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Taco Bell Franchise Cuts Worker Hours, Cites ObamaCare

An Oklahoma Taco Bell will cut employee hours in order to avoid ObamaCare. 2014 is when firms with 50 or more employees are mandated to provide health insurance to all full-time workers, or face fines.An Oklahoma TV newscaster described the situation of Johnna Davis, a mother of three who had her hours cut:

She says her manager held a meeting before Christmas, saying employees' hours would be cut in the new year. "They informed everybody that nobody was considered full-time any longer, that everybody was now considered part-time, and [they] would be cutting hours back to 28 hours or less due to Obamacare," Davis said. Under the Affordable Care Act, companies are required to provide insurance to its full-time employees, or face fines. Davis would've qualified for an insurance plan. [Full story at Oklahoma's News9}

BMM'S Take on the Reality of ObamaCare to the Average Franchise Owner

There is a lot of news lately about how franchise owners are angry about the Affordable Health Care Act, ObamaCare. The subject is a political minefield and how one views it often depends on what one's political leanings are. Here's Blue MauMau's take on the reality of the situation for the average franchise owner.

The Affordable Health Care Act (aka ObamaCare) is a progressive tax code that gives tax credit to small franchises but penalizes large multiunit franchises for not providing health care to employees. It uses full-time equivalents (FTE) as the metric, not actual full-time employees. What is counted is the total hours for which the employer pays wages to all employees during the year. Each equivalent of 2080 hours (the standard 40 hour/week work year used by HR Departments) is considered one full-time worker.

The average franchise owner employs the equivalent of 6.5 full-time employees. For ease in calculation, let's round it up to 10 per franchise. Firms who employ under 25 FTEs, which is the overwhelming majority of franchisees, will receive a tax credit of 35% of the cost of the premium this year and 50% starting in 2014 should they decide to provide health care for themselves and their employees. There are no tax penalties for small firms that choose not to provide health care.

Large multiunit franchises, big hotels or some car dealerships are another matter. For many who have six stores or more, they'll need to look closely about whether they'll be paying more in taxes. (How we came up with six stores: 50 FTEs mandatory / 10 FTEs per avg franchise = 5 franchise units that aren't penalized) So expect to hear outcries from large multiunit franchise owners as we approach the date the mandate kicks in, January of 2014. For example, expect restaurant franchise systems that are characterized by large multiunit owners like Papa John's, McDonald's or Applebee's to be particularly unhappy about paying the taxman more. Large multiunit franchise owners will want to find ways to minimize the penalties of the new health care law. Even though the first 30 employees are exempt from the penalty for these large companies, that doesn't help much if a firm has 500 full time employees (or equivalents). As for large car dealers, they already provide healthcare to their staff but they are not happy about the thought of being penalized by the government if they don't offer it.

As you can see, the typical franchisee receives an additional tax break this year and into the future with the new healthcare law but their big cousin does not. Being small just got a little easier. However, for many there still is an ideological and political point to be argued on whether the government should be getting involved in incentivizing or interfering with the healthcare or small business marketplace. We leave that argument to the pundits.

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