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The reputation of Papa John's, Applebee's and Denny's took a hit after high-ranking representatives came out against Obamacare.
The brand perception of Papa John's, Applebee's and Denny's took a beating after high-ranking representatives of the companies said Obamacare would force them to stop building restaurants, cut worker hours and raise prices.
After the comments, on a scale from 100 (totally positive) to -100 (totally negative), Papa John's score fell from 32 to 4, Applebee's score fell from 35 to to 5, and Denny's went from 10 to zero, then back to 6, according to a new survey.
Rachael Rothman, Susquehanna Financial Group analyst, shares her outlook on the restaurant operator, and explains why she downgraded the stock to "neutral" and maintains a $58 price target.
Along with everyone else, the casual dining restaurant sector has been struggling to cope with the effects of the economic downturn. For example, Darden Restaurants, which operates Olive Garden, Red Lobster and LongHorn Steakhouse, on Tuesday lowered financial expectations, sending shares down 10.7 percent. Prior to that the company had been leading the industry.
In October, Darden experimented with using more part-time employees in an effort to avoid Obamacare costs. A flurry of negative media coverage ensued. On Thursday the company will announce that it won't be reducing any full-time employees to part-time status. The company cited the bad publicity around its workforce tests, along with promotions that weren't working, when it lowered its profit outlook for the year on Tuesday.
The reputation results come from an online YouGov BrandIndex survey of 5,000 adults 18+ who had eaten at casual dining restaurants in the past month. The survey asked respondents if they've heard anything in the last two weeks positive or negative about the brand and gives a score from 100 to -100. A score of zero means equally positive and negative feedback.
While correlation is not causation, there was a noted dropoff in the BrandIndex scores after the company figures made remarks about how the Affordable Care Act -- or Obamacare -- was going to hurt their business.
For instance, Papa John's founder John Schnatter estimated in an August 1 earnings call that Obamacare costs would add $.11 to $.14 in costs to every pizza.
"Let's say fuel goes up, which it does from time to time, and we have to raise delivery charges," said Schnatter in the Aug. 1 earnings call. "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, of course, strategies to pass that cost onto consumers in order to protect our shareholders' best interest."
In November, Schnatter told a college class that he supposed Papa John's franchises would decide to cut worker hours to avoid paying health insurance. Under the Affordable Care Act, employers have to provide health insurance for employees working over 30 hours a week or face fines.
Reached for comment, Papa John's told TODAY that Papa John's franchises are independently owned and operated and decisions about hiring and wages were up to individual franchise owners. Andrew Varga, chief marketing officer of Papa John’s, told TODAY the publicized YouGov BrandIndex findings "were contradicted by the results of BrandIndex’s own general population study which showed a significant improvement in reputational scores" for the pizza chain.
Despite the drubbing the brand has taken in the press and social media following Schnatter's remarks, which Lance Tucker, Papa John's CFO told TODAY have been "misquoted and mis-reported," the company said "there is also no change in its current positive sales or earnings guidance."
CEO of an Applebee's franchise running 40 Applebee's restaurants, Zane Tankel, caught flack after he told Fox Business News that the Affordable Care Act would cost millions and force them to stop building restaurants. Voice and email messages left for Tankel were not returned.
Denny's franchise owner in West Palm Beach, Fla., John Metz, told the Huffington Post that Obamacare would force him to charge each customer 5 percent extra to offset the costs. Per company instructions on this issue, calls to Met'z franchisor headquarters were referred to an external PR firm, which did not return a request for comment.
Both Applebee'sand Denny's released statements saying they while they respected the free speech rights of their franchise owners, the comments by Tankel and Metz did not reflect corporate opinions or positions.
Mary Ellen Muckerman, head of strategy at international brand consultancy Wolff Olins, told TODAY that "Franchises are just as close to the brand as the corporate parents." Political statements per se are not forbidden, but the question is, "are the statements consistent with the overall brand purpose?" said Muckerman.
Luke Kachersky, Director of Research at The Center for Positive Marketing at Fordham University, told TODAY, "Modern branding has shifted from positioning in terms of brand benefits to positioning in terms of values. The reason for this change, ostensibly, is that sharing values with your customers opens up an avenue toward a more authentic and enduring relationship."
