Article
QSRs ponder cost of menu-labeling laws
Digital menu boards a possible solution.
July 7, 2008 by Julie Sturgeon — independent journalist, CEOEditor, Inc.
It's no wonder menu-labeling legislation throughout the country is sparking controversy. Even within the quick-service world, operators can't agree whether politicians are on to something or just on their backs.
New York City; King County, Wash.; and Los Angeles, San Francisco, San Mateo and Santa Clara counties in California are among the municipalities that have enacted menu-labeling ordinances. The states of California and New York are considering legislation as well.
The National Restaurant Association officially supports flexibility and freedom in how restaurants provide nutrition data and lobbies against specific menu labeling approaches popping up at the national level.
"The human element in the preparation of food makes it impossible to standardize food products," is its public policy line. To further complicate standardization, more than seven in 10 patrons customize their meals, whether that involves asking for mustard instead of mayonnaise or adding extra cheese.
Other industry insiders contend the information already is available on the Web and through in-store brochures, so meddling with the menu board simply is frustrating.
For national chains in affected areas, complying with each of the local ordinances is equally challenging.
"This patchwork of policies around the country is making it extremely difficult for us to conduct our business," said Steve Caldeira, chief global communications and pubic affairs officer at Dunkin' Donuts.
Even more perturbing is the laws' targeting of restaurants or QSR chains with 10 or more stores.
For example, Dr. Joshua Lipsman, health department commissioner for the New York suburb of Westchester County, said in an Oct. 1, 2007, Westchester County Business Journal article that a menu-board ruling in his region would apply to only about 300 of the 3,000 food service establishments.
"Some who propagate these regulations don't understand or realize that despite being global brands, in a lot of cases like Dunkin', we're franchised — meaning these restaurants are independently owned and operated by small-business people," Caldeira said. "My guess is the caloric count of one of our doughnuts is very similar to the count of a donut made by a mom-and-pop operator in New York City."
Still, executives like Ram Bangalore, regional manager for California-based QSR Una Mas Mexican Grill, only shrug. Although these units will have to label all the ingredients on the board, the information already is on the Web site so the numbers are ready to go.
"We're not being the food police," he said. "Some people need to know this at the point of sale for health reasons. It's a very customer-oriented move."
But there is one common ground for the industry: This won't be inexpensive, particularly in an economy struggling to keep operating expenses from driving the price beyond customers' means.
Cost to implement
Caldeira can't pinpoint Dunkin Donuts' compliance costs since the final bill will include more than just designers' fees and manufacturing costs for the actual signs. Some situations will involve third-party installers, as well as redirecting a number of in-house man hours.
"Our stores in New York City contain a lot of different layouts and footprints, so we have had to work hard to develop a solution that provides a range of solutions for different sizes," he said. "I will say the costs aren't insignificant."
Corporate headquarters is footing the bill for the design fees, but the franchisees will pick up the tab for installation.
Una Mas is budgeting between $200 and $300 per sign, and the headquarters will pay the fee.
"We see our franchisees as partners, and it's the least we can do for them since it's a mandated change," said Bangalore.
Una Mas is considering a pilot with digital menu-board signage in the near future as a way to ward off a wholesale change should other cities in its region follow Santa Clara County's lead.
Digital menu boards offer flexibility
Harvey Freidman, founder and president of Beverly Hills, Calif.-based Epicure Digital Systems, said that more QSRs are asking about digital menu boards in light of such legislation.
Digital menu boards, which Friedman said cost between $2,000-$3,000, offer operators more options than static menu boards.
| ||||||||||||||||||
Larry Drago, marketing specialist for Holbrook, N.Y.-based IDS Menus, said that digital signage can ease compliance of menu-labeling requirements.
"Unlike static menu boards, space for text, prices and item descriptions are not as much of an issue with digital signage," Drago said. "Restaurant owners can include caloric content with prices and descriptions much easier."
Customer impact
While some may applaud the addition of nutritional information on menu boards, operators are taking a "wait-and-see" approach regarding the contents' impact on sales.
Caldeira contends it's way too early to predict customers' buying reactions. Dunkin' Donuts will track its New York City units for this information.
The prevailing hope among QSRs, however, is that consumers won't stop ordering.
Operator Ryan Reese, who owns a Garlic Jim's Famous Gourmet Pizza unit in King County, Wash., believes menu labeling won't have a long-term effect.
"When they first came out with the General Surgeon's warnings on cigarettes, everyone thought that would stop smoking," Reese said. "People don't even look at that label any more. They don't care."
