He’s the largely symbolic, almost mythical hero of author Ayn Rand’s 1957 novel Atlas Shrugged, a crucial pillar of modern Libertarian thought. In the novel, Galt is a genius engineer who comes up with an automobile engine powered almost entirely by the atmosphere’s natural static electricity, but he balks at the collectivist ideas of his parent company and goes rogue, enlisting other business leaders and creative types to withdraw their gifts from society until it learns the error of its ways.
“Papa” John Schnatter you probably already know. He’s the founder and CEO of the US pizza franchise Papa John’s, the oddly dead-eyed, disturbingly ageless fast-food mogul who, unlike many of his contemporaries, never sold out to a large corporation. He most definitely Built That. (With the help of a $30,000 loan, thousands of employees, and public stock, but still.) Once a distant third to Domino’s and Pizza Hut, the company he started from a broom closet is now…. third. But a much closer third.
Now, thanks to Obamacare and the looming expiration of the Bush tax cuts, he’s having trouble making ends meet. Or so he says: back when Obamacare was before the Supreme Court last summer, he fired his opening salvo, threatening to raise his pizza prices 11 to 14 cents per large pie if he was forced to pay for his workers’ medical care. “That’s what you do, is you pass on costs,’’ he said.
This, not to put too fine a point on it, was bullshit. For one thing, it’s the free market, the conservative’s vaunted “invisible hand of the marketplace,” that dictates the price: it’s not set by how much the pizza costs to make but by how much people are willing to pay for it. It’s the reason all pizza prices are more or less the same. And quite a number of people seemed underwhelmed by the tragedy of paying 14 cents extra for a large pizza in order to have it handled by employees without chronic illnesses or communicable diseases. A large Papa John’s pepperoni pizza costs $11.99. The advent of a $12.15 pie does not exactly strike fear into the consumer. (As of now, Domino’s sells that same pizza for $11.99 also; Pizza Hut for 10 bucks even.)
So now that Obama’s been re-elected, Schnatter is at it again, this time threatening to “go Galt” by laying off workers to offset the cost of the new medical care law. He’s been joined by several companies, including Darden (Red Lobster, Olive Garden) and some Applebees franchisees. Bill O’Reilly, as usual, led the way for this type of thinking, claiming that letting the Bush tax cuts expire, ever, would mean he’d just do less work (and cut back his staff!), because paying that extra 3 percent meant his job wouldn’t be profitable enough. Republican Presidential Candidate Herman Cain, back when he was appointed CEO of Godfather’s Pizza by Pillsbury, used this logic to try and stall Bill Clinton’s proposed health care plan. “If you force me to cover those employees,” he said in 1994, “I may not be in the position to provide those jobs.”
“Papa” John doesn’t have to worry about covering the cost of most of his employees; a full 80% of the chain’s locations are independently owned and operated — franchised out. The company builds the store, trains the owners and operators, provides them with materials, and then steps back and takes a cut of the profits. 5 percent, to be exact. Any extra cost coming from outside is borne by the franchisee, not Papa John himself. Had a fire, huh? Fuck you, pay me. Commodity costs going up? Fuck you, pay me. Obama institutes a new healthcare plan so as not to clog up the nation’s medical system with your workers’ unpaid ER bills? Fuck you, pay me.
Many people wonder what the effect of Obama’s second administration will be on small business. How small are those small businesses? It varies, but in America, the top end is 1500 workers and profits in the $20,000,000 range. Obama actually kept tax cuts for business that were at least that “small” and established unprecedented incentives, in place at least until the recession ends. Not only do mom-and-pop pizza places not fall under these guidelines, neither does Papa John’s: a franchised location would have to have 50 full-time employees in order to be required to provide insurance. (Those with less than 25 employees actually receive a 35 percent tax credit to help them buy insurance for their employees if they choose to; that goes up to 50 percent next year.)
McDonald’s knows all this, which is why they haven’t been complaining about Obamacare. Their franchise locations average $1 1/2 to 2 million a year in receipts. Most of that goes back into the business, of course, but the added cost of the new health care law — $10,000 – $30,000 per store — comes out to about 1 percent of revenue. Since Papa doesn’t have to worry about 4/5 of his locations anyway, and since Treasury estimates 90 percent of his people in the front office make enough money to already have their own insurance, this leaves him plenty of money with which to enjoy his palatial estate, replete with its own golf course, his $350 million dollar personal fortune, and his $23 million condo in Utah.
In fact, Papa not only takes five times what Obamacare costs from his franchisees already, he also takes an additional three percent on top of that for… his advertising budget. (7 percent also has to be spent on local ads.) This budget helps pay for all those awkward commercials you’re inundated with during football season; the latest one features living legend (and fellow conservative) Peyton Manning helping Schnatter give away 2,000,000 free pizzas this year — pizzas apparently not tied down to the cost of Obamacare. Then Peyton announces that he, too, is a new franchisee, having just bought 21 outlets, part of the 1500 new ones that Papa is somehow still preparing to open despite the crippling blow to his bottom line. Of course, like Applebees, Schnatter’s brand was a major contributor to the Mitt Romney campaign. Perhaps he’s just trying to get some of that money back.