Franchising World July edition
By: James N. Czaban and Roger H. Miksad
Efforts by the Food and Drug Administration to implement the restaurant menu labeling provisions of the Patient Protection and Affordable Care Act of 2010 took a major step forward in April with the publication of FDA’s proposed regulations setting forth the detailed requirements restaurants will be required to meet. FDA accepted comments through June 6, 2011.
FDA previously issued a Draft Guidance for Industry in 2010 explaining FDA’s interpretation of the requirements of the Act’s menu labeling provisions (“Guidance”). Such interpretive guidance documents, while not binding on the agency or regulated industry, are nevertheless often utilized by federal agencies seeking to avoid the procedural requirements involved in promulgating formal regulations. In light of extensive comments from industry and the public around many of the more controversial aspects of the guidance, and the importance of these rules, in January 2011, FDA decided to withdraw that draft guidance and move to a full-fledged rulemaking process to ensure broader public participation.
Despite its effort to address concerns raised in response to the guidance, FDA’s proposed rules set out a substantially similar framework for the implementation of the Act as did the prior guidance. Because the proposed regulations still leave many questions unanswered, restaurant franchisors and operators should pay special attention to the proposal and provide comments to FDA to ensure that the final regulations are practical and appropriate.
Businesses and Establishments Affected
The Act imposes labeling and disclosure requirements upon any “restaurant or similar retail food establishment that is part of a chain” (a) with more than 20 locations (b) doing business under the same name, and (c) offering for sale substantially the same menu items. The rulemaking clarifies that an establishment must meet all three criteria to be subject to the requirements of the Act.
The proposed regulations state that, for purposes of menu labeling, FDA will consider a regulated restaurant to be any establishment whose primary business activity is the sale of “restaurant style” food to consumers. This definition includes businesses “similar” to restaurants that sell food directly to consumers that is intended to be consumed immediately, either on or off the premises, including self-service, carry-out and delivery restaurants. In a change of direction from the guidance, which interpreted these categories even more broadly, FDA has proposed that it will not apply these requirements to businesses for which food is an incidental business (including movie theater concession stands), and such establishments will not be required to post nutrition information. The “movie theater exception” is and remains controversial, especially given that other businesses with seemingly “incidental” food service activities. For example, a convenience store sandwich counter or a bookstore coffee stand, are not exempt. This issue may be reconsidered in the final regulations and could even form the basis for a judicial challenge.
FDA will consider as chain locations restaurants that are owned, controlled or operated by a single corporate entity, including those operated through franchise agreements. Slight name variations between locations or menu offerings will not exclude a restaurant from the definition. For example, “ABC” restaurant and “ABC Express” restaurant would be considered part of the same chain if meeting the other requirements. Also, individual locations that offer items for sale that use the “same general recipe and are prepared in substantially the same way with substantially the same food components, even if the name of the menu item varies” will be considered chain restaurants.
This provision begs the question of how FDA will go about enforcing the rules where it must evaluate whether two items (say stir-fried chicken), with different names and some variation of ingredients, are nevertheless substantially the same. Arguably, if the differences between the menu items result in different caloric content (e.g., by use of different sauces, or the use of more or fewer vegetable ingredients) the items should be treated as different. Yet FDA does not explain how it will evaluate such questions.
The Act requires restaurants to make various disclosures regarding the nutrient content of each “standard menu item.” The proposed regulations define a “standard menu item” as including any food item “routinely included in the primary writing of the restaurant… from which a consumer makes a food selection.” Such a “primary writing” may be a written menu, posted menu board, or other written communications depending on the set-up of the business.
FDA draws an interesting distinction for restaurants that provide take-out or delivery service. While menus mailed to consumers solely as advertising for conventional sit-down restaurants would not be required to include nutritional information, similarly mailed menus, menus on the Internet, or hand-delivered menus, from which a consumer can order food for delivery or take-away would be required to disclose nutritional information. The “advertising menu” exception may prove to have mixed results and may lead to confusion if a franchisor has some locations with delivery or take-away options and other locations without.
