Oh, SNAP! FNS’s Restaurant Rule Forces SNAP Retailers to Sell Sin Goods

USDA’s Food & Nutrition Service (FNS) authorized more than 250,000 SNAP retailers across the country. For many years, SNAP retailers sold substantial amounts of SNAP-eligible food items that were sold cold to SNAP beneficiaries and heated post-sale. While FNS confirmed that this practice did not violate its SNAP regulations, the agency contended that it “circumvented Congressional intent” in connection with the prohibition on the sale of hot foods for SNAP benefits. In an effort to crack down on this practice, on December 15, 2016, FNS issued its Final Rule entitled, “Enhancing Retailer Standards in the SNAP.”

The Final Rule, in pertinent part, modified FNS’s SNAP retailer eligibility regulation in several substantial ways. FNS expanded the definition of “ineligible firms” to prohibit the authorization of retail food stores that

[H]ave more than 50 percent of their total gross sales in foods cooked or heated on-site by the retailer before or after purchase; and hot and/or cold prepared foods not intended for home preparation or consumption, including prepared foods that are consumed on the premises or sold for carryout, shall not qualify for participation as retail food stores under Criterion A or B. This includes firms that primarily sell prepared foods that are consumed on the premises or sold for carryout.

As a result, FNS mischaracterizes retail food stores as restaurants if a majority of their gross receipts are hot or cold foods prepared on-site, even when they employ no wait staff and lack tables and chairs. While the Final Rule was an improvement from FNS’s proposed rule, which would have prohibited the SNAP authorization of nearly all convenience stores, the 50% threshold has resulted in hundreds of SNAP retailers across the country losing their authorization. Aside from the obvious adverse impacts on these small businesses, it has also resulted in many employees losing their jobs. Moreover, FNS’s Final Rule has caused an expansion in food deserts, causing harm to the nutritionally disadvantaged Americans that the SNAP program is designed to help.

Whether the prohibition on the use of SNAP benefits to purchase hot foods has been the subject of debate for decades, it is clear that FNS’s Final Rule and aggressive withdrawal of the SNAP authorizations of “you buy, we fry” retailers across the country has resulted in foreseeable changes to the business models of many convenience stores and fish, chicken, and seafood market designed to ensure that less than 50% of gross receipts are not hot or cold foods prepared on-site, pre-sale, or post-sale. While some stores have increased their sales of groceries or stopped cooking fish, chicken, and seafood post-sale and others have employed the use of off-site commercial kitchens, many have obtained beer, wine, liquor, tobacco, and/or lottery licenses. This has resulted in a dramatic expansion of “sin goods” being sold at SNAP retailers in areas already lacking in healthy food options.

FNS also interprets its regulation in an extremely broad fashion, despite never defining “restaurant” or “for carryout.” The agency has repeatedly refused to provide clarification on whose intent controls when interpreting the phrase, “for home preparation or consumption.” Federal agencies should not be making SNAP retailer eligibility determinations based on the opinion of bureaucrats in Alexandria, Virginia, who have never been food stamp beneficiaries. Nearly all SNAP beneficiaries purchase food, including prepared foods, for home consumption. FNS officials, however, presume otherwise given their treatment of all prepared foods as not being for home consumption or preparation. Because few SNAP-authorized convenience stores and specialty markets have tables or chairs on-premises, one wonders where FNS officials think SNAP beneficiaries are picking blue crabs in Baltimore, eating fried shrimp and chicken wings (with crack seasoning) in Detroit, or peeling crawfish in Baton Rouge and New Orleans. These absurd consequences of FNS’s “restaurant rule” should be addressed by Congress in the 2023 Farm Bill.

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