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Franchised Restaurants’ Economic Growth with Obamacare Looming

Franchised Restaurants’ Economic Growth with Obamacare Looming

2013 seems to be the year of recovery from the Great Recession in the restaurant business with promising pre-recession growth, new-store openings and higher sales.  According to 2013 Nation’s Restaurant News Top 100 research, the Top 100 restaurant chains increased their sales by 5.3 percent compared to last year’s.  New franchised restaurants contributed to much of this growth, and the number of franchised restaurants among these top chains increased by 3 percent.  The biggest growth in number of franchised stores was experienced by Subway, Burger King, 7-Eleven, Dunkin’ Donuts and Jimmy John’s.

According to the report, consumers seem to be willing again to spend their money on eating out.  Still with very slow economic growth and high unemployment, most of the growth in sales is seen by fast-food and quick- service restaurants.  The economy and unemployment is still affecting most sit-down restaurant chains negatively.

Investing in franchised restaurants has appealed to many.  The deep economic recession we have seen encouraged many who lost their jobs in the corporate world to seek out franchise ownership as an alternative way of making a living.  There’s also the great attraction of being self-employed rather than relying on a pay-check from somebody else - someone who may decide to downsize you or replace you with a younger and lower paid employee any day.  The initial investment fee for a restaurant is hard for many to come up with.  As example McDonald’s requires a minimum of $750,000 in non-borrowed personal funds.  Burger King requires $500,000 in cash.  A “low-budget choice” is Papa John’s Pizza which requires only $50,000 in cash.

Despite the positive growth trend and recovery in the restaurant business, a big issue is still casting a shadow of uncertainty over the industry.  The mandated health care coverage in Obamacare has many restaurant owners worried.  The employer portion of the law has been postponed until 2015, but owners are already thinking about having to cut their employees’ hours back to less than 30 hours a week to avoid paying the insurance coverage.  Many will have to bury the additional cost for health insurance in price increases to the consumers.  Or as one top executive of a major breakfast chain stated it (to a friend of mine):  “Instead of just passing along the cost of Obamacare and burying it in a price increase we’ll publish an OBAMACARE SURCHARGE next to every item on the menu so that patrons of the restaurant can see for themselves the cost of "free" healthcare!”  It certainly is an interesting idea.

Top 10 Restaurant Chains (in total sales) in 2013

  1. McDonald’s
  2. Subway
  3. Starbucks Coffee
  4. Burger King
  5. Wendy’s
  6. Taco Bell
  7. Dunkin’ Donuts
  8. Pizza Hut
  9. Chick-fil-A
  10. Applebee’s Neighborhood Grill & Bar

~ According to 2013 Nation’s Restaurant News Top 100 research

Kristin Allen
Director of Marketing and Accountant
Allen & Company, PC
Kennesaw, Georgia
(770) 428-6229