On the menu or menu board itself the restaurant must include the following statement at the bottom of each page or board: “A 2,000 calorie daily diet is used as the basis for general nutrition advice; however, individual calorie needs may vary.” The menu or menu board must also include a statement that discloses the availability of the additional detailed nutritional information. Both of these statements must be clearly legible, and can be no smaller than the smaller of the name or price of each menu item.
Menu Item Calorie Disclosures
The menu listing for each standard menu item must disclose the number of calories contained in the entire menu item adjacent to the item name under the heading “Calories” or “Cal.,” and not as part of the text description. The calorie information must be no smaller than the smaller of the name or price of the menu item. Menu items that come in various flavors or varieties, but are listed under a single-menu item (such as chocolate or strawberry milkshakes) could display a calorie range (e.g. “700-800 Cal.”). The calorie information should be reported by rounding to the nearest 5 calorie increment for food items with less than 50 calories, or to the nearest 10 calorie increment for items above 50 calories.
Furthermore, the restaurant must make separately available more extensive written nutrition information for each menu item that includes: total calories from all sources, total calories from total fat, total fat, saturated fat, trans fat, cholesterol, sodium, total carbohydrates, sugars and protein contained in each serving size or other unit of measure.
The proposed regulations are a bit of a two-edged sword for franchisors.
Non-standard restaurant offerings not normally listed on the menu, such as condiments, daily specials or custom orders, would not need to have nutrition information listed. However, where a condiment is a standard part of the food item as it is served, its nutritional information would be required to be included in the total information disclosed for that item.
Restaurants with self-service buffets or salad bars will face further complicated requirements. Each food item on display in a buffet or salad bar will require an individual sign to be posted adjacent to the food that provides the number of calories per serving or item in a “clear and conspicuous manner.” This information may be on the same sign as the item’s name and price where such signs are used, but restaurants that historically do not post signs for individual food items will be required to change their practices.
In an interesting twist, condiments openly available to all customers (such as a ketchup dispenser) regardless of the customers’ purchase would not need calorie information posted. However, self-serve condiments which are available only upon ordering a specific food item (such as salad dressing for a “salad bar” menu item) would be required to have calorie information posted.
Potentially conflicting requirements such as these seem likely to cause confusion as restaurants and franchisees attempt to determine where and when they need to post calorie information under the new rules.
The proposed regulations are a bit of a two-edged sword for franchisors. While they may avoid the need for a franchised chain to comply with multiple, conflicting local menu labeling requirements, the regulations will add a burden on the many chains not operating in those localities that previously required menu labeling. Franchising operations with standardized menu items will need to determine how best to fund and perform the necessary testing and standardization of calorie reporting for menu items. Regional or location based menu differences will further drive costs and implementation difficulties for larger and more diverse chains.
Franchise restaurant chains may also face further struggles in meeting the requirements of these rules due to their reduced control over individual establishments. FDA’s rules mean that franchisors will be required to ensure that all of their individual locations and diverse owners are quickly in compliance with the menu labeling requirements to avoid potentially chain-wide enforcement actions.
James N. Czaban is the chairman of the Food & Drug and Product Safety Practice and Roger H. Miksad is a lawyer at Wiley Rein LLP in Washington, D.C. Czaban’s practice centers on complex regulatory strategies and compliance matters for the pharmaceutical, biotechnology, food, and medical device industries and he represents clients in matters involving FDA, FTC, DEA, CPSC, DOJ, and other agencies. Miksad counsels clients on a broad range of health and safety related regulatory matters before the FDA, CPSC, EPA and FTC and other federal and state agencies. Czaban can be reached at 202-719-7411 or email@example.com and Miksad can be reached at 202-719-7193 or firstname.lastname@example.org.
This article provides general news about recent legal developments and should not be construed as providing legal advice or legal opinions. You should consult an attorney for any specific legal questions.