Denny's: Only The Latest To Fall In Line With Federally Mandated 29-Hour Work Week; Will Add 5% ObamaCare Surcharge

Updates

February 4, 2014: CBO (Congressional Budget Office) triples the number of workers expected to be locked out of full-time jobs due to ObamaCare. For investors: not a concern. Companies will save money, hiring fewer folks and cost-shifting health care to their workers. This is actually pretty good news for businesses and investors.

June 2, 2013: Wake County, North Carolina, considering limits on hours for substitute school teachers, so they don't exceed 30 hours; qualify for ObamaCare.

May 3, 2013: Mainstream media starts to see the impact of ObamaCare on part-time workers.

February 23, 2013: ObamaCare and the '29ers -- WSJ.

December 2, 2012: Dairy Queen franchise owner with 90 employees watching ObamaCare very closely; options -- fewer permanent employers; fewer hours for employers.

Like many franchisees, Robert U. Mayfield, who owns five Dairy Queens in and around Austin, Tex., is always eager to expand and — no surprise — has had his eyes on opening a sixth DQ. But he said concerns about [ObamaCare] had persuaded him to hold off.

"I'm scared to death of it," he said. "I'm one of the ones sitting on the sidelines to see what's really going to happen."

Mr. Mayfield, who has 99 employees, said he was worried he would face penalties of $40,000 or more because he did not offer health insurance to many of his full-time workers — generally defined as those working an average of 30 hours a week or more. Ever since the law was enacted in 2010, opponents have argued that employers who were forced to offer health insurance would lay off workers or shift more people to part-time status to compensate for the additional cost. Those claims have drawn considerable attention — and considerable anger in response — in recent weeks.

November 16, 2012: it turns out that "Denny's" is not taking this action; the headline in the DailyMail.com was very, very misleading. The decision to charge a 5% surcharge for ObamaCare as reported by the DailyMail.com was that of an independent franchise operator who happens to own several Denny's restaurants, but is not the CEO of Denny's or on the board. This is Denny's response to that independent operator's plans for a surcharge.

November 16, 2012: I don't follow Denny's so I can't comment on what is powering Denny's share price; see first comment. But Denny's is obviously doing something right, powering through the recession. I know Denny's has treated veterans very, very well; I have enjoyed free meals at Denny's on Veterans Day in San Antonio. The waitstaff always got great tips on those days. So, perhaps I am wrong. Perhaps the CEO's plan to include a 5% surcharge will last longer than a "New York minute." It would be sad if it came at the expense of tips, but who knows, it may be a great marketing move. I know Starbucks does well by charging more to ensure their employees are better compensated. Time will tell. Not following Denny's I do not know how it has powered through the recession so well. Denny's has had huge expansion overseas. Putting things into perspective, during the past five years, DENN has had a 20% return compared with McDonald's 60% (until the recent pullback following the election and the uncertainty with the "fiscal cliff"). It just shows how deep the recession was.

Original Post

Link here to the Daily Mail.com (which begs the question: why are the Brits so much better at reporting US news in such an entertaining manner?; the pictures are outstanding; the writing, well, fun).

Several other restaurants including Papa John's, Apple Metro and Jimmy John's have announced plans to skirt Obamacare by reducing employees hours to make them part-time.

Indeed, Metz is adding the surcharge because he believes that eventually firms will be fined for not covering staff who complete over 30-hours in a week.

In November, a poll for Kaiser Health Tracking found that 43 percent of the United States had a favourable opinion of ObamaCare, while 39-percent had an unfavourable one. [It will be interesting to follow the results of this poll over time.]

'Instead of indirectly charging customers by raising prices, he is directly charging and making a political statement,' said Paul Fronstin, director of the health research program at the Employee Benefit Research Institute in Washington. 

Yes, I would say that is true, that he is making a political statement. My hunch: the 5% surcharge will last a "New York minute" when customers start voting with their feet. It's also possible the 5% surcharge will replace the 15% tip.

It is generally agreed that the federally-mandated 29-hour work week will force most service employees to work two jobs. One solution: coops among restaurants. Employees would get their 29 weeks x 2 and restaurants would not be saddled with an additional $5,000/employee for health care premiums. A win-win for all.