it

[Patiod]

31. The only time I eat chain pizza is when others choose and pay

Work situations, campaign offices, or other situations where someone else has already made the decision.

When I want tasty pizza that's not all bread and crust, I support my small local business man or woman. And I don't care if they vote/contribute Democratic or Republican or Libertarian or Green - I want my money to stay in the community, go to support local churches and soccer teams and go to other local businesses.

The only chain I patronize is Primos, a Philadelphia chain. And if we could find a family-run hoagie shop that used the same bread and put in the same amount of meat, we'd go there. But damn, those Primos hoagies are like CRACK.

[K8-EEE]

41. +1 !!

It's hard for me to boycott something I would never buy in the first place, Papa Johns is just another Chick Fil A example. I fucking HATE chain restaurants! My daughters love Subway so I take them there but I never get anything. I like to support the indie restaurants that can't afford the advertising these franchises benefit from.

[rockingirl]

61. exactly

i support the great independently owned pizzerias in town or if i have time i make my own which are even better anyway. it depends on the circumstances whether i buy or make my own, of course, what else. i do not buy food from chain restaurants or groceries EVER and i always go to locally owned independent providers that ALSO support the same issues that i do. WHY would i EVER want to go to a place and give them my hard earned money so that the owner somewhere could buy another huge vacation home someplace or donate to a political party that oppresses me?!?!?!?

boycott these pig businesses because it hits them where it hurts the most, right in their wallets!

they hate it because they know that it is the best way that you can stick it right back to them!

and yeah, it does hurt them a lot!

[santamargarita]

26. Who cares about a piece of cardboard with ketchup on it

[Yavin4]

27. Employee Morale in the Food Handling Business Is Paramount.

We've seen stories and videos of employees in the food handling business commit acts of vandalism while on the job. Papa Johns needs a certain class of people working for him. In the YouTube age, Papa Johns does not want disgruntled employees working for him.

[BlueToTheBone]

29. Without employees, Papa John's is nothing.

No pizza can make itself.

[lobodons]

32. There you go again with logic and facts

There you go again trying to use logic and facts when dealing with the GOP.

[Dyedinthewoolliberal]

34. Thanks!

Good info to have around the lunch table at work etc......

[Ruby the Liberal]

35. Very well written.

And here's a gem for ya: How Papa John's stock has fared in the burdensome Obama years




The heart just bleeds for the guy.

[grantcart]

51. Your graph says it all and makes me think of this picture

These guys are like a beached whale, the people get together and push it back out to Sea,

But it keeps coming back to the beach.

Obama has made this guy rich, rich, rich but he keeps going to the beach to try and commit suicide.

[heaven05]

39. wow

if the pizza is going up that high, you can count me out actually I have never had any p... john. never will

[freshwest]

42. Grantcart, thanks for giving details on how an enlightened business is run well.

It is the knowledge base of our members that keeps us coming back to DU. Kudos for your ability and willingness to describe the world many have not had a chance to learn.

[calimary]

43. Impressive! Thanks for this post, grantcart.

It makes total sense. What good is it to nickel and dime your employees and your customer base - if you wind up undermining all of it? I have been fascinated, morbidly fascinated - ever since reagan - how cheaping out on wages and benefits to save a buck is penny-wise and pound-foolish.

That's all reagan ever was about. Saving a buck here with NO thought about the ramifications of cheaping out farther down the road over there. There never seemed to be any serious longterm analysis or concern. Henry Ford wanted his employees to be paid more so they could afford to buy his cars! Enlightened self-interest. Henry Ford clearly didn't think it was worth chiseling his employees pay or benefits to save himself a quick buck on the short term. What happens when their buying power decreases? Eventually he himself is a huge loser. romney and bain and friends all looked for the quick buck on the short term. Never mind the longterm consequences of their vulture orgies - that got THEM some goodies in the short term, and then they just bail out fast with those short-term profits and leave the wreckage behind for the victims they robbed to sift through.

Maybe it's just mis-named. It shouldn't be Bain Capital. It should be BAIL Capital. 'Cause they bail out with all the goodies just before disaster strikes. It's as though they board the crowded plane. Then once inside, they start stripping it, out from under the other people onboard. They strip the seat belts and padded seats, the electronics and wiring throughout the passenger compartment, all the instruments in the cockpit, and all the parachutes. Then, when the plane is permanently and fatally disabled, they strap on those parachutes and bail out - to safety. The plane, now stripped of all its critical components and thus rendered uncontrollable and unable to stay aloft, crashes, taking everyone else aboard down to their deaths.

[spooky3]

44. And, I wouldn't simply accept the 20c cost increase #

I think it's entirely possible there will be NO cost increase to this business.

This is a great critique but I would have liked the author to challenge P John's estimate.

[drm604]

45. Schnatter's comments were ideological, plain and simple.

Why else announce them so publicly?

His letting his ideology override his business sense.

