Pizza, Profits and Politics: Can an Aggressive Political Opinion Affect the Bottom-Line?

This is part of a series of articles by MBA students at California College of the Arts dMBA program. Follow along here. [caption id="attachment_132846" align="alignright" width="224"] Red state/Blue State: The 2012 Election[/caption] By Meg Cain Papa Johns is the third largest pizza and delivery chain in the United States. John Schnatter, the founder and CEO was both a supporter and fundraiser for Mitt Romney. Since the resulting election he has had an active opinion about health care reform. The CEO declares that because the Affordable Care Act requires full-time workers (30 hours or more a week) at companies with 50 employees or more be provided with health insurance, that not only will this reform cost the business $5-8 million annually, but employers will be forced to decrease  full-time employee hours. Consequently, he remarks that this cost will be passed on to his consumers by increasing his pizza prices. According to Forbes Caleb Melby, a fair estimation of the reflection of ObamaCare would be roughly 3.4 to 4.6 cents a pie. Obviously, Papa inflated his estimation a little (being about 9 cents off), but let’s, for a moment, consider his audience. [caption id="attachment_132847" align="alignright" width="279"] Current Concentrations of Papa John Establishments[/caption] With its headquarters in Louisville, Kentucky, Papa Johns has more than 2,600 establishments in the United States. Because the average pie is priced competitively at $12.00 for an average medium (depending on variety and toppings) and $16.00 for a large Papa Johns assures a firm demographic. Their average customer is the working family. Whether it is a family of four where both parents have jobs or a working Mom with two children, the opportunity exists when people just don’t have time to prepare meals. Within the United States, the stores are concentrated in states like Florida (243), Texas (223), California (212), Ohio (150), and North Carolina (143). As you can see, Papa John stores are concentrated in the mid-east, east coast, with the exception of California. However, this election proves that not all of these store clusters exist in states that voted for Romney in the 2012 election. Texas and North Carolina were the only ones.  California, Ohio, and Florida all supported Obama. Nevertheless, some of these states might be too large to compare the ratio of stores to voters, so lets drill a bit deeper. The counties with the highest concentration of Papa Johns stores are Los Angeles County, CA (71), Maricopa County, AZ (51), Harris County, TX (44), and Miami-Dade County, FL (31). What do these counties look like politically? [caption id="attachment_132848" align="alignright" width="240"] Counties with the most Papa John's[/caption] Three out of the four counties that hold the highest concentration of Papa John stores voted democratic, regardless of whether their state voted conservatively or not. Is it irresponsible then, that John Schnatte is so open about his opposition to ObamaCare? Chik-fil-A expressed opposition to Gay Marriage and did so seemingly without concern for its bottom-line. During the media storm reports came out that their customer base was dropping. Even the Mayors of Boston and San Francisco openly stated that the chain is "not welcome" in their cities. However, it has been voted America’s favorite Chicken Chain. Furthermore, it fared highest in its largest market, the Midwest, over Raising Cane’s, Boston Market, and Wingstop. Although it is easy to be negative about CEOs and corporations that come out with aggressive political opinions, one has to consider that these are not politicians, these are businessmen. They are not focusing on the entire audience of the United States—they are focusing on their target customer. However, voting and being a customer are very much alike. When you buy the product of a company you are, more or less, voting for them. It seems that Papa John disregarded his customer store base when he decided to voice his political beliefs. We have yet to see if it will actually hurt the company’s profits.   [image source]