Menu regs weigh on food chains

Federal regulations designed to educate consumers on their caloric consumption will have far-reaching impacts for food-service chains.

Set to take effect Dec. 1, 2016, the U.S. Food and Drug Administration finalized a menu-labeling rule requiring caloric information be listed on menus and menu boards in chain restaurants and similar retail food establishments.

The rule would apply to chains with 20 or more stores doing business under the same name, offering for sale substantially the same menu items and restaurant-type foods, according to FDA.gov.

Ashley Coneff, manager of legislative affairs for Ann Arbor, Mich.-based Domino’s Pizza Inc. (NYSE: DPZ), said the company wants to comply with the rules, but meeting the letter of the law would be daunting, to say the least.

“Domino’s has been voluntarily providing not only caloric information but also nutritional information, for 14 years,” Coneff said. “We just want to do it in a way that makes sense both for our customers, as well as our small-business owners.”

Coneff contends the pizza business is in a unique situation. While the average restaurant has about 120 menu items, Domino’s has 34 million potential combinations and more than 90 percent of customers never set foot in a store when ordering. Coneff said even the pizza building process can change the calorie count.

“It has to be baked properly, so you can’t just keep throwing on toppings,” she said. “Say you choose a ham pizza for X amount of calories. If I then were to add a second topping, it would reduce the amount of the first topping. If you chose ham and pineapple, you’re actually going to have a pizza with less calories than the one topping pizza because ham has more calories than pineapple.”

And it’s not just pizza restaurants that would be impacted.

According to the FDA, the rule applies to bakeries, cafeterias, coffee shops, convenience stores, food served at entertainment venues – such as amusement parks, bowling alleys and movie theaters – food service vendors, take-out and delivery establishments, grocery stores, big-box retailers, quick-service restaurants and table-service restaurants. The rule affects only standard menu items – not food on display offered for sale for less than 60 days per calendar year or fewer than 90 consecutive days, according to the FDA.

Since Domino’s allows customers to build their own pizzas as part of its regular menu, it must account for the different combinations at the store level – and that’s the problem.

“We have two options. We can either wallpaper from floor to ceiling to try and capture every item on our menu. The other option is a realistic approach, which is to have a standard menu board with a really wide range to capture the many, many options,” Coneff said, noting boards cost about $5,500 to replace. “But if the pizza that’s up on the board has a range of 100 to 1,000 calories, that’s not really helpful.”

Lyle Beckwith, senior vice president of government relations with the National Association of Convenience Stores, said the idea for federal rules regarding caloric information on menus gained traction about a decade ago.

“I got a call from my counterpart at McDonald’s, a lobbyist. He said, ‘We have a real problem. There are cities and municipalities all around the country that are passing menu-labeling ordinances that are all different. We’ve got stores everywhere with 50 different menu-labeling requirements and we want just one we have to comply with,’” Beckwith said.

Initially, the push only was directed at fast-food restaurants. However, the impacted businesses changed following the adoption of the Affordable Care Act, which included a provision allowing the FDA to set caloric standards on menu boards.

Beckwith said the regulation works for a company such as McDonald’s, which has standard menu items and similar store setups around the country.

“A convenience store is a completely different animal,” he said. “No two convenience stores look alike, even within the same chain. There is food throughout the store, so there is not just one location where you can look up. We could have coffee on one side, doughnuts on one side. There might be a deli.

“Every store is different.”

However, not all restaurants are crying foul.

St. Louis-based Panera Bread Co. (Nasdaq: PNRA) began its internal push for menu labeling two years ago.

“Certainly, any time you have an FDA requirement come along, you’d want to prepare for it and be in compliance,” said Brian Camey, president of franchisees Traditional Bakery Inc. and Oklahoma City Bakery Inc., which operate 36 Panera stores in Missouri, Arkansas, Oklahoma and Arizona. “We didn’t see any reason not to put caloric information on menu panels.”

Camey believes listing calories is a valuable service to customers.

As for costs, he said Panera stores change menus three to four times a year, so adding in calorie information has been a minimal expense – just the extra ink involved.

“The challenge becomes if you rotate items off your menu with a lot of frequency,” said Stephanie Hein, hospitality and restaurant administration department head at Missouri State University. “Then it becomes cumbersome.”

Introduced in the U.S. House of Representatives in April, Beckwith and Coneff both support an alternative piece of legislation – The Common Sense Nutrition Disclosure Act. The bill would allow a range or average of calories for a given menu item and would only apply to companies that generate more than 50 percent of revenues from selling prepared foods.

Assuming the FDA rule stands, Hein said she’s interested to see if listing calories actually changes any habits.

“For me, if I eat out on a Friday night, I don’t want to know how many calories are in a chocolate lava cake,” she said.

With two years already under the belt at Panera, Camey hasn’t noticed any impact on customer choices.

“We have not seen anything statistically that would affect our menu mix,” he said, adding he has heard several positive comments from customers.

“But I don’t think we’ve seen any measurable change.”