Brand experts say that when the brand communication is inconsistent with its core principals, the brand is subject to flux, diminishment -- or even erasure. That can lead to the consumer's brand preferences to getting plucked off by another stronger, more confident brand, and a decline in sales.
"A brand is just a collection of ideas," Barbara Findlay Schenck, author of "Branding for Dummies," told TODAY. "When suddenly the brand message shifted to political stances, bottom line prices, price increases and staff cutbacks, the inconsistency rocked brand strength, confidence, and preference."
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Just more liberal press BS. I will make certain to get my Pizza from Papa John's in the future. I eat at Applebees and Dennys already. Obama Care is a tax that was perpetrated on the people of the country illegally. We can expect another mandate, from the Great Leader, that informs companies that if they don't conform to his will that they can expect a Government takeover of their operations; this will cause Pelosi to jump higher and for Harry to mumble louder.
Most of the commentors on here don't eat at those places because they dont accept food stamps.
Well SuperBrain is a misnomer eh. I bet you think Chick-A-fil is gourmet dining. Sheeeeeeeeeeeesh Tea Tardism may be caused by eating lousy food. As in Applebee's, Papa Johns
I understand that some people are frightened by anything new, but as the most powerful (Some of us still believe best) country on the planet, we are behind the 8-ball in taking care of our own citizens with medical care. As a Paramedic, I should know, I've seen people refuse to go to the hospital because they couldnt afford the ambulance ride or the treatment, and ultimately be pronounced by myself or co-workers because their condtion wasn't addressed. Will this be a hard transition? Probably. Anything new is. But those of you than Angry-text with political hyperbole you heard on talk-radio aren't thinking about the human cost of not getting a system in place. I'm not the "Liberal Press', just someone who KNOWS what the cost of not covering our american citizens with the basics can be. The longer we wait, the higher the cost, in both dollars and lives. By the way, I'm older and relatively conservative, but right is right.
I have to think about how this poll was a handled . . what were the specific questions asked . . . for example . . .Do you feel it is responsible for a company to fire or not hire workers becasue of Heatht Care costs ? Most would say no but if you aksed them for a food industry company that operates with very slim margins do you understand why a company would be concerned with mandatory health care costs . . . they might be inclined to say yes and maybe for a minute consider the impact on some of these businesses. Just makes me wonder when all I see is summarized chart ! Please Papa John's 32 to 4 on one issue ! Denny's 10 to 0 to 6 ??? Give me a break . . something here is being skewed !
Used to have a very nice Denny's locally; last time I was in it the food was terrible and not anywhere near the quality it used to be but the prices had increased! Maybe, it isn't just because of the remarks these people made; maybe they are trying to make more of a profit with lower quality food. Needless to say, I don't go there anymore!
I support companies that support the country and the president - I buy American - we are one of the richest countries on the planet - all of our citizens should have access to medical care - what should happen is the fraud and waste should be rooted out, and there's plenty of that - why not appoint retiree's, who have a great interest in medicare / medicaid to a investigative commission to root it out? Certainly the savings would therefore pay for itself - just sayin
i've done without chik fil a, i can add these to my list. they are there competitions best friend. those restaurants $uk anyhow. seriously doubt someone is not going to buy a pizza because of a $.15 added cost. or maybe they would eat some of the cost to show there employees they actually care about them. which they don't..obviously....now all the christianites can line up and buy a bunch of pizzas to show there loyalty. i didn't work last time..
The 99 per cent don't know anything about what the CEO of the company does or believes let alone who he/she is. Their stomachs decide where they eat not their brains.
Didnt or can't read ?
From what I read in the history books, even the "plantation CEO's" understood that their employees had to have basic, affordable heathcare or they couldn't perform. Their phylosophy, buy more workers so you have replacements on board and let the sick ones die. I will not support any of these businesses.
Now I know where to buy, thank you! I will fro sure shop with them!!
One of the best ways to support your community is to shop at homegrown businesses. The local small business may be a little more expensive, but shopping there will keep all the money in your community, including the profits, since the business owners live in the community and will spend their profits in the community. Additionally, small business people tend to treat their employees better, buy US goods and support local charities and local education. It's a win/win. On top of all that, you don't have to subsidize the underpaid Walmart employees with your tax dollars for their food stamps, medicaid and housing subsidies.
