The Impact of Healthcare Legislation on Foodservice

While the future of healthcare in the U.S. remains unclear, one thing that remains certain is that sooner or later nutritional disclosure will be a mandate that foodservice operators will need to address.

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Bob-Evans-Fit-Breakfast2
One of Bob Evans' Fit Breakfasts
The debate over healthcare reform continues to rage and uncertainty reigns about both the future and eventual implications of the historic legislation signed into law last March. Those implications range from having to offer employees health insurance to facing reduced budgets in healthcare foodservice due to cuts in Medicare reimbursement. Details remain sketchy and fist thumping by newly empowered Republicans in the House threatening to repeal the reform legislation cast some doubts on what may actually come to pass. But there's one implication that's not likely to go away, despite what happens to other elements of the bill. It centers on nutritional disclosure on menus, and it's a mandate that at this point appears to be inevitable.

 

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In some ways, nutrition disclosure is old news. Most foodservice companies of any size have long provided detailed nutritional information through print pieces and on their websites. What's new, however, are provisions tucked into Section 4205 of the 2,000-plus-page healthcare reform bill that require restaurant chains and other retail food establishments with 20 or more units operating under the same name to display calorie counts on menus, menu boards and, in the case of self-serve operations, on signs posted adjacent to the items. The mandates apply to all standard menu items offered for sale at least 60 days per calendar year, but they exclude most alcoholic beverages, daily specials, custom orders and items in test (i.e., those on the menu for less than 90 days).

In addition to calorie counts, menus and menu boards must also include a statement noting suggested total daily caloric intake—2,000 for the average person, according to current USDA dietary guidelines—and a line indicating where consumers can find additional nutrition information. That information, to be made available in brochures, flyers or websites, for instance, must include percent of calories from fat, total fat, saturated fat, cholesterol, sodium, carbohydrates, sugars, dietary fiber and protein.

Bottom line: Once they take effect, the new federal menu labeling rules will ensure that consumers know how many calories are in their double bacon cheeseburger and fries, regardless of whether they want that information. They'll have some context via suggested daily intake in which to consider that information. And, through greater nutritional transparency, the foodservice industry will become a stronger voice in the national health-and-wellness conversation, regardless of whether it wants that to happen.

As federal law, the new requirements pre-empt the fast-growing cadre of similar laws already passed or being developed by individual states, counties and cities, each of which might have its own unique twists. They create a level playing field and guidelines on implementation, expected to be issued by the FDA by late March, will spell out for all what needs to be done and by when. On the basis of creating a uniform standard, the legislation gained the endorsement of the National Restaurant Association, which helped to develop a framework for the requirements.

Wholesale Change Ahead? Not Overnight
Dennis Lombardi, a partner at WD Partners, a Dublin, Ohio-based consulting and engineering firm, says that while operators are genuinely concerned about what the impact of posting calories on menus might be, there's no sense of panic about getting it done. "This is clearly a work in progress that started at least a year ago, maybe more," he says. "Every restaurant chain that I've touched base with on this was already in the process of evaluating their menus item by item, looking at calorie counts, changes that could be made to existing items, and developing new products to provide a balance between lower calorie/better-for-you options and indulgent/higher calorie options."

The concern Lombardi sees is over the potential reaction of consumers when they start seeing calorie counts posted next to menu items. "Yes, there's concern. But on the other hand," he adds, "the Earth hasn't totally changed in New York, where menu labeling has already been required for two years. There are some shifts in ordering, but so far it's not a wholesale change. People tend to look at the calories, say 'Oh my God!' and maybe change their order once or twice before drifting back to old habits and taste preferences. Implementing this does create challenges and a bit of fear, but a couple of years from now everyone will wonder what the big deal was."

John Cornyn, FSCI and a principal in The Cornyn Fasano Group in Portland, Ore., agrees. "I look at this whole phenomenon as analogous to when you couldn't find a restaurant that didn't have smoking," he says. "Then one by one, restaurants stepped out and said we're going to go no smoking. Eventually, smoking in bars and restaurants was banned in most places. Yes, operators were worried about the business implications. But guess what? Most found that their business either stayed the same or grew."

In November, Chicago-based market research firm Technomic published its "2010 Healthy Eating Consumer Trend Report," which lends credence to assumptions that the sky won't fall when operators have to start posting calories on menus. The study found that while nearly half of consumers say they want healthier menu items only about a quarter of them actively consider nutrition when dining out.

