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Domino's Pizza Reports Quarterly Earnings Surpassing Expectations

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Pizza chains are not happy. Neither are convenience stores or supermarkets.

Even as the digital age has made health information increasingly available and inexpensive for consumers to access online, food chain franchisees — oftentimes single-store owners — are facing regulations that would require costly nutrition analyses of menu items and expensive updates to in-store menu boards to display calorie counts and other nutrition information for customers to see in person as they order.

Food and Drug Administration officials are holding firm that beginning May 5, 2018, restaurants, food chains, grocers, movie theaters, and convenience stores with 20 or more locations will have to display calorie counts next to each standard item on their menu boards.

Under the rule, those businesses will also have to include a uniform statement noting the recommended daily intake is 2,000 calories on menu boards and list other key nutrition details about menu items, either in print or online.

Consumer protection advocates say the long-delayed menu labeling provision of the Affordable Care Act could improve public health and nutrition awareness, but restaurant owners argue the regulations are onerous and should be modernized for the digital age before the FDA implements them.

Pizza Protests

Tim McIntyre, chairman of the American Pizza Community — which is a real organization, by the way — told Independent Journal Review the problem lies in the medium through which nutrition information must be shared.

“We're not ashamed of the food we sell,” he said. “We're not trying to hide anything.”

McIntyre is also the executive vice president of communications for Domino's Pizza, which he said receives 60 percent of its orders online and another 30 percent over the phone.

The FDA rules make sense in sit-down restaurants where physical menus are the primary method for ordering food, he said, but they make less sense for pizza delivery establishments where customers rarely order inside the building.

“The most appropriate place to put the information is where people go these days to find information, which is on the internet,” McIntyre said.

Domino's has done that: Right now, if you order from the Domino's website, the final order page displays a calculated calorie count per slice.

“We want to meet the spirit of the rule, which is to put the information in front of people as they're making their decisions,” McIntyre told IJR. “We're trying to be as transparent as possible.”

But the FDA issued new guidance on the menu labeling rule in early November, doubling down on the requirement that calorie counts must be added to in-store menu boards, too.

Complying with that demand presents challenges for restaurants that sell customizable foods such as pizza.

Domino's has a wide array of toppings, sizes, doughs, and sauces for people to choose from; McIntyre said there are more than 34 million possible combinations of a Domino's pizza. Those customizable options can make a significant difference in the overall calorie count.

McIntyre argued the rule could hurt franchise owners who would have to spend money on expensive menu boards, tablets, or kiosks to display the mandated information.

In the November guidance, the FDA also introduced some flexibility for chains to use calorie ranges rather than a single calorie count for food items, which could mitigate some industry concern over liabilities, but McIntyre said the rule would still cause problems for franchise owners.

“Half of our franchisees are single-store operators,” McIntyre told IJR.

“They worked their way up. They literally are the embodiment of the American dream,” McIntyre added. “But they're being asked to spend this money for something that nobody's going to see or pay attention to when the solution is online.”

Liabilities and Confusion

Menu labeling rules aren't just set to affect restaurants and pizza chains in the spring, but they will also apply to convenience stores and supermarkets.

Rob Rosado, director of government relations for the Food Marketing Institute — a national trade organization representing supermarkets — told IJR that for grocers, complying with the law as written is like trying to fit a square peg in a round hole. He pointed to industry estimates claiming that compliance efforts could cost supermarkets more than $1 billion.

Rosado said local business owners who want to sell goods in supermarkets would have to complete complex paperwork and pay for nutrition analyses before being able to sell locally sourced products under the regulations. And even then, food retailers are nervous they would be vulnerable to lawsuits if they make even minor mistakes in providing the information.

Doug Kantor, a lobbyist representing the National Association of Convenience Stores, told IJR the FDA has promised there won't be severe penalties for businesses who are out of compliance with the rule at first.

“They've said, 'Oh, don't worry about it. We'll at first educate people, and we're not going to come down hard right away,'” Kantor said. “That's great, but it doesn't change the basic science that you can't get this stuff exact.”

Menu labeling supporters say a food chain has never been sued for violating state or local calorie count regulations, and it is unlikely to happen under the new law.

The FDA has indicated it will use the same enforcement policies for menu labeling that are currently used for other misbranding actions under the Food, Drug, and Cosmetic Act, which can range from warning letters all the way up to severe and even criminal penalties.

“Do I think somebody is going to jail for chopped carrots? No,” Kantor said. But the FDA has not provided a clear idea of what the process would look like if a store were to make a mathematical error or place the nutrition information signage incorrectly, he told IJR.

Part of the confusion lies in the regional disparities of enforcement standards. A health inspector in Maryland might let a minor error slide, while another in California could be much stricter. “That defeats the whole purpose of having a federal standard,” Kantor said.

Those regional differences are precisely why some stakeholders, such as the National Restaurant Association, support the federal regulations despite implementation costs. They argue it can be a hassle for large food chains to follow differing state and local nutrition disclosure laws across the country.

The November FDA guidance may have surprised some in the food industry who thought the Trump administration might be friendlier to their stance than the Obama administration was. McIntyre and Kantor both admitted they had been hopeful the administration would make some changes to address their concerns, but the November guidance marked little headway.

Congressional action is their best bet.

A bipartisan bill, called the Common Sense Nutrition Disclosure Act, would alter existing law to allow pizza chains and other establishments who receive most of their business online or over the phone rather than in the store to share the mandated nutrition information on their websites instead of on a physical menu board.

The legislation would also provide more flexibility for franchise owners and would answer many of the definitional questions such as “What constitutes a menu?” that the FDA and food industry have been haggling over for the past eight years.

Menu labeling advocates argue the bill would weaken the health protections of the original law, though.

A pamphlet from the Center for Science in the Public Interest pushed back on the Common Sense Nutrition Disclosure Act earlier this year.

“The bill would significantly delay and change menu labeling requirements that would increase costs to consumers and industry,” CSPI argued, pointing to an analysis that found the most recent delay would cost consumers $15 in additional health care expenses for every $1 saved by food service establishments.

The bill passed the House last winter, but it never made its way through the Senate.

House GOP Conference Chairwoman Cathy McMorris Rodgers (R-Wash.) introduced the bipartisan legislation again earlier this year. It passed the House Energy and Commerce Committee in July, but it hasn't been brought up for a full vote and final passage on the House floor yet. Its Senate counterpart has been introduced by Sen. Roy Blunt (R-Mo.) along with three GOP and three Democratic co-sponsors, but it hasn't made it out of committee.

“Seeing the Common Sense Nutrition Disclosure Act over the finish line remains a top priority for me, especially in light of the recent guidance which still left a lot of unanswered questions for the small businesses in Eastern Washington and across the country who will be impacted by this burdensome rule," McMorris Rodgers said in a statement provided to IJR.

“This isn’t about changing menu labeling requirements,” she said. “This is about providing flexibility for how businesses can provide that information in a way that makes sense for them and their customers.”

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