[femrap]

46. k

Last edited Tue Aug 21, 2012, 07:09 PM - Edit history (1)

[JDPriestly]

47. What Papa John's would never admit and may not be smart enough to understand

is that prior to the ACA,he was relying on socialized medicine to pay for the health care needs of his employees.

Here is how that works:

1. Papa John's does not pay his employees enough to permit them to buy their own health insurance.

2. Most of Papa John's employees probably don't have insurance and go to the doctor only if it won't cost much or if there is an emergency.

3. When one of Papa John's employees has an emergency, let's say discovers a cancer or has a bad fall, that employee has to go to the emergency room for "free" meaning that other hospital patients pay for Papa John's employee's hospital visit, or

4. If a Papa John's employee develops an expensive, chronic condition, say cancer, they have to try to qualify for Medicaid.

Either way, the employee ends up being subsidized either directly by the government through Medicaid or indirectly by mooching off everybody else in society who pays for health insurance.

So, Papa John has been externalizing his employees' health care costs all these years.

Externalizing your costs is just a sneaky word for socialism -- for shifting costs your business or you incur onto the society around you.

And when you do that, even if the costs are shifted from one person to another, they eventually end up being picked up by the government in the form of tax losses or direct payments or indirect payments (inflated hospital Medicare and Medicaid bills for Medicare and Medicaid eligible patients for example or even direct government grants to health care providers to cover losses from "free" care).

Which would be OK except that we are all helping to pay for the care of Papa John's employees -- and they don't even get the care they need.

So Papa John's statements about the cost of health care insurance for his employees just shows that he is a socialist at heart. He firmly believes in externalizing his costs and claiming what is left is his profits.

[spooky3]

48. Good points n/t

[SaveAmerica]

49. #5 CEO's Stupidity trickles down to Franchisee, hurts their profit

I took my first business class recently and this was my first thought I had after I realized this decision by 'Papa' was purely political.

I said to myself that he's acting like this is something that will hurt all businesses but the way he worded his message to the shareholders caught my attention. A simple search brought up the surprise that he is a Romney supporter. He's a selfish CEO who let his political leanings and greed come before the people who have invested themselves in his chain.

[Vurz]

50. He showed not only contempt for his employees, but contempt for his customers as well.

It's bad enough that he showed his obvious contempt for his employees in his "raise my prices" statement - something like that is a big time morale depressor, but then you need to look at the messages he was sending to his customers as well.

"I care so little for you that I would prefer my sick employees make you pizza." and "I know that you are all so poor and cheap that if I raise my pizza price $0.20 you will all vote the way I tell you to."

It would be worthy of a boycott for me, but I don't ever eat his pizza anyway.

[spooky3]

63. welcome to DU, and I agree with you.

[Live and Learn]

52. Dear Papa John, it is this simple;

I would much rather pay an additional 20 cents per order than have to pay your employees emergency room hospital bills. The reality is that your customers pay in either case but without insurance the costs are actually more and the health of your employees is less. I prefer my pizza made by healthy employees.

[smirkymonkey]

65. i would never eat that disgusting pizza, I would happily donate an exta 20 cents to

help their employees get healthcare. Put the cup ut out you cheap bastard Papa John. There are plenty of us who are willing to take care of your employees that you are too pathetically chaep to help out..

[ThomThom]

54. maybe he should start talking about what will happen to his prices

when Global Climate changes blows the price of food up

[abelenkpe]

55. This should be spread far and wide

Please use fb or Twitter to spread the word.

Personally I like CEO informing me of their political and religious leanings. Makes it easier to avoid buying products from those actively using their wealth and power to screw workers and undermine civil rights.

But this is a great angle and it reminds readers that media is not telling viewers the complete story. Big media needs to be broken up.

[grantcart]

56. you are free to spread it, I am not on either, thanks

[1StrongBlackMan]

58. +1

[Curmudgeoness]

59. Excellent analysis, but point 4 is irrelevent.

It has been irrelevent ever since jobs are hard to find and employers are confident that they can treat employees like shit and get away with it. We have been brow-beaten to the point where we are convinced that we are disposable. It amazes me that employee morale hasn't destroyed more companies by now.

[tandot]

62. If I'd have any pizza place give me the choice of paying $19 or $19.20

with the price of $19.20 covering healthcare for their employees, I'll gladly give them the $19.20.

Are you shitting me? Hell, I'd pay a buck or more for it.

These people are fucking nuts.

Preventative care is so much cheaper and you'll have more productive and happier employees.

We've been customers of Papa Johns frequently, since our store were producing decent pizzas. However, we stopped ordering from them since he came out in support of Romney.

If a business has the need to tell their employees to fuck off and die, instead of providing them with health care, I'll not give them any money.

[snot]

64. I hope you share this elsewhere!

Like your icon, b.t.w.

[Swagman]

66. you speak good old common sense like my banker Dad used to

and at times was puzzled by many businessmen coming to him for loans who seemed to conduct their business via prejudices, not on reality.

He often said too many want to operate in a vacuum and pretend that the whole of society didn't affect them or matter.