We are excited to announce that attorney, Steve Goldman, has joined our Hospitality, Travel and Tourism Practice Team in our Washington D.C. office! Steve has extensive experience representing brand and hotel-owner clients in all aspects of the life cycle of hotel contracts and brand and franchise systems, including launching and modifying new brands and systems in the U.S. and overseas; negotiating franchise and management agreements; developing and implementing quality assurance, e-commerce and revenue and management systems; and franchised and managed hotel transfers, workouts, receiverships and terminations. His in-depth knowledge of the hospitality industry was honed serving as Senior Litigation Counsel for Holiday Inns International, General Counsel of the Sheraton Franchise Division, and as a Corporate Officer and head of the Brand Transactions and Franchising Group and the Intellectual Property Group at Marriott International.
Welcome, Steve, we look forward to your future blog posts!
What is the impact of the FDA’s New Food-Labeling Regulations? The new rules cover any restaurant or “retail food establishment” selling “restaurant-type food.” Does that include the wide array of retail and hospitality businesses, including bakeries, cafeterias, coffee shops, convenience stores? Dan Vecchio, a litigator in our Seattle office, has been watching the latest developments. As our guest author today, Dan can shed his insights on how these new regulations might affect hoteliers and restaurateurs. Thank you for today’s post, Dan! - Greg
In the spirit of the giving season, the FDA has finally issued its long-awaited final rules on menu labeling, which had languished in draft form for several years. But for many hospitality businesses, the agency’s year-end gift is little more than a lump of coal. That is because when the rules go into effect on December 1, 2015, they will require restaurants, hotels, and other sellers of “restaurant-type food” to provide nutrition information for the items on their menus, closing what the FDA perceived as a “regulatory gap” in the food-labeling sphere.
The new rules apply primarily to chain or franchise establishments (although the FDA is quick to point out that other businesses may voluntarily opt in if desired)! Specifically, the rules cover any restaurant or “retail food establishment” that is part of a chain of twenty or more locations doing business under the same name, serving substantially similar food items at each location. Sounds simple enough, but it is the FDA’s definition of “restaurant” that has caused considerable heartburn. In the view of the agency, a restaurant can be any one of a wide array of retail and hospitality businesses, including bakeries, cafeterias, coffee shops, convenience stores, delicatessens, bowling alleys, amusement parks, grocery stores, fast food restaurants, table service restaurants, or any establishment offering for sale what the FDA has helpfully dubbed “restaurant-type food.”
What is “restaurant-type food,” exactly? According to the new rules, it is food that is usually eaten at the restaurant, or while walking away, or “soon after arriving at another location,” and is either sold for immediate consumption or is ready-to-eat somewhere else. In other words, whether it’s take-out, dine-in, or maybe a deli sandwich for dinner tonight, the rules will apply.
So, what makes a restaurant part of a chain? According to the agency, it must be doing business under the same name (or a substantially similar name, such as “Restaurant” and “Restaurant Express”) as at least nineteen other locations, and must serve the same or substantially similar menu items. “Locations” include restaurants within other facilities, and indeed multiple restaurants within the same building (a mall, for example) are counted individually. If the restaurant has no name of its own – for example, a cafeteria in an office building or an unnamed hotel café – then the restaurant is considered to be doing business under the name of its parent entity. So, that means that if each of a hotel’s twenty or more locations has an identically-named or unnamed restaurant (including the one providing room service), the rules will apply to them. On the other hand, the rules would not apply to a hotel restaurant if it has its own unique name.
To comply with the rules, businesses must include calorie and other nutrition information on their menus, menu boards, signs adjacent to the food, or the like – essentially, wherever the standard food items and prices are listed. They also must print a “succinct statement” informing customers of the recommended daily caloric intake for adults or children, depending on the menu’s target audience. Restaurants also must keep nutrition information for their standard fare on hand in case it is requested by a customer – and the restaurant must note on the menu that such information is available.
Failing to adhere to the rules is sure to cause quite the bellyache, as well. In response to public comments, the FDA noted that any person exercising authority and supervisory responsibility over a restaurant or similar retail food establishment could be liable for a violation. That could mean that even the owner of a single franchise could get his or her goose cooked if that location isn’t up to snuff.
If there is any silver lining for the hotel industry, though, it is that these rules today don’t apply to alcoholic beverages that are “food on display” and not self-service, such as those bottles of liquor behind the hotel bar. Of course, any drinks that are listed as standard menu items still will need to be labeled. Bon appétit!
