FDA Should Consider Economic Burden of Menu Labeling on Franchise Restaurant Owners
WASHINGTON, July 1-The International Franchise Association, on behalf the more than 825,000 franchised establishments in the U.S. that are responsible for creating nearly 18 million American jobs and generating $2.1 trillion in economic output, submitted formal comments today urging the Food & Drug Administration to consider the potential costs to small business restaurant franchise owners, and the unique attributes of the franchise industry, when implementing menu labeling regulations.
"The franchise industry has been supportive of the adoption of a federal menu labeling standard," said IFA Senior Vice President of Government Relations & Public Policy Judith Thorman in written comments submitted to the FDA. "However, we have significant concerns regarding the FDA's proposed interpretations of the statutory menu labeling provisions due to the potential economic burden posed to individual small business restaurant operators."
The IFA believes that the goal of the law is to provide consumers with clear and concise calorie information. The comments express the franchise industry's concerns with several aspects of the regulations, including the Reasonable Basis Compliance Standard, the definition of a Similar Retail Food Establishment, as well as the proposed effective date and the enforcement mechanisms.
The franchised restaurant business model is complex, and no two franchisors operate their franchise systems in exactly the same way. Certain businesses franchise all their establishments while others divide their systems between franchisee ownership and corporate stores. Within the scope of franchisee ownership, individual small business operators own-on average-no more than two or three restaurants. For these individuals, the prospect of implementing the new law will most certainly be a daunting and costly regulatory burden. Although franchisors may share in some of the implementation costs, the current economic uncertainties make any unnecessary costs for small businesses burdensome and problematic.
While the statute provides an exemption of the law's requirements for independent restaurants that have less than 20 locations, a small business owner that is a part of a franchise system will have to comply with the new regulations. The IFA is particularly concerned that the Proposed Rule and its requirements will create a competitive disadvantage between a single-unit franchise restaurant owner and local independent competitors.
"These new requirements will dramatically increase costs for some small businesses that are in competition with similar independent restaurants that are not subject to the requirements of the new law," said Thorman. "We are asking the FDA to ensure these rules are implemented in a way that accommodates small business owners and provides consumers with important calorie information that is clear and concise."
The FDA is accepting comments on the proposal until July 5. After reviewing the comments, FDA will finalize the regulations passed as part of the Patient Protection and Affordable Care Act passed last year. The FDA rulemaking is expected to be complete by the end of the year. The FDA has proposed restaurants will then need to comply with the new rule within six months after it is published, however the IFA has recommended a timeline no shorter than one year after the final rule is issued.
About the International Franchise Association
The International Franchise Association is the world's oldest and largest organization representing franchising worldwide. Celebrating 50 years of excellence, education and advocacy, IFA protects, enhances and promotes franchising through government relations, public relations and educational programs. Through its awareness campaign highlighting the theme,
Franchising: Building Local Businesses, One Opportunity at a Time,IFA promotes the nearly 18 million jobs and $2.1 trillion of economic activity generated by franchising. IFA members include franchise companies in over 90 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.