Analysis: Much ado about nothing?

Fast food outlets in hospitals might seem nonsensical, but there’s more to these partnerships than just a menu.

When Truman Medical Center in Kansas City, Mo., ended its 25-year lease with McDonald’s restaurant late last year, hospital CEO John Bluford announced it as “a mutually agreed upon decision between businesses.” Earlier in the year, however, Bluford had told National Public Radio that he was troubled by the presence of the world’s largest quick-serve chain right inside the hospital’s entrance, saying the hospital was giving mixed signals about healthful eating.

The activist group Corporate Accountability International (CAI) took credit for both Bluford’s opinion and his decision. In March 2012, the Boston-based organization had sent a letter to Truman, along with 21 other hospitals, urging them to cut their ties with McDonald’s.

Sara Deon, manager of CAI’s Value The Meal campaign, says the letter was the latest volley in the fight against McDonald’s, which began in 2009.

“McDonald’s presence in hospitals has earned them an undeserved reputation as a healthful food option,” Deon explains. Value The Meal has worked diligently to recruit healthcare professionals around the world to speak out against McDonald’s, to try to persuade top hospital administrators to either break their leases or opt not to renew them. Truman was the first—and thus far only—hospital since the letter was sent to break its McDonald’s lease.

Individual option

Other hospitals during the past few years have terminated relationships with McDonald’s. Children’s Hospital of Philadelphia did so in 2011, as did Lurie Children’s Hospital of Chicago last year. But other hospitals, such as Cleveland Clinic and Tampa General Hospital, have stood firm.

Paul Harvey, foodservice director at Tampa General, is the hospital’s liaison with the McDonald’s franchisee. The McDonald’s has been in place for more than 20 years. Harvey, who notes that the hospital has no control over the McDonald’s menu, says there are no plans to kick McDonald’s out.

“As long as [the franchisee] upholds the contract, I imagine they will stay here,” Harvey says. Harvey’s job is to monitor the contract, which he says is “pretty explicit.”

“We do try to make sure that they offer healthy options,” he explains, “and to its credit, McDonald’s has tried to expand the number of healthy items on its menu.”

Harvey acknowledges that some hospital employees have expressed displeasure over the fast food restaurant’s existence on hospital grounds. But he points out that there is little financial incentive for either side to want to end the arrangement. The hospital receives income from the space McDonald’s rents, and the franchisee does a brisk business.

“There are definitely some people who would prefer not to have it in the hospital,” he explains. “But if people were not [buying from] McDonald’s, they would have broken the lease years ago.”

The issue of fast food restaurants in healthcare facilities is not a new one. At one time in the late 1980s, at least five of New York City’s public hospitals had a McDonald’s or other fast food restaurant on site. There is no evidence that any are left. (Health & Hospitals Corp., which oversees the hospitals, did not respond to requests for an interview.)

Nor is McDonald’s the only “culprit” in this matter. For instance, Burger King, Subway, Taco Bell, Pizza Hut, Chick-fil-A, Sbarro and Au Bon Pain all either are operating or at one time have operated in a healthcare environment. So far, however, groups like CAI have targeted only McDonald’s, even though CAI’s Deon says Value The Meal is aimed at all fast food chains.

“Our focus has been on McDonald’s because they are the undisputed leader,” CAI’s Deon says. “No one spends more money on marketing fast food, especially to children. We believe that if you can get the industry leader to change, you can get the industry to change.”

According to Danya Proud, spokesperson for McDonald’s USA, the company has no plans to change the way it does business, even in hospitals. In fact, one could say that the company doesn’t understand what all the fuss is about.

In response to a request for an interview, Proud emailed this statement:

“At McDonald’s, we are committed to evolving our menu to meet our customers’ changing tastes and to providing reliable nutrition information that empowers them to make informed choices. We are proud of our menu and the actions we have taken to evolve the variety of choices we offer our customers. Last year, McDonald’s USA introduced a Happy Meal [that] automatically includes apple slices and a smaller portion, kids-size fry. McDonald’s also offers oatmeal as a whole-grain choice that is available throughout the day. We reduced sodium across our national menu of food choices by 11% and voluntarily put calorie information on all of our menu boards in our restaurants and drive-thrus.

“Currently, we have 14,000 McDonald’s restaurants across the country—23 in hospitals or on hospital campuses, which represents less than 1% of the total number of hospitals in the United States. As always, we will continue to engage in dialogue with our customers and with experts to determine future opportunities to offer expanded menu choices and information that enable our customers to make the choices that are right for them.”

Valuable option

The issue of healthful dining notwithstanding, quick-serve restaurants, McDonald’s or otherwise, can serve a purpose. They often benefit the hospital financially, by offering employees and visitors more food options and by serving employees when the cafeteria is not open. Sometimes the foodservice department itself operates the unit. Such is the case at Cook Children’s Medical Center in Fort Worth, Texas.

Theresa Nash, director of food and nutrition services, says the hospital entered a licensing agreement with Chick-fil-A two years ago after employees chose the chain over several other fast food choices. It is the only commercial enterprise in the hospital’s six-station food court.

“The Chick-fil-A has done extremely well for us,” says Regina Hobson, retail manager for the department. “We actually have people coming to the hospital for it. There is a hospital across the street from ours, and employees will come from there to our Chick-fil-A, and we get area high school students coming in as well.”

