A little while back, a big brouhaha broke in the States over a chicken fast food chain called Chick-fil-A.

The business, hitherto best known for its amusing billboard advertising, became the centre of a storm when key personnel spoke out against gay marriage, prompting calls for a boycott of the business.

Perhaps Chick-fil-A should have stuck to their knitting.

Their cause was taken up by right wing conservative commentator Mike Huckabee resulting in a highly successful protest in favour of the company’s position, when sales in one day went up 29%. However quite recently opinion polling revealed that some 13% of people were still considering or actively boycotting the business.

As recently as two days ago, the controversy continues to rumble. The long term effect on the brand is, as yet, unclear.

Now, a similar controversy has broken over another fast food company. And calls for a boycott are growing fast.

Pizza maker Papa John’s chief executive John Schnatter has criticized President Obama’s health-care law and said it will raise costs by 15 to 20 cents a pizza.

The blow-back has been fierce:

Papa John’s pizza extortion,” ran the headline for a story Wednesday from Salon, an American news website.

Vote for Romney or we’ll raise our prices” was how Daily Kos, a liberal news site, topped its story , which went on to illustrate Mr. Schnatter’s links to the GOP presidential candidate..

Some Twitter and Facebook users are now actively urging a boycott of the Kentucky-based pizza chain.

This is not what you want to see on your Facebook page when you check it over breakfast.

Nor this. See the ease with which the graphic encourages people to hit the Share button on Facebook? Be afraid. Be very afraid. You do not want this on a couple of million customer’s FB pages overnight.

But the Christian Science Monitor, for one, argues that such reactions may be overdone. They ask: was Mr. Schnatter making a political threat – or simply explaining the economics of the pizza business? Well, you be the judge.

In the middle of an Aug. 1 conference call with reporters and analysts to discuss the chain’s second-quarter results, Schnatter was asked about the impact of the new health-care law on Papa John’s. Here’s what he said, according to a recording of that call on the company’s website:

“Our best estimate is that the Obamacare [law] will cost about 11 to 14 cents per pizza – or 15 or 20 cents per order from a corporate basis. To put that in perspective, our average delivery charge is $1.75 to $2.50 – or about 10-fold our estimated cost of the Obamacare [law] to Papa John’s.

We’re not supportive of Obamacare, like most businesses in our industry. But our business model and unit economics [are] about as ideal as you can get for a food company to absorb Obamacare. We have a high ticket average with extremely high frequency of order counts – millions of pizzas per year. To give you an example … let’s say fuel goes up, which it does from time to time, and we have to raise delivery charges. We don’t like raising delivery charges. But the price of fuel is out of our control, as is Obamacare.

So if Obamacare is, in fact, not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto the consumer in order to protect our shareholders’ best interest.”

CSM believe several points stand out: The 15 to 20 cents he’s talking about are costs, not prices. If he was making a political statement, would he really make the point that delivery charges, based at least in part on fuel costs, are 10 times the size of the hit from Obamacare? And he is promising to cut or “shallow out” the costs of healthcare before passing any price increase to the consumer.

Is that a threat? Really? I guess it depends on what “shallowing out” costs actually means.

Schnatter is certainly no fan of the president or the health-care law. Who knows? Perhaps he will cut health-care costs by laying off or shafting his employees. But, the CSM argues, he deserves to have his words quoted in context, before another battle of the culture war is fought over fast food.

Fair enough. What is certain is that the row over his words is likely to grow. Like a brushfire. And it highlights dramatically the care that business owners and managers must take when commenting, in whatever medium, on controversial political issues.

At Wellthisiswhatithink we believe that it would not be a good thing for business to be prevented from expressing its point of view through fear of igniting controversy – it is, when all’s said and done, a key segment of society and we need to know the perspectives it holds, and why it holds them, given that “business” is somewhat opaque to the non business community.

But look out: the swamp is full of alligators, and treading warily would seem to be in order.

What a smart thing it might be, for example, for Boards of Directors to deliberately seek out and include ex-officio Directors with different points of view to their own, who might be closer to the general public, and with a better than passing knowledge of the likely public effect of policy decisions. The same could be said of a Board’s approach to environmental issues, risk management issues, (hello, BP, we’re talking to you), personnel issues generally, and many more.

“What’s on for the weekend, Bill, taking the boat out?” “Hell no, Ted, I’m heading for the mosh pit at the Midwinter Rave. Just love that feeling of mud on my jeans and getting off my face.” Yeah, right.

When companies are basically run by a group of accountants, lawyers and entrepreneurs, they can get a very narrow view of the society in which they do business. And when those same people leave work for the day, they often – not always, but often – circulate in a social milieu that usually does very little to broaden their horizons. It’s called “living in the bubble”. When a storm breaks, they are generally shocked and scramble to play catch up, often ineffectively.

As an adviser to business, I have sometimes found the upper echelons of management to be staggering insular, tone deaf to the likely public impact of their activities or statements, and completely lacking understanding of how social media has fundamentally altered the rules of the game, and as a result – essentially – they are riding for a fall.

