Papa John Committing Pizza Extortion – Forgets Business School Lesson Of Supply And Demand

“Papa” John Schnatter has apparently forgotten the law of supply and demand. In a conference call, he told shareholders that if the Affordable Care Act (Obamacare) goes into effect, he will raise the prices of his pizzas. From Politico:

“Our best estimate is that the Obamacare will cost 11 to 14 cents per pizza, or 15 to 20 cents per order from a corporate basis,” Schnatter said.

“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,” he said.

“If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect our shareholders best interests,” Schnatter vowed.

Schnatter, a Romney supporter, is forgetting the most basic law of business. People are only going to pay what they are going to pay. No one is being forced to buy his mediocre pizza. If people want to stop buying because the price goes up, his shareholders will lose. If people stop buying because of his political beliefs, his shareholders will lose.

Papa John’s, like most pizza places, is not known for providing benefits for their employees. If Shnatter already provided health insurance to his employees (some do qualify, but not most), the Affordable Care Act would likely cost him nothing. In fact there’s a good chance that his company premiums would go down.

It’s doubtful that Schnattner’s a stupid man. He knows that retail costs are not determined by the cost of manufacturing. If that were true, someone forgot to tell many retailers and manufacturers. As a country, we willingly pay $2.00 – $4.00 for a fancy bottle of tap water. We pay ridiculous markups on clothing, cosmetics and movie theater concessions. When we order a pizza, we either order for taste, convenience or price. If the taste is only so-so and it’s no more convenient than any of the other pizza delivery places, you bet we’ll call the one that didn’t raise the price, simply because Obama was reelected.

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