By: Robert Lillegard
“It’s a dirty, mud-filled, slug-filled universe of information,” one attorney says about the Affordable Care Act. To help, we’re launching a new 10-part series aimed at delivering practical advice.
You can call it Obamacare. You can call it the Affordable Care Act. You can call it a bold new era of equal healthcare for all or a massive debacle that will sink the republic. You can call it anything you like, but you can’t call it off. For better or for worse, the new law is here. Now, the question is: What are you going to do about it?
We’ve been asking ourselves the same thing. During the National Restaurant Association’s annual show in May 2013, my editor and I attended an educational session called Managing At The Margin. The session came with a touchingly optimistic agenda for a mere 45 minutes: “How Top Franchise Operators Plan to Manage Healthcare, Rising Taxes, Employee Issues and Higher Commodity Costs.” We barely touched taxes, employee issues or commodity costs. All the questions were about the healthcare law.
What would the employee share be? Would each store count towards the 50-employee minimum or be counted separately? And most importantly, how much is all this going to cost?
We decided to find the answers. Over the next year, we’ll cover the ins and outs of the new healthcare law and how it affects franchisees, franchisors and employees. But we won’t be going at it alone. We’ve assembled a team of lawyers, consultants, insurance brokers and finance experts, along with plenty of real franchisees and franchisors to make it practical. The first thing they told us is simple: It’s time to start preparing.
Justin Klein, a franchise attorney and partner with Marks & Klein, a Red Bank, New Jersey, firm specializing in franchise, business and estate law, says head-in-the-sand thinking is all too common right now.
“The biggest issue that is out there, that nobody is necessarily paying attention to, is that as far as everyone should be concerned, this is real and it’s going to happen,” Klein says. “Whether it’s January 1, 2015, or January 1, 2016, it’s going to start and people need to start preparing.”
The best first step, he says, is to gather advisers. Lawyers, consultants, accountants and insurance brokers can all be part of the mix.
“It’s a dirty, mud-filled, slug-filled universe of information,” Klein says. “If somebody has already done the hard work, at least give the businesses the short-term opportunity to figure how to wade through that stuff, you’ve got to take advantage of that.”
Roland Dickey Jr. has done just that. As the CEO of Dallas, Texas-based Dickey’s Barbecue Pit, he’s presided over a growth of 10 to 15 franchised stores a month (the chain had 339 restaurants at press time). Meanwhile, he’s been preparing for the Affordable Care Act. In an email to Franchise Times, he explained the exact steps he’s looking at.
“We are estimating around $12K per store” for impact on costs, Dickey says. “For business owners with thin margins, this can be challenging.”
One concern with the ACA is the contention it will put full-time employees out of work. Dickey Jr. says he objects to the 30 hours a week definition of “full time” as it has never historically been defined that way. Will he get rid of full-time employees and replace them with part-time workers? “Both are options we will need to consider but no decision has been made,” Dickey says.
He also says he’s open to raising prices if needed. One thing he promises never to do, though, is shrink portion sizes. “We have always offered generous portions,” Dickey says, “and that will never change.”
Credit the man for his honesty. Jim Squire, chairman of the Southeast Franchise Forum, says even franchisees unwilling to admit it are certainly taking a similar approach. “Franchisees in general were looking at how they could reduce their workforce or reschedule hours,” Squire says. “Large franchisees are reducing opportunity for spousal care.”
Squire is also the chief development officer at Firestorm, a national franchise company specializing in crisis management, vulnerability analysis/threat assessment and business continuity. He says there are three concrete steps he recommends franchisees take right now.
“The very, very first thing I would suggest is that the individual franchisee talk to their leadership team and the brand and find out what information they’ve gathered,” Squire says. “The franchisees and the franchisors will always have a common bond.”
After that, he says franchise owners need to be talking to their insurance companies and seeing what’s available. Kathleen Parzynski, a tax director for McGladrey, a Chicago-based tax, assurance and consulting firm, agrees this is a crucial step.
“Really, what your franchise owner should be doing is talking to their insurance companies right now,” Parzynski says. “Do they have an applicable plan in place? Is it ready for the 2014/2015 rollout?”
Sheldon Blumling is a partner at Atlanta-based Fisher & Phillips, and a member of the employee benefits practice group. He says no matter how much time companies have to gear up for the decision, it’s unwise to leave it until the last minute.
“Sitting down in January you might think, well gosh, there’s plenty of time to gear up for this,” Blumling says. “It always seems like there’s a lot of time until you get to the point where there really isn’t.”
Action steps to take this month
1. Stop postponing the inevitable.
2. Talk to your franchisor and see what information they have.
3. Get a proposal from your insurance company. If you don’t have a health insurance company ask your general liability insurance company. Get one or two proposals from other insurance companies.
4. Hold focus groups with your employees, to start learning their desires, and educating them about what’s to come.
5. Run an analysis with your accounting team. Consider the following options:
Reduce full-time workforce.
Add part time or temporary workers to cover the shortage.
Remove or reduce spousal coverage and non-mandatory benefits.
Reduce portion sizes or service offerings.
Reduce executive pay or administrative staff.
Renegotiate your lease, negotiate with vendors, etc.
6. Review options with a consultant to determine the best mix.
7. Make sure your plan is compliant. If in doubt, ask legal counsel.
8. Keep learning. This series is a good place to start, and the International Franchise Association and other franchise organizations will be working to keep members up-to-date as the law changes and morphs. Act now.
9. Have questions or comments? E-mail Managing Editor Beth Ewen, email@example.com
Find the article here: http://www.franchisetimes.com/January-2014/Reality-Check/