Cheesecake Factory CEO Warns ObamaCare Will Be ‘Very Costly’

| December 4 2012
Christopher Cook

My wife and I were at the Cheesecake Factory a couple of months ago. We hadn’t been in quite some time, so we were excited (instead of entrees, we love to order several of their terrific appetizers and share). While we were there, I was looking around at the decor, the style, the ambiance, and thinking about the great food . . . and I was thinking about what a good job that a lot of these big chain restaurants do. There are some people who assume that unless a restaurant is a one-of-a-kind, it can’t be good—that the act of turning a restaurant into a chain somehow diminishes it. But that isn’t true at all. Cheesecake Factory, Macaroni Grill, Buca di Beppo, and so many others do a fantastic job.  They have great food, great style, they employ so many people . . . .

And yet, the resentment of entities like these is palpable on the political left. They treat them like a bottomless resource to be endlessly plucked. They talk about their success in ways that make it sound like it was somehow ill-gotten. They treat them like the enemy. It is deeply frustrating.

These entities provide a service that people love (every time we’ve gone to the Cheesecake Factory, it has been packed!). They employ tens of thousands of people. In the case of Cheesecake Factory, they are also providing their employees with health insurance. (They cover everyone who works over 25 hours, which is pretty impressive!) But President Obama and the Democrats have decided that isn’t good enough.

On Monday’s CBS This Morning, Cheesecake Factory CEO David Overton spotlighted the looming economic impact of Obamacare’s implementation, especially on small enterprises: “For those businesses that don’t cover their employees, they’ll be in for a very expensive situation.” Overton also warned that the cost of the law would be passed on to customers.

Anchor Norah O’Donnell raised the issue of the still-controversial health care law: “One of the things that’s going to change, of course, in the new year is ObamaCare, or the Affordable Care Act. How do you implement that at Cheesecake Factory, and how will you pay for health care for all of your employees?”

 

Whatever new costs this creates will have to be passed onto customers. Overton makes that clear:

O’DONNELL: But – but when you say it will be very costly, it will be passed on to who – the customers?

OVERTON: Well, I believe most people will have to do that or cheapen their product-

O’DONNELL: And how much do you think you will have to raise prices in order to pay for health care?

Yes, Ms. O’Donnell, the money is going to have to come from somewhere. It won’t just magically appear. And no, taking away the bulk of Overton’s salary won’t cover the costs . . . . nor does this man—who employees thousands of people and makes millions happy with great food—deserve to have that taken from him.

It’s Econ 101: There’s no such thing as a free lunch. The money must come from somewhere. In this case, the only place it can is from customers. So costs will go up, and fewer of us will be able to afford their food, which means fewer of us will go, which means they will have to lay some people off. Once laid off, those people won’t be able to go to restaurants either, which means more people will get laid off at other restaurants. It’s a vicious circle. The economic plan of the political left is to move through an economy like locusts and then blame the crops they just devastated.

And, as bad as it might be for the Cheesecake Factory, it will be far worse for businesses who can’t afford to insure their employees:

ROSE: Are you worried about this – ObamaCare – and how you provide the health care?

OVERTON: Not worried yet – and, when I hear the numbers, I might be. But, again, because we spend millions and millions of dollars today on health care, we don’t know exactly how much more we’ll pay. For those businesses that don’t cover their employees, they’ll be in for a very expensive situation.

Many mid-sized businesses don’t provide their employees with insurance—not because they’re mean, greedy people, but because they cannot yet afford to. Once they get big enough, they usually do . . . just as the Cheesecake Factory has done. Forcing businesses to insure their people or pay a penalty isn’t going to get more people insured, it is simply going to make it so that those businesses never grow to the point where they can truly afford to provide insurance. Businesses will choose not to expand. Others will pass costs on to customers. Some will go out of business entirely. At some point, even the golden goose decides it’s not worth it to keep laying eggs.

I think I am going to try to convince my wife to let me take her to the Cheesecake Factory tonight. After all, she should probably get that Ahi Carpaccio she likes a few more times before they’re forced to raise the price to $36.00 to pay for Obamacare.

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