The Writing on the Wall
Restaurateurs share insights into how menu-labeling laws have affected their businesses.
Like it or not, menu labeling is on its way for all but the smallest chains nationwide, thanks to a provision buried deep in the health-care reform package passed by Congress last spring. The Food and Drug Administration (FDA) is still working out the specific requirements; the agency has until March 2011 to come up with draft rules. But one thing is clear: Chains with 20 or more units will be required to post calorie counts and information on their menus and drive-thru signs about how many calories a healthy person should eat in a day.
Operators’ opinions on the matter are mixed. Some, such as Ashley Morris, CEO of Capriotti’s Sandwich Shops, a 60-unit chain based in Las Vegas, bristle at the exemption for chains that fall below the 20-unit threshold.
“That’s basically punishing you for being successful,” he says. “If they really cared about the reasons they say they’re making these changes, they would require every food establishment to comply.”
Others are more sanguine about the requirements, though they wonder whether consumers will actually change their behavior as a result of their newfound access to nutrition information.
“People still love their fried foods,” says Mark Parmerlee, who runs Golden Chick, a 90-unit fast chicken concept; and Jalapeño Tree, a 16-unit full-service Mexican chain, from offices in Dallas. “At a Golden Chick opening, a customer thanked me for putting roast chicken and salads on the menu. But then he went and ordered a threepiece fried chicken with large fries and a Diet Coke.”
Indeed, the potential effect on consumer behavior is the $64,000 question. Prior to the health-care-reform bill, menu-labeling regulations had been a patchwork affair, with rules already in effect in New York, Seattle and Philadelphia, among other cities. (Laws in California, Oregon and other locations are set to go into effect in 2011.) The situation was ideal for researchers, who could compare consumer behavior across locations with varying labeling practices. The upshot: People do tend to order differently when calorie information is provided— and that’s not necessarily bad news for restaurants.
Generally speaking, researchers have found that the inclusion of calorie information, especially when combined with facts about average daily calorie intake, on menus prompts consumers to reduce the amount of calories they consume. In one study from a team of economists at Stanford University, Starbucks customers ordered an average of 6% fewer calories per transaction in locations with mandatory calorie labeling. Interestingly, the calorie reduction came almost entirely from customers’ food choices; they made almost no changes in their beverage ordering habits. What’s more, the researchers found that the change in ordering habits had virtually no effect on Starbucks’ profits.
That assessment rings true to Greg Rapp, a menu engineer based in Palm Springs, Calif., who has worked with national chains on adding calorie information to their menus. In general, Rapp says, the more information a menu contains about an item— whether a lengthy description or nutritional information—the less attention customers pay to the price. In fact, he says, “Some menus in New York have gone up in profitability because of menu labeling.”
Rapp says menu labeling also can push diners toward higher-profit items such as proteins. “On the menu, the calories and grams of fat make the pasta dish look worse, and the salmon looks much better,” he says.
FEWER CALORIES FOR THE KIDS
Another interesting finding from a separate study: When calorie information is posted on fast-food menus, parents select lower-calorie options for their kids—though the calorie content of their own meals doesn’t change. In one study performed by a researcher from Seattle Children’s Research Institute, parents chose meals with an average of 102 fewer calories when presented with a menu that clearly showed the calories.
In several other studies, the existence of calorie information decreased the average number of calories ordered per diner. The results bolster advocates’ claims that menu labeling will decrease obesity and increase Americans’ general levels of health. But the statistics don’t reflect the additional changes some operators make voluntarily when nutritional labeling is introduced.
Diana Prine, chef and owner of the Fife City Bar and Grill in Tacoma, Wash., participated in a small study run by the Tacoma-Pierce County Health Department, which tracked whether menu labeling changed customers’ orders. Prine and five other operators participated in the study, which included laboratory analysis of nutritional content. When Prine learned that her grilled king salmon with artichoke and pesto ravioli clocked in at a whopping 950 calories—nearly half the total daily calorie requirement for a healthy adult—she adjusted the recipe to bring the calorie count down. By cutting back on cream in the sauce, she removed more than 100 calories from the entrée.