 

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Panera-Menu-Board-Salads
The salad menu at Panera shows the calorie counts for individual menu items. Eventually, this practice could become a requirement for regular menu items at restaurant chains with more than 20 units.
"There is often a disconnect between consumers' intentions and their actions," notes Technomic executive vice president Darren Tristano. "Many consumers are actually making substantial changes to their overall habits, even basing which restaurants they frequent in part on their impressions of the healthfulness of the brands. However, as many of us know from personal experience, diners do not always follow through on their intentions once it is time to order." Calories or not, he adds, "The majority of consumers are going to understand that they're indulging when they're eating out and they'll tend to overlook what they want to overlook."

 

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That said, even if they don't always act on the information, consumer intentions are focused on more healthful eating. The NRA's 2010 industry forecast data show that 73 percent of adults say they try to eat healthier now at restaurants than they did two years ago. And most seem to favor the impending disclosure required of restaurants. Recent Mintel data show that 61 percent agree that restaurants should post nutrition information, such as calories and fat grams, on menus. Center for Science in the Public Interest, which has been pushing for menu-labeling legislation since 2003, posts on its www.menulabeling.org website several national and regional polls by other trade and health organizations showing even stronger public support for labeling, as well as laundry lists of major public health and advocacy groups that support the measure.

And while wholesale changes in ordering behavior isn't expected overnight, small but potentially significant shifts are happening in some operations that already post calories and clearly communicate nutrition information. A Stanford Graduate School of Business study released in early January, for example, examined consumer behavior before and after calorie counts were posted in April 2008 at Starbucks' units in New York City. It found an overall 6 percent reduction in calories per transaction from January 2008, prior to posting calories on the menu, through February 2009.

According to the study, Starbucks' customers didn't necessarily alter their beverage choices but they did trim calories through their food choices. Average calories from food per transaction fell by 14 percent, of which 10 percent was due to people buying fewer items and 4 percent to people buying lower-calorie food items. The study also noted that overall, Starbucks' New York revenues were not affected by the calorie-posting requirement, and that for units located within 50 meters of a competitor revenue actually increased after calories were posted.

Starbucks recently rolled out new "skinny" versions of some of its popular lattes as well as low-calorie Panini sandwiches and snacks, including fruit and nut bars and granola mixes weighing in at 220 or fewer calories per serving. The company also began distributing new brochures containing calorie information for all of its food products in U.S. stores. Starbucks also offers interactive, customizable nutrition calculation features on its website and a new iPhone application that includes nutrition information.

Leading the Way
Clearly, spurred on by growing demand, legislative pressures and First Lady Michelle Obama's efforts to focus national attention on reducing obesity, few foodservice operators are opting to sit this one out. A January NRA SmartBrief SmartPulse poll showed that almost half of the respondents (47 percent) said they had resolved to focus more attention on health and nutrition in their operations this year. And the pace of menu-item and new-concept development—much of it focused on touting lower-calorie, better-for-you choices and on nutritional transparency—has been dizzying.

Panera Bread stepped out in front of the labeling issue last year by becoming among the first national restaurant chains to voluntarily post calories on its menu boards in all company-owned units. "As we've been introducing our new menu boards across the country, customers have responded very favorably," said Scott Davis, Panera's chief concept officer, in a media release. "We've seen them gravitating toward options that allow them to customize their meals such as our You Pick Two where they can pair smaller portions of our soups, salads or sandwiches to create a meal with fewer calories. This whole initiative prompted us to take an even closer look at our menu offerings. The result was we improved the nutritional content and ingredients in several of our menu items. We view it as a win-win for both our customers and Panera."

Bob Evans, the family-style chain known for big breakfasts and hearty comfort foods, is ahead of the game as well. While calorie counts have yet to hit its menus systemwide, a Maryland unit has already complied with state laws requiring the posting of calories on menus. Detailed nutrition information for all menu items is posted on its website, as are tips for healthy living and a link to the USDA's www.MyPyramid.com for more healthy eating advice and information.

