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Health Care Reform Will Drive (Thru) Changes in Menus

As first appeared July 31, 2012, on the Business Lexington website

The restaurant industry has changed substantially in recent years with more nutritious offerings, fresh alternatives and the evolution of the fast-casual segment. More recently, several cities and counties across the country imposed nutrition labeling regulations requiring restaurants to implement new menus and menu boards. These laws also meant restaurant chains faced varying disclosure standards and expensive customization.

The recent Patient Protection and Affordable Care Act, and the U.S. Supreme Court’s decision upholding it, follows closely on the heels of these local regulations. For the restaurant industry, the Act is generally viewed as adding administrative and economic burdens to restaurant operators. But also among the Act’s 906 pages are nutritional disclosure requirements that are likely to impact our nation’s restaurants beginning in 2013.

The Food and Drug Administration is tasked with creating the regulations to implement the disclosure framework, and it published preliminary regulations for public review and comment in April 2011. The FDA anticipates issuing final regulations by the end of 2012 that would become effective within six months of release. While the specifics of the law are incomplete, the basic requirements are known. What changes should restaurant owners and patrons expect?

Types of restaurants affected

Those obligated to comply with the Act’s disclosure requirements are restaurants or similar retail food establishments that are part of a chain of 20 or more locations doing business under the same name (whether company-owned or franchised) and largely offer the same menu items. These operators are required to make certain nutritional disclosures. Although not obligated to do so, chains of less than 20 locations and independent restaurants may voluntarily comply with the federal law rather than complying with similar state and local regulations.

A restaurant or similar retail food establishment is any establishment that sells restaurant-type food and whose primary business activity is the sale of food to consumers. This includes businesses presenting themselves as restaurants and those that use greater than 50 percent of their total floor space for the sale of restaurant or restaurant-type food to consumers. As a result, movie theaters, bowling centers and other establishments whose primary business is not the sale of food would not be obligated to comply.

Nutritional labeling requirements

Each restaurant menu or menu board (including drive-thru) must display the words “Calories” or “Cal” with the number of calories beside each menu item. The display must also address suggested total daily caloric intake for which the FDA has proposed the following statement: “A 2,000 calorie diet is used as the basis for general nutrition advice; however, individual calorie needs may vary.”

Operators must also include a statement that additional written nutritional information is available upon request. This information must be available on the premises. It must disclose the total number of calories in each serving size derived from any source and the calories derived from the total fat. The information must also provide the amount of total fat, saturated fat, cholesterol, sodium, total carbohydrates, complex carbohydrates, sugars, dietary fiber and total protein contained in each serving size. The FDA is still considering whether operators may deliver this information in a manner other than print, such as through the Web or smartphone applications.

For buffet-style and other self-service restaurants (as well as for self-service beverages and any food on display to customers), restaurants must place a sign adjacent to each food offered that lists calories per displayed food item or per serving. Where menu items come in different flavors, varieties or combinations, but are listed as a single menu item, the regulations will require restaurants to display caloric information in ranges. While more toppings, fries or pasta per serving will mean that actual nutrition measures will vary serving to serving, the law anticipates these variance tolerations, provided the operator has a reasonable basis for making its disclosures.

Menu items exempt from the disclosure requirements include:

  • items not listed on the menu, such as condiments;
  • daily specials and other temporary items appearing on the menu for less than 60 days per calendar year;
  • custom orders; and
  • test marketed items appearing on the menu for less than 90 days.

Alcoholic beverages, regulated by the Alcohol and Tobacco Tax and Trade Bureau, are also likely to fall outside the scope of these provisions.

Voluntary compliance

If not obligated, restaurants may choose to voluntarily satisfy these disclosure requirements. If also registering with the FDA every two years, the restaurant will no longer be subject to any state or local nutrition disclosure requirements.

Voluntary compliance may also be driven by competition or other market forces. Although experts expect little change in consumer eating behaviors, consumers may yet become increasingly desirous of nutritional disclosure and varied nutrition options (such as low calorie choices) within a restaurant’s menu.

Cost of compliance 

Compliance also comes with real costs. Restaurants must reconfigure, print and construct new menus and menu boards. Menu boards can range from hundreds to thousands of dollars per store. Other costs may rise because of the increased attention and training that will be required for consistent recipes, supply chain and food preparation.

Operators may also need to perform a nutrition analysis as well. The FDA indicates that the cost of nutrition analysis services range from $25 to $100 per item. At least one service offers a flat rate of $49 for analysis of 10 items, in which the restaurant operator enters the menu item’s recipe into a nutritional calculator.

In evaluating their menus in this fashion, operators may find opportunity to competitively distinguish themselves in regard to trending considerations such as local food sourcing, organic and gluten-free offerings, and farm-to-table freshness.

To be sure, whether compulsory or voluntary, new menus are on the horizon in most segments of the ultra-competitive restaurant industry.

If you have questions about how these changes may affect the restaurant industry, please contact a member of the Corporate and Transactional Practice Group at Bingham Greenebaum Doll LLP.

  • Partner

    Darby is a member of the Corporate Services Department as well as the Tax and Finance Department. His practice focuses on general corporate representation, tax increment financing, real estate law, governmental affairs ...

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