It will be interesting to watch how Papa John’s deal with the crisis. The cost of getting it wrong will be a hell of a lot more than 14 cents a pizza, that’s for sure.

Some more examples that we have covered of how NOT to embrace social media can be found here, concerning recent industrial disputation and management actions at Australia’s national airline: http://wp.me/p1LY0z-cb and here: http://wp.me/p1LY0z-cu. A very funny and cautionary tale.

Anyhow, as we all sit mesmerised with horror at the new power of social media, my final word to managers and Directors is very simple.

For more than 2,000 years, Christian society has been based on what is known as the Golden Rule. To wit:  “Do unto others as you would have done unto yourself.”

Why not try applying that rule to your next major decision? Forget what you think is your responsibility to your shareholders, just momentarily, and imagine you are your customer. You will soon find, I assure you, that building shareholder value isn’t actually about pinching pennies here and there, it’s about providing world class products and services. World class.

Because in an internet world, world class is the new basic standard. Think about it.

More interesting coverage is here: http://www.mediaite.com/tv/papa-johns-pizza-ceo-john-schnatter-owes-president-obama-two-words-thank-you/  I note his share price is now down more than 4%. Bet his shareholders are delighted.

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Comments
  1. Richard Ember says:

    Pure economics, mate. Costs go up then so does selling price of your product. Remember I told you about Jamey’s uncle and the fast food outlet of their business? You get what you vote for – I am enjoying the irony of everybody getting hot under the collar because they are getting what they voted for. Wait until it impacts gas (petrol), then you’ll see something.

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    • My feeling is the business on costs will be more than outweighed by the productivity impacts of a more healthy nation. I am more interested, to be honest, in the nexus between business and politics, and how social media can impact a business for good or ill.

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  2. Richard Ember says:

    LOL, typical of you to ignore the hard facts. TBH I am against all these ‘campaigns’ to boycott or support various outlets that have pleased or upset some people. It is an idividual choice. You or I would support or boycott Chik-fil-a / Papa John’s as we see fit and I would refuse to be pushed into some lobby because it suits some arse with a laptop. People seriously need to grow up.

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    • I am not ignoring the hard facts at all. I just don’t think Obamacare is very expensive when set against the good it will do in fixing up what is by some distance the unhealthiest advanced nation on earth. Anyway, all social change and advancement costs money – the rich and privileged squealed in exactly the same way when Llloyd George introduced National Insurance. “Robbing the working man!” cried the Tories. All bollocks of course, they just didn’t want to make the employers contribution. You’ll be damn grateful Obamacare is there when you try and take out health insurance in the States, you mark my words …

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  3. Richard Ember says:

    Mate, I am not against a healthcare system. I just happen to think this is (Obamacare) an extremely poor one – a string of coupled-together compromises that will not deliver what it intends to either efficiently or economically. It will then become a big and easy target for its opponents.

    From a personal point of view, it will suit me very well as lots of people will require insurance. If only I had an Insurance Agency……oh, wait a minute….. None of which will stop me laughing at the nutters who suddenly cry ‘foul’ when prices start soaring to pay for it all. Especially those who voted Democrat.

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  4. Stephen,

    Here’s another little something to add to this [widening] debate.

    In 2008, when I was in California for the wedding of the son of an old friend, my partner and I were party to a conversation during which a self-evidently well-educated woman, married to a well-heeled doctor, said she wouldn’t vote for Obama because: “He wants to introduce universal healthcare and that’s communism. I’m not voting for communism.”

    Four years on Obama is, once again and thankfully, in The White House.

    I bet neither the doctor’s wife nor Papa John’s greedy owner voted for that!!

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    • Francis, I strongly believe Obamacare will pass into history as a great reform, gradually fixed up to work better as we go along, and not causing anything like the hoo-hah it has in its inception. Thanks for dropping in and commenting!

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  5. Well Obama passed Healthcare reform, it was a compromise and a gift to private insurance. It was not the best compromise. The states can and are still rejecting it and thus many will be left at the hands of the private insurance industry with little to no recourse. Costs will not be managed. Corporations will continue to do what they do today, not offer group coverage as it will be cheaper to pay the fines.

    If our president does anything he should gather a coalition to fix the compromise.

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  6. jvdix says:

    I have yet to make up my mind on this. You are quite right that the definition of “shallowing out” is a huge factor. His statement apparently left the decision of whether to lay off, reduce hours, or do nothing up to each individual franchise, which is kind of a cop-out. And apparently no one except Mr. Schnatter knows whether the given-away pizzas are written off as advertising at what it cost to make them, or at full price as lost income. The whole brou-ha-ha does highlight an inherent problem of corporations, which exist only to show a profit to the shareholders. I definitely agree with your advice to Directors and Managers to think like a customer, yet that is contrary to the whole nature of a corporation.

    One thing I am sure of, is that this is not the same issue morally as a food chain making hefty donations to an anti-LGBT “charity” which just happens to be located at the same address as the headquarters of the chain itself.

    Thanks for your post and keep on making me think.

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