Most on here are from insane usamas regime of misfits. Soon when he sends you your welfare check he will tell you where to spend it also. Apparently there are no business owners on here or you would have a different tale to tell. All you people that have employer paid health care will also pay homage to your king in the the form of a tax increase depending on how much your company paid for you. It is now an addition to your income. Should raise most of you a couple of tax brackets. Amazingly I don't think there is one person here with a mind of their own, only listen to what the idiot regime and msdnc say, the little sheep follow along perfectly.
Awww cry harder con man.
I voted for BHO ,x2.I did not vote for the democratic party however.I wouldn't mind seeing the republicans HELP and try to AUGMENT 'obamacare'.If they were so concerned why haven't we had 'republicare' for years already
How obvious can you be! These idiot (CEO) Romney supporters were using scare tactics to scrounge up Romney votes. Didn't work--did it. I will not spend my money in those resturaunts again...and I eat out all the time!
IPc
Both of my daughters (with their husbands) have businesses. They're doing very well, providing others with jobs. I have never gotten a welfare check. I work. Like everyone else in my family. When my son got sick, I spent almost $250,000 trying to get him healthy again. I spent my own money. Could you do that? Most of the hateful, nasty things you people say have no basis whatsoever in any kind of reality. You lost the election because the majority of Americans disagree with your paranoid, ugly, hateful beliefs. So suck it up and get over yourself.
Will not ever eat at Chic-a-fil, Papa John, or Applebee's. The Jesus Nutters always like to point out Ellen is gay lets not shop JC Penny's, but whine when someone does the same to their idiots.
So, these CEOs step up and declare war on middle and lower class citizens. They need to realize that is they are the easiest sector to defeat in such a war. I will gladly support new small businesses over these greedy bastards. Let's not forget, corporate profits (as reorted to the IRS in 2011) were up 50% over 2008. Where are the jobs? Let them join us as the newest members of the middle class.
If they didn't like the 2012 election results, they are gonna hate 2014.
You liberals love to talk out of both sides of your mouth. You want freedom of speech but NOT for everyone! You can't have it both ways and expect to be taken seriously.
Papa John, aka 2% ahole, will never see my business again. Same for the others.
Well here it comes, not only will your health insurance premiums double, its going to cost you every time you eat out, buy something at the big box, buy something for or to fix your house, your car, gasoline, power and natural gas, city workers, all of it. If you live in the city, your taxes will go up to pay the premiums for all city employees from the mayor to the garbadge man. Any company with 50 or more employee's is all companies. Sure you can get something at a little mom and pop store, but there aren't many left and they charge more. And if you work for a company with 50 or more then you will be cut to part time so they don't have to do your insurance. Pay more, Make less. You guys are geniuses. You figured out how to make us go broke faster. Now we can skip resession and go straight to depression.
@smalley50
You're kidding right? My paycheck gets hit because my employer provides me health insurance, and that goes up when people are not covered. This increases coverage, so I my costs will go DOWN. That gives me more money to spend on whatever I want, include the ability to spend 14 cents more on a pizza or 25 cents more on a $30 meal at Applebees.
Here's the thing: if the market is inflexible in pricing (e.g. Papa Johns can't actually pass on the 14 cents), then it will cut into his profits per store. In order to maintain existing profit levels, he will have to build MORE stores, not fewer.
Since this is an across-the-board tax, there will be no impact on Papa John's market position. Pizza Hut will get hit by the tax just as much. So the price of a pizza relative to the competition will stay the same.
As for city workers or big box stores, there will be no price impact since the cost of businesses for most of those companies will DECREASE. (They already offer health insurance to their employees, and the premiums will start going down when more competition is introduced).
So for most of your purchases, you will have more money and the price will remain the same. For a small number of purchases, the price will go up by a few cents, far less than you are saving in your own premiums.
As for the number of mom-and-pop stores left, it is true that Walmart has run many of them out of business. We should be passing laws that require Walmart to cover the cost of food stamps that their full time employees qualify for. That will raise their prices, allowing mom-and-pop stores the room to go back into business again.
What this does is rebalance the economy back away from huge corporations that build vast fortunes for a tiny minority of the population and more toward entrepreneurs and neighbors who are able to make a good living operating a shop on the corner. Which America do you want to live in?