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5 Pieces of Legislation Set to Disrupt the Restaurant Industry

There are a number of major pieces of legislation that have recently passed or are about to pass that will have a direct impact on the restaurant industry. Some of it will be positive, some of it will be negative, and all of it you will have to prepare for.

Here are the ones you need to pay attention to:

1. Tax Bill

This is a pretty complicated piece of legislation that dictates changes for businesses and consumers alike. Restaurateurs, in particular, need to be aware of the following changes this tax bill will bring:

  • The corporate tax rate will drop from 35% to 21% beginning in 2018.
  • For restaurants that qualify as a pass-through entity, you’ll be eligible for a 20% deduction on your earnings.
  • If you offer family medical leave to staff, you’ll receive a 12.5% tax credit on those wages paid in 2018 and 2019.
  • Bonus depreciation now applies if you buy property in 2018. If it goes into service this year, you can deduct 100% of the cost in your next tax return.
  • If you experience operational losses, you can deduct up to 80%.

As of right now, many in the restaurant industry are content with what this tax bill means for business. Cicely Simpson of the National Restaurant Association said, “This bill addresses the needs of small business and will help restaurants remain strong economic engines and job creators.”

Jennifer Hatcher of the Food Marketing Institute added, “The bill dramatically lowers the corporate tax rate and increases expensing levels, which should help fuel improvements in technology and job growth within the industry.”

2. Obamacare Individual Mandate Repeal

As part of the tax bill, the Obamacare mandate has been revoked and will go into effect after December 31, 2018. Basically, it says that individuals and businesses are no longer required to purchase health insurance or face a penalty.

And what does this mean for restaurant owners? Well, it depends on how you look at it.

For smaller restaurants employing less than 50 full-time staff, there likely won’t be much of a change as the individual mandate did not apply previously. For everyone else, this now opens up the possibility of dropping health insurance coverage for your employees.

Why would you consider doing this? Obviously, the top reason would be the cost savings for your business. In terms of drawbacks, however, consider the following:

  • More employees getting sick which could lead to a greater chance of food contamination or spreading other airborne illnesses in your restaurant.
  • More employees calling out sick last-minute and leaving you without proper coverage.
  • A drop in employee retention as they look for restaurants that do offer health insurance.

Ultimately, it’s up to you to determine how health insurance coverage (or lack thereof) will affect your operations.


The Deferred Action for Childhood Arrivals (or DACA) program has been in the news a lot this year. If this program should expire, it could have some pretty devastating effects on the restaurant industry.

Basically, here’s what’s going on:

  • The DACA program protects undocumented immigrants if they came to the U.S. with their parents as children.
  • As of right now, there are 700,000 people protected by DACA.
  • 18.7% of those people currently work in the food service industry in a variety of roles: waitstaff, cashiers, cooks, customer service representatives, and supervisors.

While there are some restaurants taking a very vocal stand against the proposed DACA changes, the decision ultimately is in the hands of the government. For now, there isn’t much anyone can do except wait and see what happens.

4. Tip-Pooling

As of writing this, the ruling regarding tip-pooling has not yet gone into effect. If it does, however, it will reverse 2011 ruling that prohibited restaurants from sharing tips from FOH staff with the BOH. But there’s more to it than that.

According to Patricia Smith of the National Employment Law Project, “I am sensitive to the disparity between back and front of house workers, but this proposed regulation allows an owner to pocket all the tips, or redistribute them. What if he or she chooses to pocket all of them and then no one gets the tips?”

There is definitely potential for that to happen if this ruling goes into effect what with minimum wage rising, though a restaurant would have to be in dire straits to consider taking money out of their waitstaff’s pockets. For the most part, however, there seems to be a lot of positive support for the tip-pooling regulation.

Sara Jenkins, the owner of Porsena in New York City, said, “I don’t think it’s fair that waiters take home such significantly huge salaries that the kitchen does not. If I could share tips between front and back of house, even if I had to pay full minimum wage, I would do it.”

And that seems to be the general consensus for those who support this ruling. It’s not about wage theft, it’s about creating a fairer balance in wages within the restaurant.

5. Joint-Employer

Finally, let’s talk about joint-employer.

In 2015, the definition of a “joint-employer” was updated to account for any parent company that had indirect control over another company (most commonly seen in the case of franchising). McDonald’s was one of the companies that originally tried to bring a fight against that ruling, to argue that they could not be held liable for labor law infractions that happened within one of their individual locations.

Now, it appears that the ruling has been overturned and that “joint-employer” will once again apply only to businesses that exert direct control over the employees of a franchise. This is good news for franchise owners who may no longer need (or want) to take part in labor disputes within their locations. On the other hand, this isn’t great news for franchisees who will no longer have the support and backing of their parent company if issues should arise.


As changes in legislation continue to unfold, it’s important to keep your eyes open and ears peeled for what’s coming down the line next. And, of course, don’t forget to listen to your guests. If these legislative changes affect their dining experience, you need to be ready to act on their grievances.

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