For years, Pita Pit worked to educate customers about the nutritional value of its various pita fillings and toppings. It rolled out an online nutrition calculator years ago, and, with a bevy of lean meats and fresh veggies from which customers can choose, the brand positions itself as a healthy alternative to greasy fast food.
But even for Pita Pit, the U.S. Food and Drug Administration’s (FDA) new menu-labeling rules seemed overly burdensome. The menu is open-ended and customizable, not a simple numbered list of value-meal options. The new requirements mandated that the company list the caloric content of each meat, topping, and sauce—creating a design nightmare for the cramped menuboards.
To Peter Riggs, Pita Pit’s president of business operations, these rules were indicative of a slew of federal regulations that went too far.
“They don’t give any thought as to how the decisions impact the day-to-day business,” he says. “In creating those overly burdensome regulations, it’s been hard for us to execute with customers who just want to come in for a quick lunch. They’re interested in how healthy or not healthy their lunch is, but the government has taken it to an extreme.”
He thinks the federal regulatory environment will relax under President Donald Trump’s administration. “To be optimistic about a regulatory environment is something we’re pretty excited about,” he says.
Riggs expects big changes on the labor side of the business. During President Barack Obama’s two terms, operators were handed increased healthcare costs with the Affordable Care Act (ACA). The Labor Department sought to vastly increase the number of American workers eligible for overtime pay. And the National Labor Relations Board moved to hold franchisors accountable for the labor violations of their individual franchisees.
Restaurant industry insiders expect many of those policies to be erased or significantly blunted. Yet Riggs says he doesn’t expect the same wave of deregulation to affect the nation’s food policy. He views federal food-safety regulations as somewhat untouchable. And he believes even the menu-labeling effort will remain largely intact because customers want it.
“I don’t see a huge fight coming on that, because a lot of restaurants are actually interested in helping customers make good choices about what they want to put into their bodies,” Riggs says. “It’s one of the growing trends customers are looking for. They want the information. They want to know.”
In what other ways will food policy be affected in the next four years? Here’s a look.
Deregulation—to a point
The Republican National Committee’s 2016 campaign platform described existing agricultural regulations under the Obama administration as “draconian.” The party opposed mandatory labeling of genetically modified organisms (GMO) and the FDA’s menu-labeling initiative. The platform says the federal government’s “regulatory impulse must be curbed, not on a case-by-case basis, but through a fundamental restructuring of the regulatory process.”
So perhaps it’s no surprise that, following Trump’s win, the industry expects major regulatory changes over the next four years.
Dan Glickman, a former U.S. secretary of agriculture under President Bill Clinton, says that will likely mean big changes for the US. Department of Agriculture’s (USDA) Supplemental Nutrition Assistance Program, more commonly known as SNAP, or the food-stamp program. And the strict limits on calories, fats, grains, and meat portions in school lunches—a hallmark effort of former first lady Michelle Obama—are likely to be relaxed.
But Glickman, now a senior fellow at the Bipartisan Policy Center, says deregulation in the realm of food policy won’t come easily. Americans are more interested than ever in what they eat, where it comes from, and how it’s prepared. Customers would not appreciate a transition to a laissez-faire approach to food policy, he says, and restaurants have the most to lose if lax food-safety standards lead to outbreaks of disease or illness.
“The public overall is much more into these issues than they used to be,” Glickman says. “So if the administration tries to fight battles like they would have 30 years ago, it’s not going to be a winning proposition for them. … The public is much more supportive of food safety than it might have been 30 years ago, when there was kind of implicit trust in food producers.”
In a fact sheet posted on his campaign website, Trump pointed to the “FDA Food Police” as an agency with the potential for eliminating regulations. It called new FDA rules regulating farm and food hygiene “inspection overkill.” That memo was later removed and replaced, and the new one did not mention the FDA, The Hill reported.
Francine Shaw, president of Food Safety Training Solutions, says she is concerned that Trump views the FDA’s recent food-safety reforms as regulatory burdens. The American food system has come a long way since the 1993 outbreak of E. coli that struck Jack in the Box customers in the Western United States, she says. That crisis left four children dead, dozens with permanent brain and kidney damage, and hundreds more ill. Shaw lauds the Obama-era rules that began to phase out hydrogenated oils, reformed farm subsidies, and required reductions in sodium content.
“Taking a step backwards in terms of deregulating food safety would not be in our country’s best interest,” she says.
In 2011, Obama signed into law the FDA Food Safety Modernization Act, which handed down seven rules aimed at better protecting against foodborne illness. Shaw says those regulations won’t be easily undone by Trump, though any USDA, FDA, or Environmental Protection Agency rule left unfinished from Obama’s two terms could easily be on the block. That means rules surrounding animal welfare, organic foods, and GMOs could be easily changed by Trump’s administration.
“It would be a true disservice to have people in the U.S. consuming unregulated food,” Shaw says.
The labor crunch
U.S. immigration policy remains a glaring unknown for the restaurant industry.
Trump made railing against undocumented immigrants a centerpiece of his campaign. Aside from the promise to build a wall along the Mexican border, he pledged a massive enforcement effort that would deport the estimated 11 million undocumented people living in the U.S.
