Food chains like pizza retailers are warning that an Obamacare regulation set to kick in on May 5 will overwhelm customers, raise prices and bankrupt businesses.
A costly and burdensome 400-page regulation in the Affordable Care Act (Section 4205) is set to go into effect on May 5 requiring any “restaurant” with 20 or more locations to post in-store menu boards with separate nutrition information for every food item and combination served.
The regulation would ensnare not only traditional sit-down restaurants, but also other businesses that sell food, such as:
- Pizza companies,
- Convenience stores,
- Microbreweries, and
- Movie theaters.
Businesses like Domino’s pizza would potentially have to display menu listings for millions of permutations of their offerings. The American Pizza Community (APC), which represents pizza companies like Pizza Hut, Papa John’s and Dominos, as well as smaller franchises, explains:
“From the 34 million combinations of Domino’s pizza to the hot and salad bar at a local supermarket or convenience store, complying with the rule as written will financially harm many small businesses, not to mention the criminal penalties that can come with technical non-compliance.”
The menu board required would be both excessively detailed and complicated, as well as extremely difficult to comprehend, APC warns.
AFP also cites U.S. Office and Management and Budget (OMB) analysis estimating that the menu-labeling regulation would require businesses to spend 14.5 million hours complying with its mandates.
Likewise, the Food Marketing Institute (FMI), whose members operate 37,000 supermarkets, estimates the first-year cost of compliance at more than $1 billion – a cost that will be passed on to consumers.
Supermarket menus won’t just be costly and cumbersome, they’ll also cause local food providers, such as bakeries and specialty food companies, to lose their supermarket business. Local providers won’t be able to afford to provide the extensive nutrition information required and, since liability ultimately rests with the food retailers, these locally-produced products will be dropped. This would not only hurt local businesses, but it would also reduce consumer choice, FMI Senior Director, Food & Health Policy, Food Marketing Institute Robert Rosado says.
Confusion about the regulation’s exact requirements will also lead to wildly inconsistent implementation and enforcement. Offerings of packaged, sliced produce would need the new menus, but what about loose produce sold by weight? “Nobody knows,” Rosado says.
And, for each restaurant affected, it could cost business owners thousands of dollars a year to maintain their in-store menu boards. For pizza retailers, this would be particularly onerous, since less than two percent of their customers actually use menu boards.
As this time-lapse video of a typical day shows, more than 90 percent of pizza orders are placed online or by phone, not in-store. What’s more, consumers can often access more customizable nutrition information provided online.
Trade groups with members threatened by the regulation are urging lawmakers to delay, withdraw and rewrite the rule to make it less burdensome, more consumer-friendly, and accommodate industry differences.
While legislative improvements to regulation would ultimately be required, an executive order by President Donald Trump or a new Food and Drug Administration (FDA) rule might be required to provide relief before May 5.
“This certainly seems to fall in the realm of other executive orders” issued by the previous administration under auspices of the current health care law, Rosado says, adding that “The FDA's square-peg-in-round-hole approach to ‘menu labeling’ is completely bizarre and ineffective.”
Worse yet, consumers will end up paying the price, Rosado explains:
“This Obama era regulation will financially punish grocery stores, already operating on less than a 2% profit margin, by causing them to incur $1 billion in compliance costs for the first year alone. These are costs that will ultimately be absorbed by customers.
“We hope that before the May 5 enforcement deadline begins, the Trump Administration will take action to revisit these rules, which the FDA has not only characterized as a ‘thorny’ issue, but has delayed implementation twice because of its complexities.
“Consumers deserve access to locally prepared foods and more effective nutrition information and there are less costly, more efficient methods readily available which can accomplish both goals.”