Thursday, April 15, 2010

Quick calculations of health bill's impact leaves some restaurateurs feeling ill

If interpreting the new healthcare law is a point of comparison, Talmudic scholars have a cakewalk. But while the experts infer the mega-bill’s precise impact on restaurants and other small businesses, a few down-and-dirty assessments are arising from the field. The tip-offs are the screams of horror and the obscenity-laced vows to find another profession.

McDonald’s franchisees, for instance, were asked in a just-completed survey to estimate the new law’s cost to their businesses. The assessments provided by 16 of the 30 participants averaged more than $55,000 per restaurant annually, with a median response of $50,000. The other 14 demurred at providing a figure, but indicated they expect a permanent increase in costs.

“This implies that, in effect, this new law could wipe out 15%-20% of a franchised McDonald’s store’s annual profits,” noted Mark Kalinowski, the Janney Montgomery Scott restaurant analyst who periodically canvasses a sampling of franchisees on their near-term business expectations.

“We will increase prices across the board to pay for this increased cost. We cannot continue to have the bottom line shrink,” one respondent anonymously responded.

Restaurateurs flying the flags of other chains may be just a pessimistic, Kalinowski has suggested. “Over the last several months, we have spoken with dozens of U.S. franchisees in a variety of systems, and not a single one of them has mentioned in a favorable way the healthcare legislation that was recently made into law,” he wrote in an earlier report to clients.

Kalinowski himself is clearly not a fan of the Obama Administration and its policies, as indicated by postings on his Facebook page. He’s characterized the President as “an empty suit.”

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