When is food service NOT a restaurant?

When is food service NOT a restaurant?
Tags: Food & Beverage, Legal Issues, Operations Management, Trends / Statistics
February 14, 2012

If you own a place that sells prepared food for people to eat, you're in the restaurant business, right? Not necessarily.

While the U.S. Food and Drug Administration is expected to finally issue its final rules on menu labeling required under the health-care reform act by mid March, a fierce battle is raging over who will have to play by those rules.

Quick-service and fast casual establishments have seen their market share eroded in recent years by convenience stores and grocery chains offering an increasingly broad selection of "meals on the go." The trend is toward c-stores becoming the place to refuel both vehicles and people; some have partnered with chain restaurants and others offer their own competing food service brands.

However, because most of their food sales come from pre-packaged items, c-stores claim they should be exempt from the nutritional disclosure requirements facing restaurants without gas pumps.

At issue is the definition of "primary business activity."

The regulations proposed by the FDA last year say that chain restaurants, vending machines and any "similar retail food establishments" with more than 20 locations that devote 50 percent of their floor space to selling food must post nutrition information where customers can see it before buying the food.

However, the trade group National Association of Convenience Stores objects to including pre-packaged food that already carries nutrition labels in that square-footage calculation.

In comments to the FDA in July, NACS offered an alternative. The organization recommended the space calculation be replaced with one based on revenues from food service.

"NACS believes an entity should be covered only if revenues from restaurant-type food sales exceed 50 percent of the store's overall sales," the group explains on its website at nacsonline.com. "In evaluating this ratio, again pre-packaged food should be excluded from the 'restaurant-type food' revenues and fuel sales should be included in the store's overall sales."

You do the math. At $3 a gallon for gasoline, your average fill-up is around $50. Grab a $5 microwave burrito and a $2 bottle of pop along with your cigarettes and lottery tickets before you check out, and there's little chance of food sales ever coming close to half of that store's revenue. But you won't be stopping at the restaurant down the street for lunch, either.

In its comments on the proposed rules, the National Restaurant Association strongly urged the FDA to treat all restaurant-like operations the same under the final regulations. It also called on the FDA to maintain the longstanding "reasonable basis" standard for determining nutrition calculations, which is different from the standard used for processed, packaged foods.

Stay tuned for the final rules, whenever they come out.