Papa John's Faces Backlash in Wake of Obamacare Comments

Reality for Restaurant Industry Is PR Minefield

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Just a day after President Obama was re-elected, Papa John's CEO John Schnatter reiterated his concerns about the health-care reform law. Last Wednesday, Mr. Schnatter told students at Edison State College's Collier County campus near Naples, Fla., that the Affordable Healthcare Act would possibly compel the company to reduce employees' hours. The Affordable Health Care act mandates that many employers provide health-care for employees or face a government fine -- but employees who work less than 30 hours are exempt.

Mr. Schnatter has made waves about the health-care reform before. Over the summer, he said that the Affordable Healthcare Act would result in a 10- to 14-cent increase per pizza. "I got in a bunch of trouble for this," he told the students last week, according to Naples News. "That's what you do, is you pass on costs. Unfortunately, I don't think people know that they're going to pay for this."

Mr. Schnatter, who hosted a fundraiser for Mitt Romney at his Louisville-area estate earlier this year, went on to say that he is neither for or against the Affordable Care act.

Also in the hot seat now is Applebee's, because one of its franchisees, Zane Tankel, said that he wouldn't hire any more workers and may cut hours of current employees because of the Affordable Healthcare Act. "We've calculated it will [cost] some millions of dollars across our system. So what does that say -- that says we won't build more restaurants. We won't hire more people," Mr. Tankel told Fox Business Network. Applebee's corporate distanced itself from Mr. Tankel, saying that the views of Mr. Tankel do not necessarily reflect that of the broader Applebee's brand.

Not surprisingly, a backlash has spawned. "Daily Show" host Jon Stewart dedicated part of a segment to Applebee's and Papa John's on Tuesday. Mr. Stewart took issue with Mr. Schnatter's cost complaints, pointing out that the chain has been known to give away some 2 million pizzas as part of a promotion during football season. Papa John's, which did not respond to multiple requests for comment, also became the target of internet outrage yesterday, with numerous memes spreading across the web.

But Papa John's isn't without plenty of supporters. A group that appears to be unaffiliated with Papa John's organized a Papa John's Appreciation Day on Facebook, scheduled for this Friday. "Papa Johns has been targeted by the left for a boycott, for simply articulating that Obamacare would hurt profits and force cutbacks in employee hours," said the Facebook event page. "Stand up to this nonsensical and illogical action and support Papa Johns this Friday!" Among the requested actions to perform on the appreciation day include liking the Papa John's Facebook page, ordering pizza from the chain and using the hashtag #IStandWithPapaJohns on Twitter.

Other chains have warned of cut hours or layoffs and have largely escaped this week's outrage. Darden Restaurants, which owns Olive Garden and Red Lobster among others, in October said it was putting more employees on a part-time schedule in select markets as part of efforts to lower costs in anticipation of Obama's health-care law.

Separately, this week a class-action lawsuit was filed against Papa John's for what the plaintiffs said was illegal text messaging. The complaint alleges that Papa John's sent 500,000 illegal text messages to customers in 2010. Participants could be awarded $500 per text message in statutory damages. According to the complaint, the company sent a flurry of text messages about pizza promotions to customers who had already ordered from Papa John's. Lawyers for the plaintiffs said in a statement that the ruling could be "one of the largest damages awards ever recovered under the federal Telephone Consumer Protection Act."

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