 

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burgerville_receipt_scan
While Burgerville has yet to post calorie counts on its menus, the Oregon-based burger chain does include nutritional information on its receipts.
To cater to customers seeking better-for-you menu options, Bob Evans last January introduced new Fit from the Farm® selections at breakfast, lunch and dinner. All of these items, which appear in a section within the regular printed menu, have less than one-third of the daily recommended allowance (based on a 2,000-calorie daily diet) of calories, fat, saturated fat and sodium. Those nutritional values are posted directly beneath the items on the menu. An expanded Fit from the Farm menu is currently under test in 15 Cincinnati- and St. Louis-area units, according to Greg West, vice president of product innovation.

 

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"In terms of our menu development strategy, the new legislation doesn't really impact what we're doing because we were already doing it," West says. "We've had an active nutritional improvement program in place. We have a big focus on transparency and on offering choice. The only thing that remains is to print all calorie counts on the menus once we get final word on what's required."

West says the expanded Fit from the Farm menu tests provide insights on how consumers react to better-for-you offerings. "Honestly, we have not seen a big shift in product mix so far," he says. "We get a few more questions from guests to servers about the new items, but we haven't seen a considerably big change in product mix. It seems most consumers don't really understand the details; some probably don't even really know what calories are or what the numbers mean. So a big part of it is educating people, and that's part of what we're trying to do."

Dean Wright, director of dining services at Brigham Young University (BYU), says his operations are in the midst of implementing a variety of strategies to both improve nutrition profiles of foods served in student facilities and to educate students on nutritional content. While the federal menu labeling mandates don't impact his operations in the same way they do commercial restaurants, student demand for information and pressure from the NCAA for nutritional information on meals served to student athletes have his team working proactively to comply.

BYU is in the process of analyzing all of its food products and establishing ways for students to access nutrition information. "Instead of putting up a little plaque next to every item noting basic nutrition information, we hope to use touch screens in all operations where students can build menus and track how many calories, fats, etc., they've consumed or will consume per their choices. Our customer base is so used to using electronics that it just makes sense for us to go this route. Eventually, we'd like for it to all be downloadable as a smartphone application. That's the epitome."

Burgerville, the regional chain based in Portland, Ore., has made nutrition education a priority as well. Having yet to post calories on menus—it's holding off until the FDA's guidelines are issued—the 39-unit chain last June went live systemwide with a program that posts nutritional information on to customers' receipts. The intent is to help customers make healthy food choices by providing such nutritional data as calorie, fiber, fat and carbohydrate counts prominently on the front of all receipts. While calorie counts on menus will necessarily be static, those printed on Burgerville's receipts reflect each guest's specific order and incorporate customization requests, such as no mayonnaise on a sandwich or extra dressing on a salad.

The receipts also include a "did you know" box. "Beneath the nutrition totals we can place an extra message," says Debe Nagy-Nero, Burgerville's director of quality assurance, nutrition and safety. "For example, if you ordered a milkshake you'll see, 'Did you know that if you'd ordered the nonfat smoothie, you'd have saved x number of calories?' Or if you ordered a basket that came with fries, a message you might get is 'how about substituting a side salad?' with the estimated calories saved."

Nagy-Nero says that while the evidence is anecdotal and changes can't be attributed exclusively to the receipt program, some shifts in ordering are happening. "The original test unit sold more smoothies as a percentage than the rest of the company during the test. They now have more people ordering smoothies than milk shakes. Other changes we've noticed are an increase in orders without cheese for items that normally come with cheese, and more switches in sides from fries to salads."

Even before the new receipt program Burgerville had long provided detailed nutritional information on its website and in brochures. Posting calories on menus will be relatively simple, Nagy-Nero says, as the information is already there. "The question is how the FDA is going to want us to do it—what size font, what specific position on the menu, and the whole issue of how we need to handle baskets and combo meals. It can get pretty confusing, especially in operations that offer a lot of options for customization. So we're waiting for those regulations to come out, supposedly in March, when they'll also issue an implementation timeline. More problematic for us than the menu boards are the brochures. We already offer them, but ours don't include sugar content and percent of calories from fat, so we'll need to gather that information and revise our brochures to satisfy the federal mandate."

So far, Burgerville hasn't focused on reformulating existing menu items to alter their calorie counts in advance of the labeling mandate. But the company does take nutrition into careful account with the many LTOs it offers. "We always consider things like, 'Could we use a smaller bun? Could we go without a spread of some kind? Could we lower the salt content?' It's very top-of-mind," Nagy-Nero says. The only standard menu changes made recently was to switch from 2 percent to 1 percent milk and from a 10-oz. serving of milk to an 8-oz. serving. The kids' menu board has also been redesigned to highlight apple slices as a first side choice over fries, and to place milk ahead of soda.