Several clients have lately been asking about notices they've received that look like this. If they come from the Eastern District court in New York, they’re legitimate, and if you are a merchant who accepted Visa or MasterCard or both between January 1, 2004 and November 28, 2012, you are a probably a member of the class and should have received one too. If you didn't, the lawsuit and proposed settlement are discussed in detail here. Take a look; the settlement could affect your legal rights. You have until May 28, 2013 to exclude yourself from the settlement (opt-out) or object to its terms; the final hearing on the proposed settlement will be September 12, 2013. Assuming the court approves the settlement, with or without changes that may occur as the result of objections, claim forms will be issued after that date to class members and a claim deadline will be set.
The United Kingdom's Office of Fair Trading (OFT) issued a Statement of Objections this Tuesday alleging that industry giants Booking.com B.V., Expedia, Inc. and InterContinental Hotels Group violated the UK’s Competition Act of 1998. The Statement of Objections will not be made public, but from OFT’s comments, it’s rate parity and best rate guarantees that are causing the trouble.
Requiring on-line travel agents (OTAs) to honor a hotel supplier’s best rate guarantee (at retail) and requiring hoteliers to provide inventory to distributors at the same price across all distribution channels are as close to universal practice in this industry as I have seen. And now, OFT appears to consider them by a less salubrious name: price-fixing. However, the Statement of Objections is not “the final word." It is a sort of pre-trial opinion in which OFT provides official notice of a “proposed infringement [of the Competition Act 1998] decision” and the parties to the dispute may make written and oral arguments to be considered before final decision is rendered.
OFT’s statement was issued at the end of an investigation begun in 2010 after a complaint was made by Skoosh, a small British OTA. Skoosh contacted OFT after Skoosh’s own hotel suppliers demanded that Skoosh raise its retail rates to a certain figure (among other allegations). The hoteliers, of course, were apparently acting to meet pressure applied by Booking and Expedia not to violate what was almost certainly a contractually required rate parity obligation of some sort. In effect, Skoosh raised concerns with OFT that rate parity and best rate guarantees operate together to artificially fix prices in the marketplace and therefore act as a barrier to competition, particularly for new or smaller players, like Skoosh, who might be willing to undersell the larger OTAs to grow its business.
If OFT formally issues a finding of an infringement, despite its jurisdiction being limited to the UK, the finding will cause--at a minimum--a shift in the way a significant majority of the hospitality industry conducts its distribution business, as well as the amount of competition in the marketplace. The Internet, after all, is international. So please stay tuned!
The Securities Division of the Washington State Department of Financial Institutions has just released a draft bill it is sending to the Legislature next January. The bill would make state franchise law more consistent with the modernized Federal Trade Commission (FTC)Rule governing the offer and sale of franchises.
For those of you that didn't know, Sunday marked the end of a 10-week sabbatical that took my wife and me and our three small boys (ages 5, 7 and 9) first to Yellowstone and the Grand Tetons for nearly 3 weeks and then to Western Europe for the month of August. What a summer break - our boys had great stories to share with their classmates when it was time to describe how they has spent their summer vacation.
Time away from the office and practice taught me many things - among them, it takes a great deal of patience and perseverance to traveling with three little boys. The time away also reminded me of the value of travel and seeing and experiencing things (even your own local practices) through others' eyes. Our experience underscored the need to include foreign travel as the part of any education - whether formal, professional or otherwise. Travel opens our minds to other viewpoints and ideas that we might not otherwise experience.
I am thrilled to be back to my practice and to re-connect with clients and friends. I'm also anxious to apply some of the new ideas and perspectives gained over the past few weeks.
A huge thanks to my partners and colleagues at our office - especially those in our hospitality practice - Ryan McFarland, Ruth Walters and Diana Shukis - who have once again reminded me that this practice has grown well beyond me. I look forward to touching base with all of you over the next few weeks and to sharing some of these my new ideas in future posts.
Greg Duff, Editor
Greg Duff founded and chairs GSB’s national Hospitality, Travel & Tourism group. His practice largely focuses on operations-oriented matters faced by hospitality industry members, including sales and marketing, distribution and e-commerce, procurement and technology. Greg also serves as counsel and legal advisor to many of the hospitality industry’s associations and trade groups, including AH&LA, HFTP and HSMAI.