Restaurant CFOs sound off on health care concerns

A group of chief financial officers from some of the largest restaurant companies recently discussed their biggest concerns surrounding health care reform, and uncertainty and increased costs topped the list. 

With many details of the Patient Protection and Affordability Care Act still unfolding, the ambiguous future of health care reform hung heavily over this month’s Restaurant Finance & Development Conference. The topic weaved its way into nearly every educational session and networking conversation that occurred during the Nov. 12-14 event in Las Vegas.

Under the law, employers with 50 or more full-time or full-time-equivalent employees are required to offer health insurance to those employees and their dependents or pay a penalty. The minimum penalty is $2,000 per employee. While the mandate to offer coverage does not go into effect until 2014, there are deadlines to meet in the meantime.

A panel of chief financial officers discussed their top concerns about the upcoming health care requirements, as well as steps they are taking now to comply with the 2010 law.

Here are edited responses from four restaurant chief financial officers when asked: “What are your three biggest concerns as related to Obamacare?”

“Cost, cost and cost. There’s significant uncertainty regardless of the size of the organization. There’s a lot of concern over this initiative. What we’ve done is have a benefits consultant run the numbers — it’s shocking.

Then we are looking for ways to deal with it. There will be some management of bringing down staff to part-time.  [But you have to remember that] in the restaurants, the employees have such great relationships with your guests, and you do want that. It’s tough to envision that conversation, but as time progresses, we’ll see how that goes.

We’re looking for certainty, and talking to operators about what’s going to happen if we take the workforce down to part-time status. We’re still assessing that.”
— Richard Peabody, CFO, Corner Bakery Café, a 140-unit fast-casual chain based in Dallas

“We know there’s some impact. We already offer health care to our full-time employees, but there will be a bigger impact to our franchisees. There’s a lack of understanding still today. After the Supreme Court decision [in June], we began educating our franchise community. The day after the election [in November] our phones started ringing. We’re a tight-margin business and the added costs could be significant.

One of our concerns is expansion. We still have a lot of single-unit operators, so they are below the 50-person minimum. But if they start expanding to two or three units, they cross that threshold. For now they are saying, ‘We’re going to hold off.’

We’re also concerned about the cost of administration. We’ve heard how complicated these documents are. You need good legal advice and consultants on the insurance side of the business. Its an18-page document to figure out what constitutes a full-time employee, compared to our six-page Constitution.”
— Joe Koss, CFO, Culver Franchising System, parent company to the 480-unit Culver’s quick-service chain based in Prairie du Sac, Wis.