Industry News | September 7, 2010

Are Restaurants at the Mercy of Legislators?

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Legislation has long impacted the quick-service industry, from smoking bans to licensing fees to the recent passing of the menu-labeling mandate.

A panel of experts at QSR's Dine America conference, September 12-14 in Atlanta, will suggest the best means for the restaurant industry to navigate the legislative environment—and what they can do to proactively engage in political advocacy and the legislative process.

The panel includes Ken Cutshaw, executive vice president and chief legal officer for Church's Chicken; Charles Hoff, general counsel for the Georgia Restaurant Association; Mike Vaquer, industry lobbyist, and Keisha Carter, a public affairs consultant.

Hoff spoke with QSR's Sam Oches about the relationship between the restaurant industry and legislative bodies.

How difficult is the legislative environment right now for the restaurant industry?

Dawn Sweeney, President and CEO of the National Restaurant Association (NRA), has identified advocacy and representation as paramount to the vitality of our industry. This means building and sustaining a favorable political environment. We couldn’t agree more.

With 945,000 locations nationwide, America’s restaurants reside in each congressional district across the country. It takes communication, collaboration and resources to ensure that every one of these locations is properly represented on a local, state and national level.

“Around the States,” a weekly publication provided by the NRA, provides a snapshot of the complexity of our current legislative environment. A pattern has emerged – more and more states and localities are taking the forefront, pushing issues like Menu Labeling to the national stage. The legislative and regulatory environment, both nationally and locally, is extremely active. Monitoring and engaging in the political process should be the primary concern of any restaurant association.

Despite the regulatory challenges our industry faces, 2010 has held many victories, such as interchange fee reform. This demonstrates the importance of being proactive in the process. A favorite saying is, “If you’re not at the table, you’re on the menu.” We find this saying holds true, particularly in the current legislative environment.

Does the restaurant industry sometimes get the short end of the stick from legislation?

As the voice of Georgia’s restaurant industry we may be a little biased, but the answer from us is emphatically, “yes.” I would not go so far as to say that restaurants are at the mercy of legislators, but I will say that many regulations fail to take into consideration the realities or our business as well as the unintended consequences of passing legislation that does not adequately appreciate the restaurant’s impact on the overall economy and job market.

This is why the education process is critical. Legislators may not be aware that according to the Small Business Administration, more than 98% of restaurants are defined as small businesses. Or that each additional $1 million in restaurant sales generates 34 more jobs for the nation’s economy.

In these challenging economic times, there are increasing financial restraints on all levels of government. The restaurant industry may appear to be an easy target, but with median profit margins of 3 to 5 percent, every penny counts.

The prevailing attitude is that we can pass the cost on to consumers, but it is not that simple. A $1,000 increase in fees drops to the bottom line and the overall cost of doing business, so raising the price of a cup of coffee is not the fix.

Legislators need to be made aware that a significant increase in the cost of doing business could negatively impact our industry, which is one of the nation's largest private sector employers. Concurrently, if Congress raised the business-meal deduction to 80%, the overall economy would grow $26 billion. Clearly, it is economically advantageous for our industry to grow and thrive, not to be stifled and constrained by unfair taxes, fees and regulations.

Is it OK for restaurants to take a stand against legislating bodies?

Certainly we want to be sure that our views are represented and our voices are heard, but standing up against legislating bodies implies a reactive stance. We prefer to be proactive and engaged from the start of the legislative process, rather than running around putting out fires.

One of the advantages of having representation from restaurant associations is that we can do the heavy lifting. We’re there to keep an eye on potential issues, clear up misperceptions, gather consensus, and communicate the position which is most beneficial to our industry.

Of course, it takes restaurant engagement to make the system work properly, and it takes contributions to our Political Action Committees to keep us effective, but individual restaurants should not feel compelled to step to the forefront on difficult issues. This is where the GRA and National Restaurant Association are most effective because we are not opposed to taking an unpopular stance if it is in the best interest of the restaurant community. That’s the beauty of the democratic system, we can stridently advocate for our position and we can disagree, without being disagreeable.

Are there possible compromises between legislators and restaurants?

Absolutely, it often makes sense to reach a consensus when it is appropriate and advantageous. While it is important to identify which issues require a hard-line stance, some issues may provide for more leniency and room for compromise. Interchange fee reform is a perfect example of being adaptable and working on state, local and national levels to ensure that favorable legislation emerged. Often we work closely with the National Restaurant Association to frame key issues and mobilize our membership. Again, working collaboratively with legislators, regulators and advocacy groups is a key part of the democratic process and has proven to be an effective means to protect our members’ interests.

Is it difficult for such a big industry with so many independent operators to come together to stand up to government?

Well, more than 70% of restaurants are single-unit operations. It can be a challenge mobilizing and communicating because day-to-day operation of a restaurant can be so demanding. The hours are grueling and time outside of the restaurant often comes at a premium for operators. That is why we have a diverse network of early alert and notification systems including fax, email, phone and social media. We want to make it as easy as possible for our members to become aware of the nature and implications of political issues and take action when needed.

While the coverage restaurant associations provide on the federal, state and local levels is crucial, we really need the help of restaurant operators on a grassroots level to assist in keeping all of us apprised of emerging issues. Local ordinances can have a profound effect on your business, yet these issues may not surface quickly and can be overlooked if restaurant operators are not vigilant and involved in the process. The key is nurturing two-way communication with restaurant operators. As we are here to support restaurants, the more we know in terms of their day to day interactions with regulators and government agencies, the more effective we can be.

How much hope do you have for the restaurant industry in standing up to government?

I think the outlook for the future of our engagement with government is positive. We are confident that given the opportunity to be heard, legislators on all levels will be responsive and receptive to our interests. Our responsibility is to make sure it is understood how vital we are to the community and the economy. According to the NRA, more than nine out of 10 restaurants are actively involved in community service activities.

Each contact we make through the legislative process builds upon our reputation as a pillar of the community and demonstrates how vital we are to the economy and well-being of the nation. We are tackling difficult issues. As with all players in the political arena, we are not always successful in prevailing on a given issue, and sometimes there is room for improvement, but each time we increase our contacts and extend our reach. The most important way we can help build upon a reputation as honest and well respected corporate citizens is for restaurant operators to build relationships with elected officials at all levels and educate them on our industry’s challenges. We need to make it known that we are an informed, active and united industry, willing to stand up for the best interest of the restaurant community.

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