Impact of the Menu Labeling Act Upon the Market Value of Foodservice Firms

Abstract

The Menu Labeling Act (MLA), which requires restaurants to provide customers with nutritional information, has encountered implementation difficulties for more than 8 years, owing to the imposition of administrative costs on restaurant firms. By investigating the market value of 46 restaurant firms that publicly trade in the United States, this research analyzes the impact of MLA-related announcements on the market value of foodservice firms. Announcements associated with restrictions tend to reduce restaurant market value by 0.29% per day (market value is defined as the number of shares times the share price), whereas announcements related to flexibility increase such market value by 0.80%. The final guideline and compliance date announced by the Food and Drug Administration has provoked significant negative effects on restaurant market value. Meanwhile, the congress’ proposed opposition act has elicited great positive effects. This study provides important implications for policy makers and practitioners in the food service industry.