In the Tacoma-Pierce County experiment, menu labels included fat, sodium and carbohydrate content for each item, in addition to total calories. (Daily specials and beverages were not labeled.) The extensive array of information was somewhat damning for Prine’s popular Reuben, which weighed in at 1,730 calories and 4,490 milligrams of sodium— the latter nearly double the recommended daily allowance.
“That’s pretty much just the way Reubens are,” says Prine, who points out that Reuben sales declined when the labels were introduced. “But knowing they’re high in sodium might mean that a customer considers cutting down on high-sodium items during another meal that day.”
In the end, the study found that when nutritional information was included, customers ordered 15 fewer calories, 1.5 fewer grams of fat and 45 fewer milligrams of sodium. Because participation in the study was voluntary, operators could remove menu labels after the research was complete. However, Prine chose to retain them. “Everything we prepare is done with fresh ingredients and made right here,” she says. “We wanted to keep the numbers on the menu to show what our meals are made of.”
NUTS AND BOLTS
The delay in implementing nationwide menu labeling has left many operators in wait-and-see mode. When asked if his clients are embracing the coming changes, menu engineer Rapp replies, “More like the opposite of embracing it. They’re pretty [ticked] off.”
Morris of Capriotti’s says his staff has begun collecting the information necessary to conduct nutritional analyses. However, they’re holding off on doing anything with that information until the legal landscape is clearer. At this point, it seems likely that federal law will set what is essentially a minimum standard for menu labeling, while more stringent state and local regulations may remain in place. “We’ll probably go with whatever the strictest rule is,” says Morris. “Soup to nuts, it’ll probably cost us about $25,000.”
Parmerlee of Golden Chick is testing some menu options in a few locations, but he’s waiting to roll out a final redesign until he’s read the fine print on the regulations. He wonders, for example, if the FDA will specify the size of type that must be used for calorie information—a critical factor in menu layout. Still, he’s not too worried about the change.
“There’s always a big scare around restrictions like these,” says Parmerlee. “When Dallas banned smoking in restaurants and the suburban areas didn’t, there were great fears that we’d lose customers. We didn’t.”
What’s more, all the emphasis on health shouldn’t obscure the fact that many consumers see an out-of-home meal as an occasion to splurge—both financially and calorically. “Have I seen huge calorie counts that still sell well? Yes. There is stuff out there that people crave,” says Rapp. “And that’s the key from a restaurant’s point of view: putting together meals that people crave and want to come back for.”
Tools of the Trade
New menu-labeling requirements are a boon for vendors, who are offering a number of technology-driven tools to help operators comply with the law.
- Digital Menu Boards: For operators who’ve already invested in it, digital menu technology makes adding nutritional information easy. But startup costs can run into the tens of thousands of dollars, making this an expensive choice for many chains.
- Electronic Kiosks: Stand-alone kiosks are also easily adaptable; once an operator has the data, most kiosk systems can be updated quickly.
- Nutritional Analysis Services:At this point, it’s unclear whether operators will be liable for errors in labeling or nutritional analysis. Regardless, accuracy in menu labels is critical to maintaining your brand’s integrity. You can hire a consultant to perform the analysis for you, or use an online tool or software package. No matter which approach you take, be sure the numbers come with a quality-assurance guarantee.
Crunching the Numbers
How many calories are in that turkey club? How about the light Caesar salad? For most operators, gathering the nutritional information of any dish typically means sending their recipes to a firm specializing in nutritional analysis. Operators need to provide a detailed list of ingredients along with information that describes how the food is prepared and, if possible, where the ingredients come from. Analysts primarily use FDAapproved software to generate a simple list of each ingredient’s nutrient information. The cost of this type of analysis depends on the number of menu items and the complexity of the recipes. For instance, the costs to analyze a menu with 25 items—each composed of 10 ingredients— could range from $500 to $1,000. Operators also have the option to subject a prepared meal to a battery of laboratory tests to measure the exact nutritional content. This process is much more involved—and up to eight times as expensive. The main benefit of the direct testing, however, is accuracy. The software-based analysis is only as accurate as the recipe information. And certain factors, such as the amount of oil absorbed during cooking, may vary from recipe to recipe.