Hobson says the menu is typical of what you would find at a storefront Chick-fil-A, with a couple of exceptions. The main difference is that the hospital serves up grilled chicken nuggets, which are unbreaded.

“The nuggets are actually our most popular item,” she adds.

Other hospitals seem to prefer to bring in commercial restaurant franchisees to provide another option to the employee cafeteria. The Medical Center of Lewisville, Texas, has had such an arrangement with Subway for the past four years.

“We were looking for a way to cut our labor costs by closing our cafeteria at night and on weekends,” says Susan Karpiel, director of food and nutrition at Lewisville. “Subway fills that void.”

Karpiel explains that the advent of Subway came from a decision to close a doctors’ dining room. “We had a little room that we used, but the doctors never really liked it,” she says. “So we took it out. We had three different [restaurants] look at the space. The others were small, local operations like coffee shops that couldn’t offer what we wanted.

“Subway has been a good option for us. They are seen as healthy, and there’s been no real pushback from employees or visitors.”

As a matter of fact, Karpiel has never worried about the Subway menu so much as its popularity. “As the foodservice director I was initially concerned with competition. But it hasn’t affected our sales at all.”

Winning proposition

Subway owner John Hart says the Lewisville location is his fourth store; he also operates in the Denton Regional Medical Center. He views the lease as a win-win.

“The hospital has been very good to us in terms of fixed costs,” Hart says. “We have no utility cost, no phone cost and no security cost. That, and the fact that we have lower labor costs, means that we can generate as little as $3,500 a week in revenue and still make a little money.”

He admits that the Lewisville unit does lower sales volume than his typical storefront Subways, even though he offers the same number of menu items as he does in his other stores. One reason is that “we sell a lot more small stuff.”

“At a typical store the sandwich-to-drink ratio is pretty much 1-to-1,” Hart explains. “But at Lewisville, we sell a lot more drinks, about 25% more drinks by themselves than we do elsewhere. We also sell a lot more cookies.”

Still, he is pleased with his arrangement and he believes the hospital is, too.

“From a business standpoint we provide a very good service,” he says. “The hospital foodservice can cut its hours of operation, and we pick up the slack, so they save money. But I believe we got into the hospital because of our healthy message. That played a large role. I think they would not want to put a quick-serve concept in here that wasn’t healthy.”

A third option is to allow a local restaurateur to operate a station within the hospital cafeteria, a different type of arrangement than a licensing agreement in that the hospital has more control over the menu and the restaurateur doesn’t have to worry about overhead costs.

One such setup can be found at Ronald Reagan UCLA Medical Center in Los Angeles, where Director of Food and Nutrition Patti Oliver works with a local El Pollo Loco operator.

“Restaurant employees come in and offer some menu items, and our customers go to the station and pick up their food and go through our cashier,” says Oliver, who notes that the percentage El Pollo Loco receives covers its food and labor costs with a slight profit, making for a nice bit of PR for the restaurant chain.

“We are able to dictate what menu items they serve,” she adds, explaining that the scaled down menu of chicken meals, taco and burritos must meet the hospital’s guidelines for healthy meals. She notes that one of the reasons for the arrangement is the decent percentage of El Pollo Loco’s menu items that fit UCLA’s stringent requirements.

A non-food issue

Even when a hospital ousts a fast food restaurant from the building, it’s not necessarily because the menu isn’t healthy enough for a hospital. When New York’s public hospitals began removing McDonald’s, it had little to do with food. The hospitals’ unionized foodservice workers, led by SEIU Local 1099, began protesting the arrangements, saying the commercial restaurants were undercutting the union by offering minimum wage. When the hospitals, in order to reduce their labor costs, reduced cafeteria hours the union employees suffered.

At UNC Hospital in Chapel Hill, N.C., Foodservice Director Angelo Mojica convinced administrators to remove a Wendy’s restaurant even though at the time it was reported to be the highest grossing Wendy’s in the Southeast.

“When I got here [eight years ago] I said I wanted all the retail venues,” Mojica recalls. “Administration was concerned about the Wendy’s, and so I had to take the moral high ground.”

Mojica’s argument was similar to the SEIU’s in New York: Wendy’s employees were making minimum wage while Mojica’s employees were earning much more. In addition, all potential UNC employees were subject to background checks, something Wendy’s did not require of its workers.

“Yeah, we get a percentage of Wendy’s revenue, and that’s nice,” Mojica remembers telling administrators, “ ‘but is that really what we want to do to this community? Make money off their backs?’”

He also deflected arguments that Wendy’s was a low-price option for employees because of its value menu, by pointing out that Wendy’s check average was $5.55, while his cafeteria’s average check was only $4.50.

“That value menu looks great, but it adds up,” he explains.

Mojica also believes that hospitals that play the health card when deciding against quick-serve options must be sure that they have their own houses in order.

“If you decide to kick McDonald’s out and then you serve burgers, what have you accomplished?” he asks. “You have to be realistic. What kind of
control do you want to have over people? Healthy and tasty don’t always go together; for example, you’re not going to serve paella with brown rice. Well, you can, but it’s not going to be the same. The point is, you always have to have options.” 


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