Restaurant Brokers Share Industry Position on Obamacare

As the 2012 election cycle bears down on all owners, it’s apparent from what the restaurant brokers are reading that the industry has a strong point of view on Obamacare regulation and its potential impact on business.

The National Restaurant Association sent a key vote letter to all House members in July of this year.  They urged the repeal of the legislation saying among other things, “The early signals of the economic impact of the health care legislation signed into law in March of 2010 are not encouraging for our industry. In particular, the employer mandate and associated penalties are such that many restaurant operators fear that they will need to shed jobs or close down in order to avoid cost increases upwards of 40 percent. The current construct appears to impose untenable cost and job burdens for many in the restaurant industry.”  The full text of the letter reveals to these restaurant brokers that the major organization representing 960,000 restaurant and foodservice outlets is committed to the repeal of the legislation while still firmly backing the need for health care reform.

Others in the industry are going straight to the numbers to make their case. Atlanta Taco Bell and Kentucky Fried Chicken franchisor David Barr recently appeared on Fox News to go through major points he made with legislators as part of an International Franchise Association meeting.  His business case shows the restaurant brokers why the law is so damaging. 

Barr has 23 stores with 421 employees.  109 of his employees are full time and he provides health insurance for 30 of those workers.  In his example, he pays 81 percent of their Blue Cross Blue Shield policy or $4,073 for individuals, (more for families), but with a total bill of $129,000 a year. Employees pay $995.

Under Obamacare, he will have to provide health insurance for all 109 full-time workers, a cost of $444,000, or two and half times more than his current costs. That $315,000 increase is equal to just over half his annual profit, after expenses, or 1.5 percent of sales. If he provides no insurance, he’ll incur a federal fine of $158,000.  Weighing the options, it’s a sure bet, he’ll go with the federal fine, cut jobs or a combination of the two.

The restaurant brokers are finding similar stories in virtually every news outlet in the industry.  Darden Restaurant Group announced last month that they were testing a plan to put more workers on part-time status in order to eliminate the requirement for health care coverage.  That means taking employees to less than 30 hours per week.

On a local level, the restaurant brokers have talked to dozens of restaurant owners who are looking at the same strategy.  They are parsing their operations into multiple companies and cutting hours so they fall under the 50 employee threshold for providing health care that goes into effect January 1, 2014.

These are the unintended consequences of health care legislation that we are just beginning to understand.  The “taxes” in the bill will hit every day middle class Americans whether or not they operate a restaurant.  Here’s a partial list of the new taxes from Congressman Jeff Duncan:

• $86 Billion in Medicare Payroll Tax that hits the self-employed (like these restaurant brokers)

• $65 Billion: Individual Mandate Excise Tax and Employer Mandate Tax (discussed above)

Individual: Anyone not buying “qualifying” health insurance as defined by Obama-appointed HHS bureaucrats must pay an income surtax according to the higher of the following.  It’s a small number in 2014 but by 2016, the middle class will be hit with $1390 a year.  That’s on top of the estimate $2500 increase in insurance premiums.   These restaurant brokers have seen the price of our insurance increase by more than 40% in the last two years.

The list of taxes associated with the legislation continues as shown below. 

• $60.1 Billion: Tax on Health Insurers
• $32 Billion: Excise Tax on Comprehensive Health Insurance Plans
• $23.6 Billion: “Black liquor” tax hike (
• $22.2 Billion: Tax on Innovator Drug Companies
• $20 Billion: Tax on Medical Device Manufacturers
• $15.2 Billion: High Medical Bills Tax
• $13.2 Billion: Flexible Spending Account Cap – aka “Special Needs Kids Tax”
• $5 Billion: Medicine Cabinet Tax
• $4.5 Billion: Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D
• $4.5 Billion: Codification of the “economic substance doctrine”
• $2.7 Billion: Tax on Indoor Tanning Services

As restaurant brokers, we see the good, the bad and the ugly part of regulation.  When it comes to Obamacare, it's weighing in for the restaurant industry as a big hot mess of ugly.

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