Such an effort could strike a blow to the restaurant industry by threatening the underlying U.S. food supply. The American Farm Bureau Federation predicts that the sudden loss of undocumented workers would cause agricultural output to fall by as much as $60 billion. American fruit production could drop by more than half, while meat production could drop by as much as 31 percent with stricter immigration enforcement.
Like many observers, Aaron Allen, CEO of global restaurant consulting firm Aaron Allen & Associates, doesn’t believe Trump will follow through with his plans to deport millions of people.
“But if he did, who’s going to grow the food, who’s going to cook the food, and who’s going to clean up afterward?” Allen says. “It would be crushing for the restaurant industry.”
Allen believes Trump’s proposed infrastructure projects could be an economic boon to the restaurant industry. If unemployment remains low and the economy ramps up, restaurants will see increased labor pressure, Allen says. That will likely lead to market-mandated wage hikes as operators compete for employees, regardless of policies like the minimum wage or overtime thresholds.
That makes the possibility of mass deportations even more alarming, says Stephen Nicholson, vice president of food and agribusiness research advisory and senior analyst for grain and oil seeds at Rabobank, a Dutch bank focused on food and agriculture.
“We as an industry need to make sure that the Trump administration understands that this is an important industry and we depend on that labor,” he says. “If you can find Americans to do that work, we’re willing to put them to work and pay them. But we can’t find that work now.”
He fears that the immigration debate is defined by extremists on the left and the right. Aside from his talk on immigrant labor, Trump’s anti-trade rhetoric could prove harmful if American restaurants aren’t able to easily and cheaply import foreign food products, Nicholson says. But he remains hopeful that Trump’s presidency will unfold to resemble that of President Ronald Reagan, with tough talk early on that eventually gives way to more pragmatic positions.
“To do what this administration is proposing to do would be a very big drain on resources,” he says. “It’s certainly an issue that needs a lot more communication.”
Restaurants’ glee could be short-lived
Trump’s surprise electoral win in November encouraged many restaurateurs. In the 11 straight months leading up to the presidential election, operators surveyed by the National Restaurant Association expressed negative sentiments about the business environment for the following two quarters. And then, seemingly overnight, their tune went from sour to sweet; the nearly year-long adverse trend reversed in November, when operators were interviewed again after Trump’s win.
“They had a negative outlook for business conditions in October, but in November, they believed conditions were going to be better in the next six months,” says Cicely Simpson, executive vice president of government affairs and policy at the NRA. “So we believe operators have a very positive outlook going forward.”
Simpson thinks the restaurant industry will have a greater voice at the table under Trump’s leadership. That will allow restaurateurs to weigh in on possible changes to food-safety measures, the ACA, and various labor regulations.
There are clear indications Trump’s Labor Department won’t look anything like his predecessor’s. He originally nominated CKE Restaurants CEO Andy Puzder to be labor secretary; in his time leading Hardee’s and Carl’s Jr., Puzder opposed efforts to raise the federal minimum wage, decried the ACA, and opposed the previous administration’s hard line on joint employers, which sought to hold franchisors accountable for labor violations at the franchisee level.
Puzder withdrew from the nomination after intense scrutiny during the confirmation process. At press time, Trump had yet to nominate another secretary for the Labor Department.
Carl Howard, CEO of Fazoli’s, is confident that a national minimum wage hike is now out of the question and that the pervious administration’s direction on joint employers will go nowhere. He views those as positive steps, though he noted that none of those public policy issues define the central strategy for his 222-unit chain.
“I think under the new regime and the new president … it’s good for the industry,” he says. “But we deal with the facts that we have, and the knowable costs and regulations, and we figure out how to outcompete everybody else. So everybody for the most part is on an even playing field.”
With labor pressures remaining high, operators shouldn’t take their newfound regulatory freedom too far, says Josh Ostrega, COO of WorkJam, an employee-engagement platform for the service industry. Even the most deregulated of environments cannot make up for the strain of competing for workers.
“The people who take advantage of it and don’t focus on employee engagement and the wellbeing of their staff, those are the companies that will be hurt the most in the long run. Because the companies that recruit and retain the best staff will be the most profitable,” he says. “If they don’t focus on the well-being of their employees, their attrition rate is going to stay high. Their costs are going to stay high. The reality is they’re creating the problem themselves.”
Alden Parker, a regional managing partner for the Fisher Phillips law firm and a member of the California Restaurant Association’s legal center, says the restaurant industry shouldn’t keep all its focus on Washington, D.C. State and local governments have legislated heavily on issues affecting the restaurant industry in recent years, and they’re likely to keep doing so, particularly if federal regulations ease up.
In the wake of congressional inaction on the federal minimum wage, a majority of states and many cities have approved their own minimum-wage hikes. Other statewide regulations required mandatory sick leave for all workers and increased employer liability in civil court for wage or worker compensation violations.
Several cities have also formed their own food policy. New York, San Francisco, and Boulder, Colorado, approved so-called “soda taxes” that levy taxes on sugary drinks. And New York became the first city to regulate sodium content by requiring chains to post a warning for menu items with more than 2,300 milligrams of sodium. “I think it will be vastly different in red states where you have a more business-friendly approach to regulation,” Parker says. “They will continue to take their cues from the federal level, which will slow down regulations and probably start eliminating some. In other states ... you’re going to end up seeing a big focus on the local ordinances.”
This story originally appeared in QSR's March 2017 issue with the title "Where Does Food Policy Go Now?"
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