Sunday, December 9, 2012

How It Should Be Done

The restaurant business is a tough one. Despite relatively high mark-ups on the actual food, overall margins can be tight. Part of the reason why tipping restaurant wait staff after a sit-down meal is considered a requirement is that restaurant owners push wages down as far as they can. And they still plead poverty at every turn. Which explains comments, after the November elections, from John Schnatter, CEO of Papa John's Pizza and Zane Tankel, CEO of Applebee’s franchisee Apple-Metro that there would be consequences for their workers from the President's re-election, stemming from the fact that the Patient Protection and Affordable Care Act, commonly known as Obamacare or just "the federal health care law," would introduce new requirements for them as far as covering their workers. At the same time Darden Restaurants, owners of Red Lobster and the Olive Garden (among others), started testing new staffing patterns that would keep employees below the 30-hour work weeks that would make them eligible for new coverage, and Denny's franchise owner John Metz announced that prices would rise by 5%, and employee hours would be cut in response to the law.

If this was meant to be attempt to marshal public anger, it worked. Except for the minor detail that the anger was directed at the restauranteurs, and not the Obama Administration. According to YouGov BrandIndex Papa John's and Applebees both suffered significant downturns in public opinion after their anti-ACA statements. Denny's saw it's already low rating fall the rest of the way, hitting zero before rebounding. And Darden is backing away from its new staffing plans after announcing that earnings were plummeting, in part because of negative publicity.

What should we think about this? "Bravo." This is the way that things are supposed to work. The public votes with their feet and their wallets to support companies that behave in a way that they approve of, and to punish those that don't toe the line. Sure, it has it's downsides, but it's better than a constant littany of new government regulations. Not that government regulations are, in and of themselves a bad thing, but if a problem can be solved without the need to make the already massive federal code even larger, then we should take it. Of course, this could simply lead to more hiding behind trade associations, rather than braving the public themselves, but still it lets them know that business is all about the customers. Seeking to enlist them in crusades against things those same customers find worthwhile is a bad idea.

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