My prediction for 2013

by Terry Brown

I don't make predictions very often, mainly because I don't like to be wrong.   However, some indicators are popping up that I cannot ignore.

Reports are that there are 10 million young adults from ages 18 to 25 who are living at home.   Why?   They don't have jobs or are can't get enough hours where they work due to the job market.

The National Restaurant Association claims that they are the largest industry in the United States.   That makes sense, since it covers the Hot Dog wagon to 5 Star restaurants.   Tens of millions of people work in this industry.   I own a national brand fast food restaurant and have owned various brands over the years.   I'm still very plugged in to the different franchises that I have belonged to over the years, and they are all planning on doing the same thing in 2013.

Obamacare is the law of the land.    No matter if you love it or hate it, it's still the law - so I for one am now figuring out how to deal with it without it sinking me, and everyone else in this industry is doing the same thing.    According to the law, if you have 50 or more full time employees, you must provide insurance for them all or pay a $2000 fine for each of them.    If you can do math, that's a $100k tax.     If  you have one of those national brand restaurants, normal annual sales are usually in the $1M area, but they have lots of royalty fees and marketing fees and require you do all kinds of stuff which is expensive - so if you can post a 10% bottom line, you are the norm.   Some fine-tune it and pull off 15% bottom lines, but they are rare.  That's why there are so many multi-unit owners out there - $100k a year for a serious investment isn't a very good payback - so have 3 or 4 of them and you can increase your percentage upwards to 12-15% bottom line by sharing expenses.   However, now an owner has to pay $100k for a new tax for just 50 employees, some of these multi-unit owners have a total 200 employees - and many are full-time.  Quick math says 200 employees x $2k = $400k.   Now the owner doesn't have much of a bottom line any longer...

So, what can one do?    Ah!   Make everyone PART-TIME!    This is great for the owner, as they dodge a really deadly bullet, but bad for the employees - as a Part-time definition in Obamacare is 29.5hrs or less per week.    So, all those restaurant workers who voted for Obamacare will now get 25% of their hours cut - I'm sure they were told this somewhere - don't you think?  

However, this is where the silver lining begins.   Remember, an employer is going to have to take a 40hr per week employee to less than 30hrs per week - or 25% less hours.    I can attest that restaurant owners don't run padded staffs - they usually have exactly how many people it takes to make their operation run, not a person more.   So, if they are going to cut 25% of ALL hours, they are going to need to HIRE 25% more employees.   Think of it - EVERY restaurant in the US is about to hire 25% more staff!    This is going to put a strain on job pool.   Many people who are unemployed are so because they can't find a job - they are now going to be able to get two jobs if they can handle the scheduling...  

This is going to help get this 10 million young adults off parent's couches and into their own apartments.  

Oh yeah, has anyone noticed that no one has been building apartments since 2008?   Seven million high school graduates a year since 2008 and less than 1 million new housing units each year since then - in other words, we have a massive housing shortage that is about to fall into our laps.  

2013 could be a frenzy of Real Estate transactions.   The Feds are going to recognize it and start pumping some of these foreclosures that are sitting on the sidelines, further exhausting empty houses in neighborhoods.     This is great, great news - IF you are a home owner.  If you are renting - sorry, you are about to pay a premium as housing starts to dry up - so try to lock your lease rate for multiple years if you can convince your landlord to ink the deal - OR - BUY.    Even if you have questionable credit, there are still alot of home owners that will do an owner financed deal if you have enough down payment.

That's my outlook of 2013.   An unexpected war, default of the US, etc could easily void this projection but otherwise - this is what I'm gearing up for.

Terry Brown, Owner - RE/MAX Mountain River
Owner - Key Largo Arby's (14 years)
Past Owner - Florida Keys Wendy's (18 years)
Past Owner - Florida Keys Dairy Queen (5 years)