Article
Legislative outlook: QSRs and health care reform
Operators are keeping close tabs on the controversial legislation.
January 31, 2010
Quick-service operators may have breathed a sigh of relief when Scott Brown spoiled Democrats' plans for health care reform. But while the filibuster-proof majority may be gone, the legislation isn't dead, with Congressional leaders examining their options.
As the two versions of the bills now stand, operators have plenty to concern them. Essentially, the separate legislation passed by the House and Senate would require most employers to offer health care coverage to their employees. Independent operators and small franchisee businesses would be impacted the most, especially by the House version. In that one, a smaller number of operators — only those with payrolls under $500,000 — would be exempt.
To lessen the impact on the industry, especially its independent operators and smaller franchisees, the National Restaurant Association has worked hard to fight for several key provisions. Those efforts haveresulted in the Senate version including a provision for a 90-day waiting period, 60 days penalty-free, before an employer offers coverage. The waiting period would accommodate for the industry's high turnover rate, especially at quick-service restaurants. The House bill does not have such a waiting period.
The NRA also has called for a change to the definition of 'full-time employee' to one that better fits the industry's flexible scheduling: 390 hours in a calendar quarter (13 weeks) as opposed to the standard weekly definition.
The association has pushed for as strong a small business exemption as possible. The Senate bill exempts businesses with fewer than 50 full-time employees from the mandate, a significant difference between the House's exemption of those with payrolls under $500,000.
Other provisions the association is lobbying for include an exemption for part-time and seasonal workers and maintaining the current regulatory framework of the Employee Retirement Income Security Act (ERISA) that allows large, multi-state employers to offer consistent health benefits to employees.
Chains concerned, too
QSRs have been following the developments closely, some to see how their franchisees might be impacted and others for the national menu labeling standard included in both bills.
A number of national brands such as McDonald's, already offer health care coverage. According to People Report, 93 percent of QSRs offer health care coverage to their full-time hourly staff, with 48 percent of the coverage typically paid by the company. Only 20 percent of QSR hourly employees participate in the health benefits offered.
Subway has about 23,000 U.S. stores, all operated by franchisees. Some large, multiunit operators offer health insurance coverage, but many smaller operators do not. Therefore, mandated health care will impact the chain's operators differently, depending on the number of stores a franchisee owns and the number of employees per store, said Les Winograd, public relations specialist for the company, who is part of a group of Subway executives monitoring the bills' progress.
Key differences in health care reform legislation |
House version:
Senate version:
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"There's no cookie cutter answer for us (regarding universal health care coverage) because our locations run the gamut," from stores with 50-plus employees to those with fewer than 15, he said. "Just because of the sheer number of people we're talking about, we're going to have a cross section on both sides of the aisle."
Subway officials are more interested in the passage of the menu labeling requirements. Both versions of the bill contain similar language regarding menu labeling, essentially requiring chains with 20 or more locations to post calorie information on menus and menu boards.
The difficulty for Subway operators now is that several states as well as a number of cities and counties have passed differing legislation. For multiunit operators in different cities, they have to keep track of which menu boards go in which stores. Having a national standard would simplify operations.
"To us, the menu labeling is going to have a very far-reaching impact on our restaurants," Winograd said.
Operators look at cost
Rick Sampson, president and CEO of the New York State Restaurant Association, said that as more cities, counties and states pass menu labeling requirements, a national standard for menu labeling is welcome.
When local or state legislators mandate such laws, they seem to have little consideration for the changes that large chains like McDonald's and Subway must undergo for one market, he said. But even a national program means more expenses for operators.
"It all plays into more costs for restaurants, especially QSRs," Sampson said.
Cost is the primary reason most operators do not already offer health care plans for their employees. Some independent operators cannot even afford the coverage for themselves, he added.
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"If health care was affordable, small business would absolutely make it available to employees because it's just good business," Sampson said. "[They] want to keep these people."
Operators fear the impact of taking on additional expenses — potentially an additional 8 to 10 percent to offer health coverage — when they already are facing some of the toughest economic challenges in recent memory.
Sampson said he has had a number of operators express their concern over the legislation, especially the health care portion. Essentially, they fear the extra operating expense will push their businesses to the breaking point.
"I have had restaurants report back to me that if this goes into effect, 'I will have to close my doors,'" he said. "This industry is so sensitive to raising prices because the public has a choice. They don't have to eat out. They can stay home."
Policy / LegislationInsurance / Risk ManagementMenu BoardsDigital SignageAssociationsNational Restaurant AssociationSandwichOperations
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