Papa John's CEO John Schnatter gave shareholders a side of politics with their pizza last week when he said the pizza chain would see a price increase for its pizza, blaming Obamacare for the hike in prices.
Schnatter broke the news to shareholders during a conference call last week, according to Politico, citing President Barack Obama's controversial health care law as the reason for the price increase. The pizza CEO said the health care law, set to roll out in 2014, will result in higher labor costs for the Louisville, Ky., company to produce its pies, forcing the chain to increase prices for customers but marginally.
"Our best estimate is that the Obamacare will cost 11 to 14 cents per pizza, or 15 to 20 cents per order from a corporate basis," Schnatter said, according to Politico.
Schnatter said Papa John's, the nation's third-largest pizza chain, will be forced to offer health care coverage for its 16,500 employees or pay a penalty fine.
"We're not supportive of Obamacare, like most businesses in our industry. But our business model and unit economics are about as ideal as you can get for a food company to absorb Obamacare," he said. "If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect our shareholders' best interests."
Similarly, fast food chain McDonald's said Obamacare will cost each of its 14,000 franchise locations anywhere between $10,000 and $30,000, Businessweek reported. In addition to McDonald's, Subway, Burger King and Dunkin' Donuts filed complaints on Capitol Hill regarding future extra costs because of the health care law.
Papa John's International Inc. (Nasdaq: PZZA) saw strong sales in the second quarter, with a 6.7 percent share surge to $54.43 in after-hours trading on Aug. 1, after the company reported results.
Earlier this month, the company said its quarterly revenue rose 9 percent to $318.6 million from $293.5 million last year. Analysts had expected revenue of $311.1 million. Meanwhile, revenue at restaurants open at least one year rose 5.7 percent in North America and 6.1 percent internationally. This metric is a key indicator of a company's health, because it excludes results from recently opened or closed locations.
To contact the editor, e-mail: