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Obamacare Charge Appearing on Restaurant Bills

Stocks in this article: PZZA MCD

NEW YORK (TheStreet) -- One small restaurant chain in Florida is doing something to offset its increased costs under Obamacare's regulations requiring companies to provide insurance for full-time employees. 

Gator's Dockside restaurants, a sports bar chain in Florida, hit the news recently with its addition of a 1% Affordable Care Act charge to tabs. Eight of the company's 19 locations are adding the charge onto customers' bills. Franchised restaurant have no plans to add the charge.

Gator's estimates that Obamacare regulations will cost the company $500,000 per year. The 1% charge on bills is estimated to bring in $160,000. The 1% charge is a relatively small amount to customers and pays for less than a third of the company's new insurance costs. Gator's currently provides insurance only for managers, but will have to provide coverage for 70% of its workforce once changes take effect.

One of the most vocal opponents of Obamacare has been Papa John's  (PZZA) founder and CEO John Schnatter. In 2012, Papa John's said that Obamacare would cost the company an additional 11 cents to 14 cents per pizza. Schnatter planned on passing on the extra costs to the consumer with higher pizza prices. Gators lead in putting the ACA charge on bills could be something Schnatter follows. The backlash he saw from wanting to raise prices on pizzas might scare him away from the charge.

McDonald's (MCD) has also said the effects of Obamacare will hit its restaurants hard. Estimates say stores will each have to spend $10,000 to $30,000 additional annually. The restaurant company seems content with making these expenses work and has no plans to raise prices. However, I wouldn't be surprised if the dollar menu takes a hit or becomes more like other restaurants calling it a value menu. McDonald's was also one of several companies that lobbied against Obamacare and wanted the rules to be changed to save the company money in the long run.

Take a look at your plane ticket or phone bill sometime. You're sure to notice many charges and fees that have been passed along after you got your great price that doesn't quite add up.

This move by Gator's may seems like a political move, it might in fact be smart business. The chain will lose some customers, but is gaining free publicity with its stand against increased costs, and that could bring in more patrons.

Once Obamacare rules for employers take full effect, expect restaurants to feel the pinch. Investors may want to avoid the sector completely until earnings have been reported and shares have fallen. Otherwise, investors should follow companies with solid same store sales growth or expansion plans. The bottom line of many companies will be impacted until they figure out a way to offset the cost.

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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