A major issue facing franchisors and franchisees alike has been the differing state requirements with regard to nutritional labeling of food products. These laws present a significant challenge to franchisors that operate on a national basis and are required to comply with regulations that are inconsistent with regard to the content, scope and application of the food labeling requirements.  Many franchisors and franchisees have called for national legislation to set one standard that restaurants and food establishments can rely upon when creating their menus. The health care reform bill adopted in March contains such federal health and nutrition labeling mandates, applicable to certain “chain” restaurants and food establishments.

Specifically, the new federal nutritional labeling requirements apply to restaurants or similar retail food establishments that are part of a chain with 20 or more locations doing business under the same name (regardless of the type of ownership of the locations). These locations must also offer for sale substantially the same menu items. Therefore, franchised locations that have substantially similar menu items will count towards the 20 unit minimum. The bill will only apply to “restaurant or similar retail food establishment,” however, there is no definition or explanation as to what constitutes a restaurant or food establishment.

In addition, the food must be a “standard menu item,” meaning that the provision does not apply to (i) items not listed on a menu or menu board (such as condiments), (ii) daily specials and temporary menu items appearing for less than 60 days per calendar year, (iii) custom orders, and (iv) food that is part of a customary market test appearing on the menu for less than 90 days. The term “menu” or “menu board” refers to the primary writing from which a consumer makes an order selection.

The food labeling requirements are as follows:

- The number of calories contained in standard menu items must be disclosed in a clear and conspicuous manner adjacent to the name of the menu item, and must be clearly associated with the menu item.

- The menu must include a prominently placed disclosure “designed to enable the public to understand in the context of a total daily diet, the significance of the caloric information provided on the menu” (regulations, once promulgated, may prescribe actual language).

- All standard nutritional information must be provided somewhere in the restaurant, and a clear and conspicuous statement stating this fact must be on the menu board.

- Food that is part of a salad bar, buffet line, cafeteria line or self-service facility must list calories per displayed food item or per serving next to each item.

The FDA is required to adopt regulations within the next year, which may prescribe additional ingredients or nutritional information that must be disclosed. These regulations also may address how to deal with food variations and different flavors or combinations.

Special requirements are provided for in the bill for vending machineoperators, specifically those who own or operate 20 or more vending machines. However, it is unclear as to whether to meet this threshold, all of the vending machines must be owned and/or operated by one person, or if vending machines as part of a franchised system will also be included. The “regardless of the type of ownership” language is not included in this section, and it seems this section would only apply to actual owners or operators of the vending machines. If the food sold from a covered vending machine does not permit the purchaser to examine the nutrition facts prior to purchasing it, the vending machine operator must put up a sign in close proximity to each article of food, or the selection button, that discloses the number of calories in the article of food.

Importantly, the federal requirements preempt inconsistent state laws, and so covered establishments can comply with the federal guidelines and not be burdened by meeting different requirements in different states. In addition, restaurants or other establishments that are not otherwise covered by the law can opt in to this program by registration, and avoid complying with inconsistent state statutes.

Franchisors and business owners will need to wait until the regulations are released for further details, including the date on which these requirements will go into effect.