Robin Garr wrote:I find this fascinating, first because of his apparent priorities: Shareholders first, employees second, and his customers, it seems, dead last. But it’s also curious because of his apparent limited command of simple business economics
I'm gonna go out on a limb here and say John, and his fellow board members, have a better grasp of business economics, particularly with regards to managing input costs, then everyone on this forum combined. I've known him since Junior high. We're not big buddies or anything but I can assure you he's an extremely bright guy. I suppose his success should speak for itself and frankly, you look a bit silly suggesting he's a dummy.
Anyway, since I'm in securities, and listen to analyst calls all the time, I think I can add some perspective. Quarterly earnings calls are aimed at analysts, investors, and the financial press. I'm quite sure John didn't expect his relatively normal response to a relatively normal analyst question to be incorporated into the latest yackety-yack political news spin-cycle. The investment community absolutely HATES CEOs/CFOs who try to get cute or coy with their answers.... so that's why he gave a very straightforward answer to the question (posed by Telsey analyst Peter Saleh). If he's not forthright, his share will get pummeled. That's just the way the market works.
Anyhoo, you can read the whole interchange below which makes it clear that PJ's sees the Obamacare cost inputs as marginal in the grand scheme of things.... something the political press doesn't bother to point out.....because it's not their business to provide context.
<Q - Peter Saleh>: Great. And then just last question and I'll hop off. When
you look out to 2014, I know it's still early, anything new on the healthcare
side in terms of how you guys are planning for it or what do you expected
impact could be in 2014?
<A - John H. Schnatter>: Again, another great observation. I'll give you our point of view. Our best estimate is that the Obamacare will cost about $0.11
to $0.14 per pizza or $0.15 or $0.20 per order from a corporate basis. To put
that in perspective, our average delivery charge is $1.75 to $2.50 or about
ten-fold our estimated cost of the Obamacare to Papa John's.
We're not supportive of Obamacare like most businesses in our industry but
our business model and unit economics are about as ideal as you can get for a
food company to absorb Obamacare, ergo, we have a high ticket average with
extremely high frequency of order counts, millions of pizzas per year.
And giving you an example, Peter, let's say fuel goes up which is does from
time to time, and we have to raise delivery charges. We don't like raising
delivery charges but the price of fuel is out of our control as is Obamacare.
So if Obamacare is, in fact, not repealed, we will find tactics to shallow
out any Obamacare cost and, of course, strategy is to pass that cost on the
consumer in order to protect our shareholders' best interest.
<Q - Peter Saleh>: Great. Thank you very much.
