The 2016 presidential election was billed as a high-stakes showdown. Many in the restaurant industry—indeed, in the wider business community—were pushing for serious change after eight years of the Obama administration’s regulations.
President Donald Trump’s administration has undoubtedly taken a different direction. So far, his tumultuous first term has delivered the restaurant industry a few solid wins. But as the U.S. approaches another election—the November midterm races—many political issues continue to weigh on the industry at large. As Washington ushered in a new era of deregulation, state and local governments responded with their own waves of rules that affected restaurants. Now the National Restaurant Association (nra) is busy addressing those myriad regulations. At the same time, the group continues to lobby for comprehensive immigration reform, push against the National Labor Relations Board’s joint employer standard, and call for a fix to the restaurant tax depreciation issue that arose from Trump’s marquee tax reform package.
The NRA is also against the administration’s tough position on trade, arguing for free trade at a time when the president continues to stoke trade wars across the globe.
“Leading up to Election Day, we will continue working to educate elected officials and candidates on key issues, such as immigration reform, common-sense fixes to the Affordable Care Act, and removing harmful regulations on America’s restaurants,” says Steve Danon, the NRA’s senior vice president of public affairs.
Here’s a look at how those and other issues are affecting the quick-service industry, and a preview of what’s at stake in November’s midterm elections.
“There’s nothing we can really do”
Pita Pit CEO Peter Riggs says the industry has achieved some real gains during the inaugural months of the Trump presidency. But policy is shaped over the long arc of history.
“It’s politics, so nothing ever changes drastically,” he says. “It’s wins here and not so much there. It’s always what kind of progress is being made. The biggest thing for us is always trying to stay flexible.”
The $1.5 trillion in tax cuts the president signed into law in December 2017 will put more money into the pockets of both consumers and operators, Riggs says. But franchisees still face a range of local labor regulations, particularly those that restrict how managers can set employee schedules by mandating reliable scheduling. And the president’s instigation of trade wars could upset global agricultural markets, potentially affecting the price and availability of the food supply.
The NRA points out that restaurants rely on global, interconnected supply chains to provide meals to millions each day. And any disruption to the complex supply chains—including tariffs—will affect the availability and price of food for operators and consumers alike, Danon says.
“It’s pretty top of mind and it is an issue we’re watching,” Riggs says. “But unfortunately … there’s nothing we can really do about it.”
Riggs says his team is approaching trade in the same way they would a food-safety recall: trying to create contingency plans for its existing supply chain.
“But of course, you can’t plan for every eventuality. One of the things we talk about here is just trying to stay flexible. These are such big things that can change on a dime,” he says. “These are big, global powers duking it out. We’re just saying, What can we do to ensure we have an uninterrupted supply?”
Federal vs. local regulations
Political change rarely happens fast. And this November’s elections stand to slow things even further if Democrats win one chamber of Congress, says Alex Susskind, an associate professor at Cornell University’s School of Hotel Administration who studies trends in the food industry.
“The wheels of progress move very, very slowly,” he says. “Even if they flip, there’s not going to be enough momentum to really do anything of consequence right away. It’s going to take time. And anything that’s going across the president’s desk is likely going to see Democratic resistance.”
State and city regulations, on the other hand, can happen quickly. Nowadays, local ordinances on everything from paid parental leave to minimum wage to reliable scheduling mean operators are faced with a patchwork of laws. In Washington, lobbyists wield great influence. But it’s the complete opposite in local politics.
“It’s harder to influence local things, because that’s where people have the strongest voice: in their neighborhood, their state legislature, or their town council,” Susskind says. “Individuals have a stronger voice in those domains.”
While restaurant operators reel from more aggressive local regulations, they have some relief at the federal level, says Alden Parker, a regional managing partner for the Fisher Phillips law firm in Sacramento, California, and a member of the California Restaurant Association’s legal center. Many employers initially anticipated more aggressive deregulation. They had hoped for a complete repeal of health-care reform, for example. While there is some disappointment, restaurants seem to trust that the administration at least won’t inflict harm, Parker says.
“That enthusiasm has been blunted a little bit by the inactivity in Congress and the inability to get things through,” he says. “It’s sort of settled into a belief that at least we’re not piling on more. It’s sort of a deep breath; OK, we’re taking a pause from these regulations right now, and we just may not see anything new come up. But we’re going to be stuck with some of this stuff.”
The all-consuming news cycle
In the summer of 2016, chefs with the six-unit concept Grown took over the White House kitchens for a day, serving their organic, nutrient-dense food to executive branch staffers. It was just one small way the Obama White House worked to promote healthier eating.
But it didn’t take long for Grown founder Shannon Allen to realize the Trump White House had very different priorities; the administration quickly overturned some of the school lunch nutritional standards that had been a priority during the Obama years.
“That shocked me that that was one of the first orders of business for the new president,” Allen says. “That was very telling about their priorities with food policy.”
Allen held a voter registration drive at Grown during the 2016 presidential campaign. Now she says she’s worried about the state of U.S. politics. The administration’s tough rhetoric and enforcement efforts around immigration have horrified her. There are business implications, she says. But she’s mostly worried about the human cost.
“I’m certainly not an expert on immigration, but I’m a citizen of this country, a parent, and a small-business owner. And it’s scary,” she says. “I’ve had people come to me in tears who are legal citizens, who pay their taxes, but they’re still afraid.”
Allen is disturbed by the ever-changing news cycles and the constant ups and downs associated with the Trump White House. That weighs on everyone, she says—customers and restaurant workers included.
