--National Restaurant Association says mandate threatens chains'
already-slim profit margins
--National Retail Federation argues the law is unreasonably
complicated to administer
--Some corporations, like Starbucks, are supportive of mandate
and already compliant
By Annie Gasparro
Restaurant and retail chains say they are "deeply disappointed"
by the Supreme Court's decision Thursday to uphold the health-care
law, arguing the mandate will increase labor costs, prevent
expansion and make business tougher in an already struggling
economy.
"As it stands, the law wrongly focuses more on penalizing
employers and the private sector than reducing health costs," said
National Retail Federation Chief Executive Matthew Shay in a
statement. "Although the Court upheld the law's constitutionality,
many problems remain: It penalizes employers too much; it doesn't
do enough to reduce the cost of health care; and it is unreasonably
complicated and difficult to implement and administer."
Based on the Supreme Court's ruling to uphold the law, employers
with 50 or more full-time equivalent employees must offer some
level of health insurance to full-time employees and their
dependents, or pay a penalty. An employee is considered full-time
if he or she works on average at least 30 hours per week.
The National Restaurant Association said the employer
requirements outlined in the law "threaten the economic health of
the restaurant industry," and "impact restaurant operators' ability
to grow and create jobs."
National Restaurant Association Chief Executive Dawn Sweeney
said in a statement that the costs of providing coverage or paying
penalties "could threaten the very slim profit margin on which most
restaurants operate."
Many large restaurant chains, such as Dunkin' Brands Inc.
(DNKN), Burger King Worldwide Inc.(BKW), Yum Brands Inc.
(YUM)--owner of Pizza Hut, KFC and Taco Bell--and DineEquity Inc.
(DIN)--which owns Applebee's and IHOP--are heavily franchised in
the U.S. As a result, the franchise owners will be struck with
these higher labor costs, which could prevent them from reinvesting
in the business in other ways.
"We are deeply disappointed by the High Court ruling to uphold
the Affordable Care Act, which places undue burdens on the
franchise small business community," International Franchise
Association Chief Executive Steve Caldeira said in an interview. He
says the requirements of the act are unaffordable for small
business owners, and puts up barriers for franchise owners looking
to expand their businesses.
However, Mr. Caldeira added that small business owners are
smart. "A lot of them are shifting their business models from
full-time to part-time workers, or they will raise prices on
consumers" in order to offset the impact on profit margins, he
said.
Earlier this month, Home Depot Inc.'s (HD) Chairman and Chief
Executive Frank Blake said that "as an employer of over 250,000
associates in the U.S., the impact of the Supreme Court's decision
on health care will be significant." Now that the decision has been
made, Home Depot adds, "We're evaluating our program to determine
the best approach, based on the Supreme Court's ruling."
Starbucks Corp. (SBUX), however, is an outlier in the restaurant
space, as it supports the Affordable Care Act and has offered
health benefits to full- and part-time cafe workers for 20 years.
"We have advocated for health-care reform for at least 10 years,"
spokesman Jim Olson told Dow Jones. Starbucks said that, as it
stands, the company is already compliant with the requirements the
Act sets for 2014.
Target Corp. (TGT) said it "remains committed to providing
affordable, quality health-care benefits" and "will continue to
implement the health-care reform provisions as prescribed by the
law."
For pharmacies, the additional insured Americans could provide a
boost in business. "With the Supreme Court decision, approximately
30 million more Americans will have access to health insurance and
the type of convenient, affordable and trusted care Walgreens
offers," Walgreen Co. (WAG) said in a statement. "We share
America's vision for a better and more affordable health-care
system...In addition, we will continue expanding the role of
health-care providers at our Take Care Clinics to offer convenient
primary care," such as health testing and immunizations.
CVS Caremark Corp. (CVS) said it will continue to work with
policymakers to solve the ongoing "health-care cost-quality-access"
dilemma. "We believe effective pharmacy care has an important role
to play in managing health care costs, and we are committed to
making innovative solutions available," Chief Executive Larry Merlo
said in a statement.
The National Retail Federation said it will redouble efforts to
repeal the law, while working with regulators to smooth
implementation for retailers. The National Restaurant Association
also said it encourages Congress to continue efforts to repeal the
law, and that as the analysis of the Supreme Court's ruling becomes
clearer, it will continue to evaluate the impact on the
industry.
-Karen Talley, Joan Solsman and John Kell contributed to this
article.
Write to Annie Gasparro at annie.gasparro@dowjones.com