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View Diary: Papa John's CEO is exaggerating when he tries to scare you on Obamacare's cost per pizza (140 comments)

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  •  Wonder what the cost of making a pizza is for (12+ / 0-)


    I watched a vid over at about a NYC chef who was out on the town for a night. Chef went to a small bar where you get a free small sized pizza with EVERY drink order. Drives mad traffic to the bar.

    Chef went back to the kitchen and had a conversation with the cook.Long and short of it, it cost that small bar less than 25 cents to make a pizza, thats the raw ingredients. On the massive scale of Papa's you might expect that cost to be even lower.

    •  We need to kill the myth... (17+ / 0-)

      ...that businesses "pass along taxes and regulatory costs" to consumers.

      If PJ had the ability to charge $0.14 more, they would already be doing it...and they would be pocketing the difference.

      Only at higher levels will we actually see price hikes, and they will be accompanied by decreases in volume.

      Think of it the other way around. Suppose Romney had won and killed the mortgage interest deduction for the middle class.  Would you get to go to your boss and say:

      "I'm sorry, but those Republicans just raised my taxes. I'm passing along the cost to you and demand a $1,000/yr raise".

      Lastly, has anyone calculated how much I'm going to save in local taxes because my local emergency room is not filled with Papa John's employees?

      •  It's not a myth. (3+ / 0-)
        Recommended by:
        drmah, tinfoilhat, rhauenstein

        Taxes and regulatory expenses are a special case of costs because they apply to everyone in the business.  There is no disincentive to pass them along.  

        Pretty much the same thing happens when ingredients go up in price.  They go for everybody, so everybody passes along the increase.

        The most likely reason that Papa Johns isn't passing the increase along yet is because it hasn't been incurred -- and hasn't hit their competitors yet, either.

        LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

        by dinotrac on Thu Nov 15, 2012 at 04:54:05 PM PST

        [ Parent ]

        •  If costs go up... (0+ / 0-)

          ...I have to make a decision whether or not to raise my prices.

          If I know that my competitors will raise prices, then that's collusion.

          PJ knows that if they raise prices too much people will simply not eat out. They have already fixed their price at what they think is the maximum they can get away with.

          •  No. Collusion requires agreement. (0+ / 0-)

            Deciding it's safe to raise your prices because you figure that others will also raise theirs is not (in most cases) collusion.

            Your assertion that that PJ has already fixed their price at the maximum they can "get away" with does reflect an Econ 101 understanding of basic market forces, but falls a bit short as an analysis:

            1. While it's true that people will not go to restaurants if the price of restaurant food goes too high, that is not the only price determinant.  Papa John's must also compete with other pizza joints (specifically) and other restaurants targeting the same customer space. That competition may (and likely does) cause prices to be set at levels lower than the price that will cause potential customers to eat at home instead.

            2.  The actual pricing decision is based on profit maximization, not some single price point to which all businesses must adhere.  For example, Apple prices its products significantly higher than competitors' products.  Consequently, iPhones do not make up a majority of the smart phone market.  iPhones are not even the most popular brand of smart phone.  That suits Apple fine: they earn the biggest margin in the industry.  They make more money on fewer phones than their competitors.

            LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

            by dinotrac on Thu Nov 15, 2012 at 10:39:08 PM PST

            [ Parent ]

      •  Exactly. Federal laws have no effect on businesses (1+ / 0-)
        Recommended by:

        because there's a level playing field. All of them have the same expense. Unlike choosing to pay millions in compensation to incompetent aholes foisting overpriced garbage on the public. Plus, if this particular ahole wanted to save on employee health care, and if he had a brain instead of a KochBoy speaking tube, he'd have been leading to fight for universal health care. Problem solved.

        Remember what happened when we turned the country over to that dumbass rich kid? So now we're thinking about doing it again? Really?

        by DaveW on Thu Nov 15, 2012 at 04:55:29 PM PST

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      •  if it's only 14 cents to cover the costs of the... (1+ / 0-)
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        ManhattanMan act, how does that franchisee of Denny's justify a 5% surcharge??

        I'm a blue drop in a red bucket.

        by blue drop on Thu Nov 15, 2012 at 06:15:50 PM PST

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    •  I would bet that ingredients are not the biggest (1+ / 0-)
      Recommended by:

      cost.  Retail space costs money, and so do people.

      That's the main reason restaurant food is so much more expensive than what you can fix at home.

      LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

      by dinotrac on Thu Nov 15, 2012 at 04:51:45 PM PST

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    •  Pizza has one of the highest mark-ups (0+ / 0-)

      Dirt cheap. My mom was in the food sales industry for years. Breakfast, pizza and Tex-Mex are the three biggest returns on investment in her opinion and considering she was selling them the stuff wholesale I value her info.

      Putting on the spectacles of science in expectation of finding an answer to everything looked at signifies inner blindness. -- J(ames) Frank Dobie

      by cactusflinthead on Thu Nov 15, 2012 at 05:17:06 PM PST

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