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Lessons from a year’s reporting on Obamacare


In the final installment of our series designed to sort out the ACA, our columnist summarizes what he’s learned. His biggest takeaway: Complying doesn’t require having nine lives.

The email I got last week from Andrew, a PR rep at a Los Angeles-based public relations firm, was equal parts touching and naïve. 

“We are definitely interested in this opportunity,” he wrote in response to my request for an interview about how Menchie’s is handling the Affordable Care Act. “I will connect with the team and get some times from them ASAP.”

Oh, Andrew. It’s funny—I hadn’t heard of his client, Menchie’s Frozen Yogurt, until the day I sent that email, and already I knew at least one thing about them this young PR rep didn’t. I had asked him a simple question: How is Menchie’s responding to the Affordable Care Act? And after a year of reporting on the law, I was almost certain the answer would be: silence.

Homewood Suites entered a mysteriously long “quiet period” back in October 2013—and when it came to ACA-related topics has been there ever since. Dunkin’ Donuts, Domino’s, Cold Stone Creamery, and numerous others have all declined to comment. While Mike Bidwell (The Dwyer Group) and Catherine Monson (Fastsigns International) vehemently protested the ACA to the national press, my specific questions to them remained unanswered. And so today, I wasn’t surprised to hear Andrew’s follow-up.

“Unfortunately,” he wrote, “Menchie’s would like to pass on this opportunity.”

There are many strange facets to the Affordable Care Act, and the silence surrounding it is just one of them. In this year-long series on Obamacare, I’ve tackled everything from the myths (you can’t actually split into four companies and dodge the mandate) to the rewards (your employees get more efficient when you shift hours around, especially when you make staffers compete for the plum full-time spots). Here are some of the biggest lessons I’ve learned.

It will be massively bad for all franchisees and franchisors….There’s no doubt on this. Just ask the International Franchise Association, or any reporter at Bloomberg or Fox News. Franchisees are cutting hours, franchisors are cutting growth and the industry is more or less doomed.

. …except, of course, for you. Oh, except for nearly every franchisee and franchisor  I talked to. “Fortunately,” my sources would tell me, “I’m in a position to absorb these costs.” It turns out that on the ground, things look very different from the headlines. 

People know they “should” support health insurance for all.  It may be conscience, or it may be the PR fallout of publicly opposing it, but everyone I talked to agrees that providing insurance to employees is good in theory.

It’s been frustrating. Probably the biggest actual fallout from the law has been intangible. Small franchisees sounded palpably frustrated when they discussed the hours of work they had put into trying to untangle the law and even CEOs of larger companies said they had invested substantial time, effort and money into figuring it out. 

The multiple delays to the employer mandate were more harm than help here, as one of the most common responses I heard all year long was “we’re really not sure what’s going on.” This is not the kind of climate that fosters innovation and risk.

It cuts employment. I found only two examples of companies that pre-emptively implemented ACA-compliant policies—Jacksonville, Florida-based Firehouse Subs and its largest franchisee Don Davey (neither wanted to surprise their employees with “whoops, no insurance for you” after the extensive planning and focus grouping they had done). Both ended up with serious job losses. Davey, who has stores in Wisconsin and Orlando, had to close a very marginal store when the new costs pushed it over the edge (15 jobs lost) and Firehouse CEO Don Fox said his average store employee count went from 17 to 15.5. Multiply that over an industry and that’s a lot of people out of work.

It’s expensive. Early this year, Marietta, Georgia-based PMTD Restaurants chairman David Barr called it a “$350,000 problem” (spread over 23 Taco Bell and KFC locations). Dallas-based Dickey’s Barbecue Pit’s Roland Dickey Jr. was estimating $12,000 per store as of late 2013. Depending on the plan and employee, ACA requirements can boost your cost by 20 percent.

But it hasn’t stopped growth. Even Sweden has millionaires. Government intervention arguably slows growth and innovation, but very few franchisees admit to slowing down because of the new requirements. Some are using it to spur efficiency and have chosen to look at the new law as a way of building employee loyalty. Stores are opening, companies are expanding, and business is growing.

There’s basically one solution. While the bill is 11,000 pages, I can tell you how to respond in one paragraph: Shop around with a few brokers for a plan you can live with. Then, wait until shortly before the law is really going to take effect (as it keeps getting delayed). Pick your most essential, talented, best workers who aren’t already full-time and make them work 40 hours a week. Cut everyone else down to 29 hours or less. 

Encourage your full-timers to see what they can find on the exchanges or through spousal coverage, letting them know they’ll have to pay up to 9.5 percent of their adjusted gross income for your coverage so they might be better off elsewhere. Once you have sign-up figures, pay for the difference by some combination of a) raising prices, b) getting rid of your weakest workers, c) re-negotiating with landlords or suppliers or d) just taking that as a loss for now while you figure out a viable strategy for the future. 

This is basically “the” solution to the Affordable Care Act. In its essence, it is what every franchisee and franchisor I talked to all year is doing. It’s been a long 12 months of research, but now you know. 

Winners and Losers

Who’s most affected by the Affordable Care Act? The answers were surprising.

The winners: good workers, insurance companies.

Now that the battle has been lost and you have to pay for insurance anyway, look on the bright side. For years, medical bankruptcy was a looming possibility for your best and brightest hourly workers. Isn’t it nice to know you’ve taken that off of their plates?

Of course, the real winners are the insurance companies, as everyone is forced to buy their product. Now if only they’d mandate people buy what you’re selling.


The losers: marginal workers, customers.

You probably lost some workers in the shuffle or forced hours down. Carol’s health insurance means that Andy is going to have trouble paying his rent. And at some point, prices are going to have to go up for the customer. Chances are your distributor is a large employer, your franchisor is a large employer… all that money is coming from somewhere.


The not terribly affected: franchisees and franchisors.

If you’re like the average large (50 FTE+) employer, your experience with the ACA probably paralleled that of most others. It started as a massive headache, turned into a lot of frustrating paperwork, and didn’t cost as much as you thought it would. As 2015 starts to roll, it will soon be part of business as usual. As much as Obamacare was a pressing issue, the franchise industry continues to grow and expand.

Perhaps now it’s time to turn our attention to something really scary: the minimum wage hikes!

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