Health care remains top concern for 2013

Health care reform and costs rose by a wide margin as the top concern of respondents to an NRN.com pre-Christmas poll on business concerns in the year ahead.

About 40 percent of survey respondents selected health care as the “top business concern for 2013.” The poll serves as an indicator of restaurant industry sentiment, and results were limited to registered users of the Nation’s Restaurant News website. Respondents could vote numerous times, and no demographic information was collected.

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Among the 137 users who participated in the survey, health care concerns were followed by concern over consumer spending, at 31 percent; anticipated increases in commodity costs, at 20 percent; and tightened access to growth capital, at 8 percent.

Concerns about the 2013 provisions of the Patient Protection and Affordable Care Act drew 55 of the 137 votes cast in the poll, as of Dec. 27. Foodservice industry executives have previously expressed concerns about the additional costs of mandatory insurance coverage for full-time employees.

Some experimental techniques earlier in 2012 to deal with the upcoming increased costs, including Darden Restaurants Inc.’s test of limiting full-time workers in existing units in some markets, has drawn consumer backlash.

Clarence Otis Jr., chief executive of Darden, parent to Olive Garden, Red Lobster and other brands, said news accounts of its efforts to limit some employees to less than 30 hours a week to skirt upcoming mandated health care requirements may have contributed to poor negative same-store sales comparisons in the second quarter, which ended Nov. 25.

“The volume of coverage and conversation about this was significant,” Otis said. “And although it's difficult to measure, we do think it had an adverse impact on our results.”

Consumer spending also left poll respondents uneasy, with 31 percent, or 43 respondents, expressing that as their biggest concern. That aligns with concerns revealed in the exclusive NRN-MillerPulse outlook.

Larry Miller, restaurant securities analyst at RBC Capital Markets and creator of the monthly MillerPulse surveys, said he saw “a lot of fear” in the November outlook. “If we go over the fiscal cliff, everyone will see higher taxes,” Miller said. “I’m not that optimistic; 2013 looks like a tough year.”

Commodity cost pressures concerned 20 percent, or 28, of poll respondents. An early December U.S. Drought Monitor report found more than 62 percent of the contiguous United States remained in some form of drought, affecting wheat and pasture conditions for cattle.

Access to growth capital was a trailing concern among those participating in the poll, with only 8 percent expressing that as a top issue. The National Restaurant Association’s 2013 Restaurant Industry Forecast indicated that restaurant operators were finding some loosening of the purse strings.

“Looking forward to 2013, operators in both the full-service and limited-service segments indicated that they plan to ramp up capital spending,” the NRA forecast said. About three out of 10 full-service operators said they planned to devote more resources to new equipment in the year ahead, similar to 31 percent of quick-service operators and 26 percent of fast-casual operators.

Remodeling and renovations were a higher priority for operators. About 46 percent of fine-dining operators said they plan to devote more resources to remodeling or renovation in 2013, according to the NRA Forecast. Four out of 10 casual-dining, quick-service and fast-casual operators also said they plan to spend more on remodeling or renovation in 2013.

Contact Ron Ruggless at [email protected].
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