CEO's blame layoffs and reduced hours on Obama re-election

[Halicia]

Doesn't matter, demand will certainly be lower due to a 10 cent higher price. The question is: How much?

Food costs in general have gone through the roof (even before the election & not all even remotely connected to health care), so if the price is ONLY increasing by 10 cents, while rival products are doubling or tripling... its far from 'certain' that demand will be lower.

Remember that even among their direct rivals, they will be reacting to the same cost increases "from Obama's re-election", so that doesn't affect them negatively at all.

Heck, even the 50 cent candybars from a year or so back are going for a buck now. thats a heck of a lot more of an increase then 10 cents on a $10 pizza.

[smelltheglove]

It does.

Taken from individuals and a small sample size, it wouldn't show it.

But across over all America in the span of a year or so, there will be a measurable lowered demand.

id have to see it to believe it. most people wouldnt stop to pick a dime, let alone hesitate to spend one on something they wanted. if it was a relevant amount i could see it, but that amount is simply nothing

as it is, business has been decreased by my orders. voting with my dollar, just as all the free market types keep suggesting

[chadwix]

1. Papa "john" is a d-bag by himself. You should read up on him if you havent.
2. Papa Johns is the only pizza sold at NFL games now. He is making boatloads of money.

Boycott that pos

He has infiltrated our schools too. My niece eats papa johns at school on fridays.

[Deadvolcanoes]

Doesn't matter, demand will certainly be lower due to a 10 cent higher price. The question is: How much?

What would be your best estimate?

What do you think effects demand more? A ten cent price increase on a pizza, or political posturing because your butthurt that Obama won?

All he had to do was come out and say, Papa Johns is raising the price of their pizza by ten cents. We are doing this to comply with the new health care mandate, and we think its a great that all our employees will finally have access to basic healthcare.

Instead of boycotting, people would be supporting his business.

Has this guy ever heard of public relations before...

[Laize]

It does.

Taken from individuals and a small sample size, it wouldn't show it.

But across over all America in the span of a year or so, there will be a measurable lowered demand.

I find it very hard to believe price and demand are perfectly elastic.

Everyone has a price they determine to be "a small change". This is how Farmville and the Apple App Store rake in cash hand over fist. People don't consider their apps to cost a lot of money even though they objectively cost between 8 and 35x as much as this papa johns pizza increase.

I don't think a 15 cent price increase will harm their model.

[Diurdi]

Food costs in general have gone through the roof (even before the election & not all even remotely connected to health care), so if the price is ONLY increasing by 10 cents, while rival products are doubling or tripling... its far from 'certain' that demand will be lower.

Remember that even among their direct rivals, they will be reacting to the same cost increases "from Obama's re-election", so that doesn't affect them negatively at all.

Heck, even the 50 cent candybars from a year or so back are going for a buck now. thats a heck of a lot more of an increase then 10 cents on a $10 pizza.

We're obviously talking about an extra 10 cent increase in price in addition to any other price increasing factors.

[Kasierith]

He is adapting.

You just disagree with how he is doing it.

Well, if what I saw about the state of the company since that statement is accurate, they chose a horrible way to do it.

[smelltheglove]

All he had to do was come out and say, Papa Johns is raising the price of their pizza by ten cents. We are doing this to comply with the new health care mandate, and we think its a great that all our employees will finally have access to basic healthcare.

Instead of boycotting, people would be supporting his business.

Has this guy ever heard of public relations before...

in spite of all of these claims to the contrary, this was never about business. this was a public hissy fit that he didnt get his way. as someone else mentioned, he was most likely going to a walmart style employment model either way, and this was a chance to throw a cheap shot in the process.

[Diurdi]

I find it very hard to believe price and demand are perfectly elastic.

What's "perfectly elastic" supposed to mean? Ideally, businessmen raise their prices until 1% increase in prices result in 1% drop in demand (price elasticity of -1).

Either way, an increase in prices will lower demand, the question as I said is: how much? More or less than 1%? I think it's an insult to his intelligence to think that his price elasticity is above -1 (between -1 and 0), and that ACA forcing him to raise prices will actually increase his profits.

[Riidii]

Well, if what I saw about the state of the company since that statement is accurate, they chose a horrible way to do it.

I think they'll be fine.

Like I said, others will come out and say similar things. Maybe more subtly though.

He was just the first. So all the hate goes on him.

---------- Post added 2012-11-14 at 05:20 PM ----------

What's "perfectly elastic" supposed to mean? Ideally, businessmen raise their prices until 1% increase in prices result in 1% drop in demand (price elasticity of -1). Either way, an increase in prices will lower demand, the question as I said is: how much?

I imagine the relationship is exponential.

But yes, however small it may be, it will exist.

There is no minimum threshold or anything.

[Kasierith]

I think they'll be fine.

Like I said, others will come out and say similar things. Maybe more subtly though.

He was just the first. So all the hate goes on him

It was the lack of subtlety that made it a poor decision. If both Papa Johns and Dominos are forced to let employees go to maintain costs, and Papa Johns makes a huge announcement out of it while Dominoes does it quietly, than between the two Papa Johns will suffer since public perception is a large part of competing in a free market. If you have to do something unpopular, do it more quietly than the person next to you.

