Re: A Word About Papa John's Pizza and Obamacare
Posted by:
More clues
()
Date: November 19, 2012 01:27AM
Missed part of it.... Wrote:
-------------------------------------------------------
> Some clues Wrote:
> --------------------------------------------------
> -----
> > ^ Never mind. Don't need to.
> >
> > According to their financials average weekly
> sales
> > for franchisees stores were $14,431 (a range of
> > $14,839 - $10,316 for comparable and
> > non-comparable stores, respectively).
> >
> > That equals out to be about $750,000/year in
> > sales.
> >
> > Looking at some comparables one can assume
> > somewhere between about a 7% - 10% net profit.
> > (Papa John's itself at the corporate level
> makes
> > ~4.6% net profit.)
> >
> > So that gives you about $52,500 - $75,000 in
> total
> > profit to work with.
> >
> > Now how many full-time people at fully loaded
> > salary costs do you want to hire?
>
>
> So they pay their employees from their profit, I
> guess?
>
> You have a few things mixed up there. Papa John's
> corporate profits are based on corporate store
> sales and franchise fees.
>
> The franchise owner who is only making 10% net
> profit is paying 2 or 3 full time employees
> already.
>
> You forgot, nobody was talking about hiring more
> workers, the discussion is that Snitzel or
> schattler or whoever is throwing a fit about Obama
> winning re-election and wants to get rid of all
> full time workers, except for a store manager, and
> only have part-time employees.
>
> Many of his franchisees will probably see that as
> good cover to increase their profit, but they'll
> also suffer in the long run.
No, as I said that's net profit.
I don't have anything mixed up, I very clearly separated the corporate numbers for that reason. The corporate numbers are entirely different since most of his full-time employees are at the corporate level and not out making pizzas. They do employ people in the corporate-owned stores where that does apply. The numbers that he's using are averaged out across all of the company including both groups and divided by some number of units sold so it appears trivial on a per unit basis. But if extended to providing benefits for N people/store x N stores (~700 if I remember right) x $ thousands/year each turns into significant money. Since they're not covering all of the employees who are required to be covered under Obamacare, then it is additive.
But here we were talking about franchisees. The point being that there's not a whole heck of a lot of margin to work with for places like this. At some point it's just not worth doing. You don't buy into it and put your money at risk just to employ other people. The only way that these deals really generate much money is over volume. Maybe some of the larger franchisees with many stores are but the average guy with a couple of stores isn't dragging in big money. They also probably have most of their assets tied up in the business. And that net profit is to the business. Depending on how it's structured, they're paying personal taxes on whatever they pull out of it on top.
Even at the big end of the scale one group of franchisees noted in their financials with 33 stores lost ~$25,000 on over $5 million in sales with $5.25 million in expenses (reported since they gave them a loan).