Executive Insights | October 2012 | By Mary Avant

The Fight for America

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President Obama and challenger Mitt Romney square off in presidential election.
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One other tax Richardson says White Castle hopes to see repealed is the Estate Tax, a tax on one’s right to transfer property at his or her death.

For family-owned businesses like White Castle, repealing the Estate Tax is essential “so it isn’t something where the day the founder dies, the family’s left with a huge tax liability that doesn’t allow them to keep the founder’s dream alive,” he says. “It doesn’t seem congruent with the American dream.”

Health Care

If there’s one issue that’s single-handedly shaped the election, it’s health care. After the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA), the health-care reform signed into law by President Obama in 2010 that aims to provide health insurance for all Americans, a sweeping majority of operators flooded the airwaves with distressed responses. Many brand owners claimed the mandatory coverage required by the PPACA for businesses with more than 50 full-time-equivalent employees—along with the penalties levied if operators fail to comply with the new rules—could hamper revenue, at best, or completely put them out of business, at worst.

The reform, most of which doesn’t go into effect until 2014, will charge businesses $2,000 a year for each full-time employee if the company fails to provide health-care coverage. It can also fine up to $3,000 per employee if a company offers unaffordable health-care plans. The NRA’s DeFife says that because the restaurant industry is low-margin and highly dependent on a large workforce, this could spell disaster for many brands.

NCCR’s Green echoes this sentiment, but notes that his organization has had “a very positive conversation” with the Obama Administration about the challenges the new health-care bill presents for the lion’s share of the restaurant sector. “I think they’re trying to work in good faith,” Green says, “but the law itself prevents a lot of progress from being made.”

Although Romney, too, aspires for universal health care, his plan follows a smaller-government mindset. Romney’s proposition involves turning over power to states by developing free-market systems. He says competition will result in producing higher-quality goods at cheaper prices.

White Castle’s Richardson says this type of market-based solution is what his company seeks. He adds that, in the short term, the brand would like to see provisions to the law that provide more flexibility for restaurants, “so we can at least have a chance to implement it in a way that allows us to survive.”

Immigration

Arguably one of the issues that bites hardest at fast-food companies, immigration policy and reforms can have a huge influence on the workforce backbone of the industry, both in terms of who restaurants hire and how they hire them.

While both Obama’s and Romney’s view of the issue and subsequent reform proposals have several common threads—welcoming legal immigrants and enforcing tougher policies for employers when hiring and verifying the legality of their workers, for example—they differ in execution. This is especially true when it comes to the sticky situation of how to handle immigrants already living in the U.S. illegally.

Romney’s solution involves securing the borders with a high-tech fence, placing officers on the ground to gain control of the border, and developing a system of exit verification to ensure immigrants don’t overstay their visas. While he wants to simplify the system for bringing in temporary agricultural and other seasonal workers, Romney has been outspoken in his opposition to providing amnesty to current illegal immigrants.

President Obama, on the other hand, signed the DREAM Act into law in June, which clears the way for young illegal immigrants who meet a certain set of requirements to remain in the U.S. for a minimum of two years. Obama says this law could benefit at least 800,000 young people—young people who could potentially make up a large share of the restaurant workforce.

At White Castle, Richardson says the 91-year-old company would like to see a path to citizenship for those immigrants who are already in the U.S. “We’ve seen firsthand the incredible resource that people bring to our community and that immigrants can be the lifeblood of a very vibrant economy,” he says. The company calls for dialogue about how to “allow people that are willing and wanting to contribute to have the chance to do that.”

NCCR’s Green says the most effective immigration policy for the restaurant industry combines efforts to tighten security and regulation while also instating a system “that reflects what’s going to be a very tremendous demand for employees from the restaurant industry” in the future.

Where Do They Stand?

A glance at each candidate’s stance on the issues.

Wages–

Romney: As recently as February, Romney offered his support for raising the minimum wage with inflation. After backlash from conservatives, however, he changed his tune and told CNBC’s Lawrence Kudlow in March, “Right now, there’s probably not a need to raise the minimum wage.”

Obama: During his 2008 campaign, Obama promised to increase the minimum wage to $9.50 by the end of 2011. But with Republicans in Congress set against the increases, a proposal never actualized. Since then, Obama has kept mum on his plans for further wage increases, despite calls from liberals.

Organized Labor–

Romney: The former governor is against the Employee Free Choice Act, a law that eases the path for unions to organize. “On day one, I will end the government’s favoritism toward unions,” Romney told the Associated Builders and Contractors organization during a speech in February. “I’m also going to make sure that workers in America have a right to a secret ballot, and I will fight for right-to-work laws.”

Obama: Though Romney says the president “takes his marching orders from union bosses,” several union officials have chastised Obama for not supporting organized labor strongly enough. During Obama’s first term, labor union membership dropped 3.3 percent, but many major unions continue to back him in his re-election bid.

Capital Expenditures–

Romney: Romney proposes extending for one year the full expensing of capital expenditures. He believes this will induce businesses to spend more, causing other companies to hire additional staff and, in turn, create jobs.

Obama: In 2010, the president put forward a deal that would allow companies to immediately write off 100 percent of their capital expenditures. In addition, February’s budget proposal called for businesses to fully deduct capital expenditures for all of 2012.

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