Restaurants Prepare for Cost of New Menus Mandated by Obamacare

Published February 21, 2013

As President Obama’s health care law goes into effect, restaurants across the country are preparing for the new expense of meeting informational requirements under the law which are likely to prove costly without any certainty of health benefits.

Section 4205 of Obama’s law requires restaurants and similar retail food establishments with 20 or more locations to list calorie content information for standard menu items on all menus and menu boards, including drive-through boards. The law also requires vending machine operators who own or operate 20 or more vending machines to disclose calorie content for certain items.

Other nutrient information—total calories, fat, saturated fat, cholesterol, sodium, total carbohydrates, sugars, fiber, and total protein—would have to be made available in writing upon request. According to the U.S. Food and Drug Administration (FDA), the following information must be provided for standard menu items sold in chain retail food establishments:

  • The number of calories in each standard menu item on a menu or menu board—the calorie disclosure must be “clearly associated with” and “adjacent to” the name of the standard menu item,
  • a statement on the menu or menu board that puts the calorie information in the context of a recommended total daily caloric intake,
  • additional nutrition information for standard menu items in written form (“written nutrition information”), which must be made available to consumers upon request,
  • a “prominent, clear, and conspicuous” statement on the menu or menu board regarding the availability of the written nutrition information, and
  • the number of calories (per item or per serving) adjacent to self-service food and food on display, including food sold at salad bars, buffet lines, cafeteria lines, or similar self-service facilities, and self-service beverages and food on display visible to consumers

Predicted Cost: $44.2 Million Per Year

The FDA estimates that the initial mean cost of complying with the proposed regulations is $315.1 million, with an estimated mean ongoing cost of $44.2 million per year. The FDA did not estimate the benefits of the proposed regulations.

Erik Lieberman, regulatory counsel for the Food Marketing Institute (FMI), a trade group that represents 1,500 food retailers and wholesalers, said the national menu standard was supported by the restaurant industry as a way to “preempt the patchwork of various state and municipal menu labeling laws.”

“Food retailers already comply with the Nutrition Labeling and Education Act and label more than 95 percent of foods sold at grocery stores. Stores also display nutritional information for raw meat and poultry items and have voluntarily invested millions adopting more user-friendly guidance on the front of food packages and shelf-tags,” he said.

Job Losses Expected

But the effects of Obama’s law could be high on cost without much benefit.

“The unnecessarily burdensome menu labeling rule is going to impose a billion dollar burden on retailers. In an industry operating on a 1 percent profit margin, this financial load will mean the loss of jobs and an unnecessary increase to consumers’ grocery bill,” Lieberman said.

Lieberman pointed out research has consistently shown no significant health benefit from posted calorie counts on restaurant menus in cities which have adopted such policies. But the cost ramifications for retailers and consumers are very real.

“With the U.S. Department of Agriculture predicting food prices rising 3 percent to 4 percent this year, the cost of paying for this regulation is the last thing both retailers and consumers need. The restaurant menu labeling regulation keeps our members up at night because it will hinder their businesses and impede innovation,” said Lieberman. “The Office of Management and Budget (OMB) identifies the restaurant menu labeling provision as the third most burdensome regulation, and FDA hasn’t been able to quantify a single benefit, even though food retailers can clearly add up the costs impacting their businesses.”

Pizza Chains Hardest Hit

Devon Herrick, a senior fellow of the National Center for Policy Analysis in Dallas, Texas, says this is an example of a regulation that has gone totally out of control. He points out pizza makers could be hit especially hard by the regulation. Domino’s Pizza, for instance, would have to post up to 34 million different signs in every store—one for every possible pizza order.

“Everyone knows pizza is probably not the healthiest choice for a meal. It’s high in carbohydrates, high in fat, and usually high in calories. Most people order by phone and consume the meal at home. Posting signage in each store makes little sense and will prove less useful than providing the information on a website or in a brochure at the store,” says Herrick.

Seton Motley, president of Less Government, a public policy group that advocates smaller, less centralized government, says the compliance cost for pizza chains and other restaurants is too burdensome.

“This is information that no one in the private sector is even asking for,” says Motley. “A simpler way would be to post one sign with a calorie count for each ingredient, each size pizza, and for the works, and then let the customers do the math if they’re so inclined. This regulation just shows that the bureaucrats on Capitol Hill, who purport to have our best interests at heart, have no clue how a business is run.”