Menu labeling: The Countdown is on for Restaurant Chains

Food retailers have a few more months before they will be subject to the regulations of the Healthy Menu Choices Act, 2015 (the “Act”).

On January 1, 2017, restaurants, convenience stores and cafes that operate more than 20 locations in Ontario will need to comply with the Act. As noted in our previous blog post on the topic, franchisors should be particularly concerned because the Act could make a franchisor liable for its franchisees’ compliance. The circumstances in which a franchisor will be held jointly liable is currently unknown, but if we take guidance from other areas of law where franchisors are jointly liable, a franchisor’s liability under the Act will likely be tied to the degree of control that it exerts in relation to the supply chain, food preparation and menu. In most franchises, franchisors exert a relatively high degree of control over these aspects, which would make them vulnerable to joint liability.

The regulations set out detailed, technical requirements for how, where and what information must be posted on menus for standard food and drink items (i.e. not seasonal/special items and self-serve condiments), alcoholic beverages, and self-serve items. The requirements are highlighted below, but operators are well-advised to consult legal counsel, as there are special circumstances and exemptions that may applicable to their particular situation.

I. General Requirements for Standard Food And Drink Items

Content: The number of calories in a standard food item must be provided. For items with different flavours, varieties or sizes that are listed, the number of calories for each variation must be displayed. For customizable items where toppings, sauces, dressings or condiments are listed, the number of calories for a standard portion of each item must be displayed. For meal combinations that are individually listed, the number of calories for each combination must be listed. It is possible to provide ranges of calorie counts if the flavours, varieties, sizes, customizable items or meal combinations are not listed.

Menus: Paper and electronic menus, menu boards, displays, and drive-through menus must display the required information. Online menus and menu applications and mail-outs and flyer campaign materials are also subject to the regulations if prices are listed or if items available for delivery or takeout are listed.

Formatting: The calorie count must be clearly visible and accessible on menus next to the name or price of the item, or on labels or tags where the item is put on display, and must be in the same style and size as the item name or price.

Determination: The calorie count may be determined by laboratory analysis or nutrient analysis method that the food operator reasonably believes will accurately determine the calorie count. Determination by laboratory analysis may be necessary where an item’s composition is complex. One laboratory in Ontario that we spoke to offers basic nutrient analysis in 8-10 business days, at a starting cost of around $85 per item, with the potential for a volume discount. Laboratory analysis of hundreds of menu items will quickly become an expensive endeavour, making the more cost-efficient nutrient analysis more appealing. Nutrient analysis calculates an item’s calorie count based on the ingredients in a recipe. Software is available to assist with these calculations.

Although the legislation does not contemplate the situation where calorie counts are made available by a supplier, we suggest that it would be reasonable for an operator to rely on the supplier’s information, as long as the operator performed some degree of due diligence. For example, an operator may ask for redacted copies of nutrient or laboratory analysis that the supplier conducted, where confidential information about items is blacked out. The operator may also consider revising its supplier agreement to include representations and warranties from the supplier regarding calorie count information. Ultimately, the franchisor would still be primarily liable.

II. Other Requirements

For licensed establishments, a standard table with information about alcoholic beverages must be displayed. All establishments must display a standard “contextual” statement about the average adult’s daily caloric requirements on signage or on menus. It is worth noting that the regulations can be revised in the future, leaving open the possibility that operators could be subject to additional obligations.

III. Enforcement

Inspectors may enter an establishment, including a franchisor’s premises, during business hours to conduct an inspection. Inspectors can examine and remove food items and records. Failure to comply with the Act could result in significant fines:

• $500/day for a first offence or $1,000/day for a second offence for individuals, and
• $5,000/day for a first offence or $10,000/day for a second offence for corporations.

These fines can also be imposed on directors and officers of any corporation that fails to take reasonable care to comply with the Act.

IV. Impact

Franchisors should not delay in taking immediate steps to plan updates to their menus in order to comply with the Act. Affected businesses will need to expend resources to determine calorie counts of their standard menu items (whether by laboratory testing of menu items or nutrient analysis), and also in designing, producing, and installing new menu boards, printed and electronic menus, flyers, signs and labels. Franchisors may also need to allocate resources to enforce franchisees’ compliance with the Act and with consistent food preparation and portioning. It remains to be seen whether the new menu labeling legislation will be effective in helping consumers make “healthier choices”. Studies examining New York’s introduction of menu labeling in 2008 suggest that posting caloric information has had limited effect on the number of calories that consumers order. It will also be interesting to see whether non-chain restaurants will feel pressure to follow suit where menu labeling becomes widely adopted or if chain restaurants will be disadvantaged by menu labeling compared to their non-chain counterparts. Ultimately, menu labeling is a time-intensive, costly and resource demanding experiment that affected restaurant operators will have to participate in beginning in the new year.