What's on National Restaurant Exec Scott DeFife's Plate?

Menu-Labeling Measures, Interchanges for Debit-Card Swipes, Regulations on Marketing Fast Food to Kids Among Top Concerns

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You'd expect regulations about marketing fast food to children to be top of mind for Scott DeFife. As the exec VP-policy and government affairs for the National Restaurant Association, he's one of the top lobbyists for the fast-food industry.

Scott DeFife
Scott DeFife

But he's also spending a lot of time worrying about high interchanges for debit cards that could cut into chain restaurants' razor-thin profit margins. Oh, and what the implementation of the health-care bill will do to the bottom lines of the sector's businesses, both big and small.

Of course, one of the NRA's core issues of late has been the mandatory display of calories on food menus, a provision signed into law with the passing of the March 2010 health-care bill.

The U.S. Food and Drug Administration issued its draft guidelines on how calorie information should be displayed, but decided against immediate implementation of the rules, which it now has until March 2011 to put into effect. The rules will affect restaurants with more than 20 locations, such as McDonald's, Pizza Hut and Burger King, and would also require them to be able to provide additional nutritional information -- think fat grams -- upon consumer request.

Mr. DeFife said the NRA supports the menu-labeling measure. "The menu-labeling provides nutritional information for consumers, but is also a consistent platform across the country. What you see in a restaurant in California will be similar to what you see at ones in New York or Minnesota. It's important to the industry and consumers that there's consistency." Mr. DeFife added that the regulatory burden would be far higher for menu implementation if the law was on a local or state level, as restaurants with multi-state chains would have to comply with numerous different rules.

Although the NRA supported the menu-labeling measure, it had publicly expressed other concerns with the health-care bill, which it claimed would weaken small-business exemption, increase penalties on employers and place administrative burdens on the industry.

Aside from menu labeling, on the front burner for the NRA now is the implementation of interchange- and swipe-fee regulations that were enacted as part of the financial services reform bill in July 2010. The interchange-fee measure, known as the Durbin Amendment, gave the Federal Reserve regulatory power over the interchange fees banks can charge businesses when debit cards are used in their stores. The Fed in December proposed rules to limit the interchange fees banks charge retailers when customers use debit cards, lending more potential benefit to retailers than to banks.

Mr. DeFife said the NRA is in support of the Durbin Amendment, as the provision moves to charge retailers a per-swipe fee on debit cards as opposed to a percentage -- say, 2% or 3% -- of each customer's bill. Mr. DeFife just last month sent a letter to every member of the U.S. House Financial Services Committee, urging them "to allow the Federal Reserve to continue the process of implementing the provision as directed under law."

Of particular concern for the NRA in this issue is the average restaurant profit margin of 3% to 4%. "It's the kind of margin where unexpected fee changes from credit cards, commodity prices, or regulatory prices can have a substantial impact on an operator's ability to stay in business," said Mr. DeFife. "Something that's not well known is that interchange and swipe fees have become the third-largest cost in running a restaurant, after food and labor."

And, of course, marketing to children has been a hot issue in the fast-food industry. Mr. DeFife said that, while this is an important issue, it's more of a local and state focus at this point. The Federal Trade Commission over the years has released reports for food marketing, but on the federal level, Congress has left much of marketing open to self-regulation, with the exception of rules like the 1990 Children's Television Act, which limited the amount of time broadcasters could devote to ads during children's programs. Municipalities like San Francisco and Santa Clara County, Calif., have recently either attempted to or have passed laws limiting marketing food to children, including restrictions on toy offers with children's meals.

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