Article

Menu Labeling: Boon or Bane for LTOs?

The new healthcare reform bill offers a nutritional information reprieve for LTOs so will more roll out in the future?

June 22, 2010

By Lisa Bertagnoli

A loophole in the recently passed healthcare reform bill exempts items - such as LTOs - on the menu for 60 or fewer days within a calendar year. Test items on the menu for fewer than 90 days also are exempt.

Some fast casual executives see the exemption as an opportunity for some brands to offer high-calorie LTOs, while others say it will have limited to no impact on their food and beverage initiatives.

Randy Schechter, managing partner of New York-based Energy Kitchen, is in favor of menu-labeling laws, but he calls the LTO exemption a loophole that allows concepts to slip high-fat, high-calorie items onto the menu. "To me it doesn't make sense," he said. "What's the difference whether it's a permanent item or a special?"

Indeed, the cost of figuring out nutrition information is one reason chains might step up LTOs as menu labeling becomes law. Schechter estimated that it costs him $2,000 to $3,000 to send menu items to labs for nutritional testing and evaluation. Not sending items out for testing saves money and makes the LTOs marginally more profitable.

Energy Kitchen posts nutritional information on its menu boards and in ads, even though, at nine units, it doesn't have to.

"We want to make all our food transparent," Schechter said. And apparently that transparency is working with consumers: The stores average $1.1 million to $1.5 million in annual sales, and have a $12 check average.

For some chains, LTOs also will help make up for the slump in sales of high-calorie items, predicted Scott Testa, a professor of business administration at Cabrini College in Philadelphia.

"Customers are much more aware of nutritional issues now, and the industry will use this as a way, not to trick consumers, but not to be as straightforward as they can," he said.

Testa allowed that taste is customers' main deciding factor while at a restaurant, which is why they order higher-calorie menu items, but nutrition is slowly becoming a factor as well.

The continuing economic slump might play a part as well. LTOs, Testa said, are huge marketing tools in foodservice. "These markets are so competitive," he said. "The industry knows it has to constantly come up with new specials to drive traffic." 

Decision time

For fast casual concepts, the closing in of menu labeling laws means a decision: Step up LTOs --the development of which can be labor- and cost-intensive and whose sales success is hardly a sure shot -- or continue to roll out a handful of limited-time offers a year?

For 300-unit Bruegger's, a company that sees a "significant portion" of sales from limited-time items, the verdict has yet to come in.

"We're waiting to see what's going to be required," said a Bruegger's spokeswoman. With menu information available online and in brochures at the stores, "we are in compliance," with menu-labeling requirements, she said.

For 37-unit California Tortilla, the question of whether to add more LTOs to its annual calendar hasn't been discussed, said director of marketing, Stacey Kane. Although, "it's a really good question," she said.

For the Rockville, Md.-based chain, menu labeling laws, as mandated by Maryland's Montgomery County, will go into effect July 1.

Meanwhile, Boudin Bakery, which has 20 units all in California, will be required to label items for all foods except those on the menu for 180 days or fewer. This fall, Boudin will offer two special sandwiches: Roast ham and Brie on ciabatta ($7.99) and roast turkey with cranberry slaw ($7.49). Boudin will not offer nutritional information with the sandwiches, said Gayle DeBrosse, vice president of business development and marketing for the bakery/sandwich concept.

Marketing opportunity 

Extreme Pita does not expect to change its LTO schedule, said Norm Pickering, director of marketing for the Mississauga, Ontario-based sandwich concept, which has 35 U.S. locations.

The concept views menu labeling as an opportunity to tout its healthful menu.

"We're fully exposed, we have nothing to hide," said Pickering, pointing out that the stores already display nutritional information, both on a nutrition panel and in brochures.

Extreme Pita has never been aggressive about LTOs, Pickering added. Its last LTO, a tandoori chicken sandwich, was only offered in the concept's non-traditional locations. Previously, it has not disclosed nutritional info of LTOs, Pickering said, citing cost as a factor. In the future, though, it will.

"We see it as a marketing plus, not a negative," Pickering said.