“I definitely think it trickles down,” she says. “People are paying attention way more than ever to what’s going on in the news cycle and each new tweet. It’s unavoidable. It’s all-consuming.”
What’s at stake in November?
This November’s elections won’t get near the attention that 2016’s presidential race did. But they’re still not to be ignored, says Matthew Haller, vice president of public affairs for the International Franchise Association.
“It’s very high stakes if you’re a business owner in any business, but particularly in franchising and the restaurant industry. You’ve seen a lot of improvement in the last two years in the business climate,” he says. “The question you should be asking yourself if you’re in a city or state with a midterm election is, Do you want to see a continuation of what Congress and the administration have done from an economic standpoint? Leave all the nonsense out of it in terms of stuff that comes across the Twitter feed.”
Often, Haller says, change is incremental. And it’s unlikely that Congress can make much happen now; it requires 60 votes to move legislation through the Senate, and the Republican majority has only 51 votes. But he argues that even a change to Democratic control of the House of Representatives could alter the nation’s public agenda.
“It would make it a lot harder to get some of the things that haven’t been solved done. Let’s say the house flips to Democratic control; while these things may not become law immediately, the Democrats will have control of the floor and control of the committees,” he says. “If (Rep.) Nancy Pelosi is speaker of the house, she’s been campaigning on a $15 minimum wage and universal healthcare.”
Most industry types figured there would be more clarity on public policy by 2018’s midterm elections. But that’s not really the case, says Matthew Mabel, president of consultancy Surrender Inc.
“I think the biggest things the industry thinks about are immigration and healthcare. And that hasn’t really changed in 10–15 years,” he says. “I would think that most industry figures would think the future on that would have been clearer than it is.”
Still, restaurants don’t close down because of political uncertainty, he adds. “We have to make decisions every day, whether the government is stable or not.”
Operators are also suffering through a widespread workforce shortage that makes it difficult to hire from coast to coast. That’s an unfortunate consequence of an expanding economy; the nation’s unemployment rate continued to fall during the first five months of 2018, reaching 3.8 percent in May, according to the Bureau of Labor Statistics.
“People that tend to panic think the sky is falling. But what I’ve noticed is the sky never falls over the years,” Mabel says. “You’ve got a choice: You have a good economy and a labor shortage, or you have a bad economy and everyone is unemployed.”
While uncertainty has dominated much of the administration’s first half, restaurants do have more clarity on its stance on nutritional standards, says Margo Wootan, vice president for nutrition at the Center for Science in the Public Interest. Though Trump’s administration isn’t prioritizing nutrition the way Obama’s did, the Food and Drug Administration has kept certain commitments to improve the healthfulness of the food supply. The FDA will still require restaurants, movie theaters, and convenience stores to post calorie counts with the food and beverages on offer. The agency has offered leniency, while at the same time signaling it’s serious about the rules, Wootan says.
A May 2018 enforcement deadline was extended one more year, giving operators until May 2019 to implement labeling or face sanctions.
“The FDA has said they are going to give chain foodservice establishments some time to figure out how to label and how to do it right,” she says. “They’ll be working in a constructive way to help supermarkets, convenience stores, and restaurants to comply.”
And the FDA will continue to push for lower sodium counts in restaurant and packaged foods. Exact sodium targets are still being crafted, but operators should already be looking at ways of reducing salt loads, Wootan says.
“They don’t need to know the exact target to be assessing their menu, figuring out which items are too high in sodium and finding ways to reformulate,” she says.
Holistically, the FDA’s tact is keeping nutrition at the forefront, Wootan says. Nutrition is growing so important that some restaurants now think about calorie counts and sodium levels as they create new menu items, she says.
“Menu labeling is bringing nutrition into the restaurant setting in a way it never has been,” she says. “A decade ago, no restaurants had calorie labeling for all menu items. Now, consumers see nutrition as part of the dining experience.”
Fazoli’s CEO Carl Howard says restaurant leaders should have few reasons to complain in 2018. Taxes are lower for consumers and companies. A booming stock market has fattened 401(k)s. And regulations are on the decline across the industry.
“What else would a business want?” he said. “The mega brands are probably ecstatic about the change in leadership. Because not only did we unwind regulation, but we also added a pretty significant tax cut that allows them to free up more capital to invest back in their business.”
Howard was pleased to see the Affordable Care Act, Obama’s marquee policy accomplishment, weakened during the Trump presidency. In late 2017, Congress repealed the individual mandate penalty for consumers who don’t purchase insurance.
In 2010, when the first news of the ACA broke, Fazoli’s began working on a plan, hiring a third-party consultant to determine how to respond to the millions of new costs associated with the healthcare costs. Now the issue is hardly talked about at corporate, Howard says.
Howard has followed Trump’s international trade wars. Aside from affecting food prices, continued retaliatory tariffs on Canadian lumber could drive up the cost of new restaurant construction, he says.
“We think about it. But I don’t know that it keeps me up at night,” he says. “I don’t know how it’s going to shake out. It may shake out at the end of the day where everything’s just fine.”
Howard sees the fall midterms as a high-stakes election cycle; a change in the power structure in D.C. could usher in a reversal of recent regulatory relief. At best, it would ensure even more gridlock, he says, if Democrats were to win control of a chamber of Congress.
“It will create more stress and harm than it will good, so I think the midterm elections are very important,” he says. “But when we spend time sitting down and talking about what will impact our business, we don’t talk about the midterm elections.”