Since the dust has settled from the re-election of Obama, the restaurant industry is grappling with the fact that the Affordable Care Act (aka Obamacare) is going to stand. There will be no repealing.
What that means to foodservice was put rather succinctly in a press release from the National Restaurant Association in June. “Employers with 50 or more full-time equivalent employees must offer ‘affordable’ health insurance of minimum value to full-time employees and their dependents or pay penalties. The cost of such coverage or the penalties could threaten the very slim profit margin on which most restaurants operate.”
Some chains, like Darden with its Olive Garden and Red Lobster brands, to name a few, said during election season that it would solve the problem by bringing its full-time employees down to part-time and new hires would be part-time.
Coming from big restaurant brands, it was a powerful statement against Obamacare. But it turned on them. They forgot that they serve intelligent human beings, not robots, in their restaurants.
Darden actually went as far as to experiment with hiring part-time rather than full-time employees in a few markets. They wanted to measure/compare costs.
The result? Those intelligent human beings, turns out, voted with their wallets. They stayed away from Darden, and the chain began to struggle. In its fiscal Q2, same-store sales fell 2.7%. Its stock fell 10% this week. Outwardly, the company is blaming it on other things. But also this week, Darden said it wouldn’t cut workers hours to avoid paying for health care.
This week I was writing the Mintel report to be released in January, “Dining Out: A 2013 Look Ahead,” and I was intrigued with a consumer-survey statistic that relates to all this and that every restaurant brand should know. Consumers were asked to what extent certain factors influence their restaurant choices. Some 40% said “The foodservice establishment actively supports charities, community organizations or causes that I also support.” The number is higher for Millennials (48% for men and 43% for women).
Let me translate: “Oh, you’re planning to rip off your employees? Well, I’m not eating at your restaurants.”
Consumers voting on restaurants by giving/withholding business is going to continue and grow. They feel increasingly empowered. Restaurants being ethically responsible is as expected as their being environmentally responsible in the minds of the new generation.
Still, restaurants will have to figure out a way to handle the increased healthcare costs, and there could be stalled restaurant growth because of the added expense. But restaurant brands will have to work on diplomacy. Darden taught everyone that lesson.
Now tell me what you think.
Jody
Hi Jody -- That a company today would act so unsustainably surprises me as a business owner, PR advisor and a consumer, for two reasons. First, Darden, Papa John's et al should have fully expected the negative consumer reaction and related attention they got, as the social consciousness of today's consumers is well established. Second, companies who aren't committed to their employees get employees who aren't committed to the company, and hence aren't committed to creating a positive product/experience for the company's customers. I suspect that over the long term it will be much more costly to the corporate bottom line to NOT offer health insurance. Why not get some positive attention instead of negative, by working on finding solutions to fixing problems with our too-expensive health care system? Company spokespersons and accountants alike would breathe a sigh of relief.
Posted by: Julia Stewart | 12/10/2012 at 07:48 AM