In 2006, when Indiana small-business owner Scott Womack purchased a development agreement to expand his IHOP franchise into Ohio, he had no idea Congress would pass a massive overhaul of the health care system four years later.
Today, one year after that legislative overhaul became law, Womack is very aware of Obamacare — and of its effects on his plans for growth.
Under the year-old law, Womack must provide health insurance to all full-time employees beginning in 2014. Right now, he employs nearly 1,000 full- and part-time workers and already offers insurance to his management staff. He simply does not know how he’ll generate the revenue to do more.
Womack estimates the cost of the law to his company will be 50 percent greater than his company’s earnings — in other words, beyond his ability to pay.
That’s not because his company of 12 IHOP restaurants in Indiana and Ohio is unprofitable. Quite the opposite, in fact. By industry standards, he’s doing well. But labor-intensive restaurants generate profits of just 5 percent to 7 percent per employee.
With fears about how he’ll afford to provide health insurance with those low profit margins, Womack is worried about his expansion plans in Ohio. He can’t exactly cancel his development agreement. But he’ll only be able to fund his new restaurants — and the construction, real estate and manufacturing jobs that would go along with them — if Obamacare is repealed.
“If the health care reform law is not repealed or if the employer mandate doesn’t go away, we’re going to have to take drastic action,” Womack explains.
From his perspective, the law represents Congress’ fundamental misunderstanding of important differences among industries. He’s frustrated that so few lawmakers sought input from people like him — but he’s doing what he can to speak up now to offer a glimpse into the law’s effects on small-business owners.
Posted by Matt Haller, IFA Director of Communications (with permission from The Heritage Foundation)