“Papa John’s pizza extortion,” ran the headline for a story Wednesday from Salon, a news website.
“Vote for Romney or we'll raise our prices” was how Daily Kos, a liberal news site, topped its story , which went on to illustrate Mr. Schnatter’s links to the GOP presidential candidate..
Some Twitter users are urging a boycott of the Kentucky-based pizza chain.
But such reactions may be overdone. Was Schnatter making a political threat — or simply explaining the economics of the pizza business? You be the judge.
In the middle of an Aug. 1 conference call with reporters and analysts to discuss the chain’s second-quarter results, Schnatter was asked about the impact of the new health-care law on Papa John’s. Here’s what he said, according to a recording of that call on the company’s website:
“Our best estimate is that the Obamacare [law] will cost about 11 to 14 cents per pizza – or 15 or 20 cents per order from a corporate basis. To put that in perspective, our average delivery charge is $1.75 to $2.50 – or about 10-fold our estimated cost of the Obamacare [law] 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…. We have a high ticket average with extremely high frequency of order counts – millions of pizzas per year. To give you an example, Peter, let's say fuel goes up, which it 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 So if Obamacare is, in fact, not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto the consumer in order to protect our shareholders' best interest.”