Health Insurance Legislation Could Hike Restaurant Prices
September 16 2009 - 10:54AM
Dow Jones News
Restaurant executives warned that requiring employers to provide
health insurance to employees will result in higher menu prices and
stifle growth.
"It will be inflationary at the very least, and completely shake
out the business at its worst," Rick Rosenfield, co-founder and
co-chief executive of California Pizza Kitchen Inc. (CPKI), said
Wednesday at an RBC Capital Markets consumer conference.
California Pizza Kitchen already has higher prices at
restaurants in San Francisco, which requires companies, including
restaurants, to offer health insurance to employees.
Higher prices could turn off customers at a time when
restaurants are struggling grow sales in the midst of the worst
operating environment in decades.
Restaurants may also have to divert money earmarked for opening
stores or other growth plans toward paying higher health insurance
costs.
"It's not like we have a pot of money in the closet" to pay for
health insurance, said Michael Murphy, president of CKE Restaurants
Inc. (CKR), which owns the Hardee's and Carl's Jr. fast food
chains.
Murphy said that another legislative issue, menu-labeling, is
"somewhat discriminatory" in that proposed legislation only
requires chains with more than 20 outlets to post calorie
counts.
Executives said overall real estate costs are favorable, as more
sites open up and more restaurants close than open.
They also expect consumers to eventually shake off habits
brought on by the recession, although some chains may have hurt
their images with rampant discounting.
"I think it's long-term destructive for those guys," Kent
Taylor, founder and chairman of Texas Roadhouse Inc. (TXRH),
said.
Shares of CKE Restaurants, which reports fiscal second-quarter
earnings later Wednesday, rose 28 cents, or 2.6%, in recent trading
to $11.09. Texas Roadhouse shares added 20 cents, or 1.8%, to
$11.48, while California Pizza Kitchen shares rose slightly to
$14.64.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com