November 20, 2012
Pizza Industry Hopes to Head Off New ObamaCare Regulation that May Force Price Hikes and Slice Off Thousands of Jobs
Finding out what’s in ObamaCare’s onerous regulations
When Rep. Nancy Pelosi infamously declared that we have to pass ObamaCare in order to find out what’s in it, she wasn’t kidding. Buried in the mammoth 2700-page law that most in Congress did not bother to read before passing is Section 4205. That section requires any pizzeria, grocery store, or convenience store with more than 20 locations to post calorie information in their stores on menu boards. The way the law is written, it requires the national pizza chains to post fixed information on a whole lot of varieties of pizza. Pizza shops and chains with fewer than 20 outlets would be exempted.
“There are 34 million ways to make a pizza, we’ve done the math,” American Pizza Community spokeswoman Jenny Fouracre-Petko told me in an interview. “There just is no way to put that on a menu board.”
She added that menu boards would help virtually no customers at, say, Domino’s Pizza make any kind of informed nutritional decision. “Normally, with carry out restaurants, you’re not standing in front a menu board. You’re ordering over the phone, or online, so an online solution is a much more technologically savvy way to provide the information than an extensive menu board that no one sees. Also, the information on a menu board may not be accurate because of the way pizzas are made. The information may not be accurate if a 16-year-old kid decides to toss on an extra handful of cheese. We don’t want a class action lawsuit over something like that.”
Indeed. Speaking for myself, I haven’t stood inside a Domino’s or any other chain carry-out pizza place in at least a decade. Online ordering is the usual method. Online nutritional tools and information would seem the way to go. The fear of lawyers lawyering a handful of cheese or sausage is not unreasonable. In the ObamaCare future, the pizza industry might need its own version of tort reform to bring costs down, if Section 4205 is not stopped. But the FDA is not even disclosing when it will issue its final rule.
The American Pizza Community has tried working with the Food and Drug Administration to fix the expensive regulation, which is set to go into full effect at some point by the end of 2012. But the FDA has not been cooperative, and has not acted on the industry’s input. Fouracre-Petko says that the FDA is missing an opportunity to work with an industry that wants to provide information to consumers, just in a way that the consumers can actually use, and which will be easier for the agency to monitor for compliance.
“We really feel strongly that we want to provide nutrition information, and we know how to provide it to our customers in a way that makes sense,” she said. “It’s frustrating to see the FDA continue down the path of government overreach. There’s things about this law with the FDA that we know aren’t going to work out. For instance, checking thousands of stores all around the country. The online solution is going to be easier for compliance alone.” The FDA would need an army of compliance officers, similar to the 16,000 agents hired by the IRS to look after ObamaCare’s new mandate, just to check the menu boards in thousands of stores.
A more sensible approach would also be easier on the brains of consumers. As it is currently written, Section 4205 requires the nutritional content of pizzas to be calculated for a whole pie. Almost no one eats a whole pie, though: We eat one or more of the eight slices of a typical pie. So to figure out how many calories you’re consuming, you would have to take the number on the FDA’s menu board, then divide by eight, then multiply by whatever number of slices you intend to eat. If you have a teenager in the house, good luck getting an accurate guess on that.
There are an estimated 70,000 pizzerias in the United States, when you take into account sit-down restaurants and carry out chains like Domino’s, Papa John’s, and the rest. Fouracre-Petko pointed out that Domino’s Pizza already has an online Cal-0-Meter that customers can use to determine the nutritional value of their pies. Papa John’s also posts nutritional information online. Pizza Hut posts nutritional information online as well. An online tool is easy for the FDA to check, and cheap for the restaurant chains to maintain. More importantly, it’s where customers would actually tend to get the information they need. The regulation as written will cost each store about $4,700 per year. Do the math, and you arrive at a grand total of $329,000,000, making Section 4205 the third most expensive regulation passed by the government in 2010. The Office of Management and Budget has officially rated it as such.
“Pizza profit margins vary a lot but generally it’s a good business. Our franchisees have pizza sauce in their veins. You’re employing a lot of young people in their first jobs. It’s a source of pride and you’ve created a job for yourself,” Fouracre-Petko said.
The pizza industry is not a high profit margin industry and cannot afford to just give away vast millions of dollars to fulfill a mostly useless regulation without some pain. Some chains and franchisees will end up raising prices, laying workers off, or shutting down. Papa John’s founder and CEO John Schnatter has warned that ObamaCare will hurt his industry, only to earn accusations of “whining” from the likes of Matthew Yglesias, who has never himself run a business, and a leftist boycott.
The pizza community isn’t just pounding their fists into dough. They have tossed up a bipartisan solution, the Common Sense Nutrition Disclosure Act. Its sponsors in the House include Reps. John Carter and Henry Cuellar of Texas, a Republican and a Democrat. In the Senate, Missouri Sen. Roy Blunt is its champion. The law would undo Section 4205 of ObamaCare and require the pizza chains to post relevant nutritional information online. In the House it has more than 40 co-sponsors including several Democrats, while in the Senate the number is 11 and growing. The pizza industry hopes to get the Common Sense law passed in time to head off the FDA and Section 4205, but the fiscal cliff dominates discussions in DC today.
“We’re not asking to change the sun and moon and stars, we’re just asking for some common sense in the regulations.”