Multi-Unit Franchisee Magazine Issue II, 2012 | Page 59

Health-ScareREFORM
“I guess I’m like a lot of other people I’ve
spoken with: I’m hoping the law will get
repealed or revised before it kicks in.”
a lot to consider, says Greg Cutchall, who
operates 57 locations spread among 8
brands (including Famous Dave’s, Sonic
Drive-In, T Peaks, and Domino’s Pizza)
win
in five states (Nebraska, Iowa, Kansas,
Texas, and Utah). He describes the employer mandate as “flawed.” “I think it’s
the right idea but the wrong execution,”
he says. “Part of me says there’s merit to
all of us having insurance, because one of
the reasons the rates are so high is that
only people who need it buy it. But on
the other hand, should anyone be forced
to do anything?”
Cutchall admits he has nightmares
about the volume of paperwork that
would be involved in compliance if the
mandates go into effect. “That would
be especially tough for the restaurant
industry, which has higher than normal turnover,” he says. “I guess I’m like
a lot of other people I’ve spoken with:
I’m hoping the law will get repealed or
revised before it kicks in.”
Like many multi-unit franchise organizations in recent years, Cutchall’s
company has been forced to cut back
on the portion of insurance premiums
it pays for employees. “We hated to do
it, but if their portion is even $10, the
young people say, ‘No thanks.’ It makes
the group more high-risk and raises
everybody’s rates if you can’t get your
young managers to pay,” he says.
Currently, the portion Cutchall’s
company pays depends on the level of
the employee. “If it’s a partner in a division—and there are only a couple of
those—we pay 100 percent. If an employee
is administrative, or an office worker, or
a GM, we pay 75 percent. Below that,
assistant managers get 50 percent, and
we allow other employees who work a
certain number of hours and have been
with us for a while to participate in our
plan at their own expense. That’s still
cheaper than they could get it as an individual,” he says.
Tighter margins every year have be-

come a fact of life, he says—something
that can be worrisome. “It’s all the nickel
and diming. The other day when I was
signing checks, there were 15 out of 60
that I didn’t know who the companies
were. I said, ‘What are we buying from
this company?’ Most of them were legitimate line items, but it can be overwhelming,” he says. “A restaurant that did
$1 million five years ago definitely made
more money than a restaurant making
$1 million this year.” One certainty in
the ongoing debate: paying more for
employee healthcare insurance certainly
won’t help the bottom line.
Red tape and red flags

Greg Cutchall

mistake. That’s the kind of stuff that
keeps you awake at night.”
Everyone who works at Grace’s Supercuts salons for 30 or more hours a
week is eligible for health insurance, he
says. A small number who were grandfathered in are covered at 100 percent,
while all new employees are covered
for 75 percent of their health insurance
costs. “Some people don’t take it,” he
says. “The most common reason is that
they’re already covered under a spouse.
Then there are the young people who
have no medical bills and don’t feel it’s
necessary to pay the 25 percent. Others
just don’t want to pay the 25 percent.”
Grace says his company has “good policies” that run close to $400 a month.
To date, the answer to rising costs
for his company hasn’t been to reduce
benefits or lay people off, Grace says.
“We’ve been reluctant to reduce benefits. We have done that a little over the
years. Our co-pay for a doctor’s visit is
now $30; it was $10 about
10 years ago. When our
premiums increase, we
look at the coverage and
make minor tweaks to
keep premiums somewhat
in line. We had a big increase for this year. I was
surprised at how much.”

Gary Grace, who operates 37 Supercuts
in Southern California, also sees red flags
ahead. “What we see as problems are the
massive red tape and the highly possible
potential for penalties because there
are so many different regulations about
who qualifies and who doesn’t,” he says.
“Complex compliance combined with
severe penalty possibilities if you’re not
100 percent compliant is expensive and
translates eventually into higher prices
and costs for consumers. While the red
tape is not easy, we can deal with it. The
potential for penalties is a different story.”
Grace recently experienced what he
sees as an example of the future if the
employer mandate goes into effect. “I’m
just coming off a classaction lawsuit against me
because I mistakenly underpaid 700 employees
over a four-year period.
The amount I underpaid
totaled $8,000, but the
lawsuit asked $15 million
in penalties. Of course, I
paid the employees what
I owed them, but was still
subject to the suit. I won’t
be paying $15 million,
but it will cost me about
Gary Grace
$300,000 for that $8,000

Compliant and
penalized

Rob Branca, with 60
Dunkin’ Donuts and 5
Baskin-Robbins units in

Multi-Unit Franchisee Is s u e II, 2012



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