Slim-Down Strategies Abound
Tristano and others anticipate more subtle and not-so-subtle menu development and merchandising efforts in the months and years ahead as menu labeling takes hold and nutrition awareness increases. "We're already seeing less salt and less fat. And we're starting to see items being menued separately. For example, salads may be listed without the dressing, which can often contain more calories and fat than the salad itself. So what's posted on the menu are calories in the salad and not those in the dressing packet, which the consumer can add separately to his or her taste. We'll see less salt on French fries, and maybe even salt packets distributed separately or built into the packaging so consumers can add their own and the operator doesn't have to show that sodium content."

At BYU, recent changes made to menus include introducing more whole grains, switching to healthier oils, changing from 90/10 to 97/3 (lean/fat) ground beef, reducing sodium in prepared foods, switching from frozen to fresh vegetables in all soups and sauces, and removing salt shakers from tables in campus restaurants. "We did all this without fanfare. If anything, the response has been positive," Wright says.

Other menu and operational moves in the works:
Tweaking menu items to make once-standard, high-fat components such as mayonnaise an optional add-on, thereby subtracting those calories from the menu posting. "We may see a lot more mayonnaise dispensers next to the ketchup dispensers," says Lombardi.

More reduced portion sizes, which brings both the nutrition counts and the price down. "It's a marketing opportunity to sell smaller, more healthful portions at value prices. Then you can offer a deal for people to buy two if they want more," Lombardi says.

Salad bars and fresh cook-to-order stations in noncommercial operations being placed in more prominent positions. "From a health perspective, what you're trying to do is subtly get people to see and consider those items first. Maybe they have to walk a bit toward the back to get to the burger or the pizza station," Cornyn says.

Fewer variations on menus. "Instead of offering multiple sizes or sides, they might drop down to one or two only to reduce the number of items they have to post," says Lombardi.

Continued emphasis on promoting healthier choices through advertising and marketing. "McDonald's new oatmeal ads tout the fresh fruit, raisins and cranberries, the whole grain, the better-for-you appeal. Over time, that type of messaging is likely to have more impact than a brochure or calorie statement that might not get read," Lombardi adds.

More voluntary point-of-service signage highlighting better-for-you choices in noncommercial and other operations not bound by federal menu labeling mandates. "Healthcare operators have been doing this for some time," Cornyn points out. "They'll post key nutrition information and/or color code menu items to indicate that they're low calorie, or gluten-free, or heart healthy."

Greater focus in healthcare foodservice on revenue generation to compensate for cuts in Medicare reimbursement. "Many venues are becoming more like commercial operations and trying to offset cuts with new revenue-generating strategies," says Marsha Diamond, RD, an independent foodservice business development consultant.

Continued shift away from frying toward grilling, broiling and roasting. "Over time we might see physical repositioning of fry stations in operations such as QSRs to move them out of customers' sight lines," Lombardi says. "But it will be a slow process. Nobody's going to pull their kitchen apart because of this."

Emergence of more concepts like Darden's upscale Seasons 52 Fresh Grill and Wine Bar, where no menu item exceeds 450 calories, and EVO, a Florida-based burger chain that touts natural and organic ingredients and French fries that are air baked, not fried.

Seasons 52, in particular, seems to be connecting the dots in ways that set new standards for accessible, fresh, well-presented foods that just happen to be healthful and low in calories. While calories are key to its positioning, its real focus is on living well and eating well, not on obsessing over nutrition counts.

Cornyn calls it a stealth approach and he, too, expects to see more of it in commercial and noncommercial operations, alike. "It's not hitting you over the head saying, 'This is the right thing to eat, dummy.' That doesn't work. Many of the contractors and self-op foodservice companies are engaging in stealth nutrition, too, with an approach that says, 'We really want you to take this item because it's attractive, delicious and something you actually want to eat. The fact that it's on a whole wheat bun instead of a traditional white flour bun is irrelevant.'"

That's ultimately where we need to be, he adds, noting that food is just one piece of the total wellness puzzle. "We're starting to connect the dots and awareness of what's going on in terms of larger wellness-related lifestyle adjustments is really critical for operators. We as an industry have an obligation to stay on top of these issues and to be proactive. For the health of our businesses and our customer base, we can't just sit back and react to legislation."
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