[Laize]

What's "perfectly elastic" supposed to mean? Ideally, businessmen raise their prices until 1% increase in prices result in 1% drop in demand (price elasticity of -1).

Either way, an increase in prices will lower demand, the question as I said is: how much? More or less than 1%? I think it's an insult to his intelligence to think that his price elasticity is above -1 (between -1 and 0), and that ACA forcing him to raise prices will actually increase his profits.

Perfect elasticity is where a 1% increase in prices will result in a 1% decrease in demand.

It doesn't actually happen like that. Economics is a social science, not an exact one. PED is a great way of explaining behavior in the market, not predicting them.

If PED were perfectly accurate then a decrease in the price of a good to 0 would result in infinite demand while an increase in the price of a good far beyond its fair value (Say, $10,000 for a pizza) would result in no one buying it, rather than the predicted "very few".

A .7% increase in prices won't necessarily result in a .7% decrease in demand.

[Diurdi]

Perfect elasticity is where a 1% increase in prices will result in a 1% decrease in demand.

I've never heard it called perfect elasticity, but whatever.

It doesn't actually happen like that. Economics is a social science, not an exact one. PED is a great way of explaining behavior in the market, not predicting them.

If PED were perfectly accurate then a decrease in the price of a good to 0 would result in infinite demand while an increase in the price of a good far beyond its fair value (Say, $10,000 for a pizza) would result in no one buying it, rather than the predicted "very few".

A .7% increase in prices won't necessarily result in a .7% decrease in demand.

Preaching to the choir.

The problem I see with his comments is the following: Presumably he has raised prices to such a point that he believes creates the highest returns for him. A new cost emerges that will squeeze his margins. So, if he thinks raising prices will actually help him, why the fuck hasn't he already done so - before ACA?

The only possibility is that ACA increases the cost of all his competitors as well. In that case the higher cost of doing business would be pushed onto consumers. How many of his competitors will see costs increase due to ACA? Will they increase more or less than for Papa John's? Those questions will determine the winners and losers.

[Laize]

I've never heard it called perfect elasticity, but whatever.

Preaching to the choir.

The problem I see with his comments is the following: Presumably he has raised prices to such a point that he believes creates the highest returns for him. A new cost emerges that will squeeze his margins. So, if he thinks raising prices will actually help him, why the fuck hasn't he already done so - before ACA?

The only possibility is that ACA increases the cost of all his competitors as well. In that case the higher cost of doing business would be pushed onto consumers. How many of his competitors will see costs increase due to ACA? Will they increase more or less than for Papa John's? Those questions will determine the winners and losers.

Has it occurred to you that, maybe, Schnatter isn't a very educated man and has a more intuitive understanding of business, rather than practical? Richard Branson is a high school dropout with dyslexia and poor academic performance while, at the same time, being an entrepreneurial savant worth over $4 billion.

John Schnatter seems to be Richard Branson if you toned down the genius and creativity and gave him an American, Republican midwest upbringing.

[Diurdi]

Has it occurred to you that, maybe, Schnatter isn't a very educated man and has a more intuitive understanding of business, rather than practical? Richard Branson is a high school dropout with dyslexia and poor academic performance while, at the same time, being an entrepreneurial savant worth over $4 billion.

John Schnatter seems to be Richard Branson if you toned down the genius and creativity and gave him an American, Republican midwest upbringing.

Sure, Schnatter may be uneducated but his CFO probably isn't. I guess his threats are either empty (i.e. his CFO will tell him not to raise prices) or they're the result of everyone else having to raise prices making a price raise for him worthwhile as well.

[Laize]

Sure, Schnatter may be uneducated but his CFO probably isn't. I guess his threats are either empty (i.e. his CFO will tell him not to raise prices) or they're the result of everyone else having to raise prices making a price raise for him worthwhile as well.

Paul Broun is a medical doctor who doesn't believe in embryology. Schnatter is a man whose cute advice for success is "Keep your eyes on the pies". I wouldn't put it past him to be able to find a CFO that gives retarded advice that uses an excuse to lean right.

The alternative is that maybe they have good reason to think $.15 will be a detrimental increase in the price of their pies. Maybe they do.

As a non-1% member of their target demographic, however, I disagree. In that regard, I can absolutely say I know more than them. $.15 would affect my or anyone's choice whether to buy a Papa Johns pizza.

[Wells]

His 10 cents number isn't even terribly accurate given his claims on how much it will cost in total if you make some necessary assumptions

But either way, if its 10 cents or 3-5 cents as the article posits, as Laize points out markets aren't perfectly elastic and I see no reason it will do anything to demand.

[ranku]

aren't these practices technically illegal due to firing without reasonable cause?

[Laize]

aren't these practices technically illegal due to firing without reasonable cause?

Mass layoffs because a company wants to cut operating expenses are perfectly legitimate reasons to terminate someone.

Schnatter is just an idiot in thinking a $.15 price hike will stop anyone from buying his pizza.

[ranku]

Mass layoffs because a company wants to cut operating expenses are perfectly legitimate reasons to terminate someone.

Schnatter is just an idiot in thinking a $.15 price hike will stop anyone from buying his pizza.

im just saying, the reasons he is giving don't sound like reasonable cause and it doesn't seem like something he can back-peddle away from.