Even a quick casual lunch can be too much of a financial burden for younger generations.
Chipotle CEO Scott Boatwright said young diners between the ages of 25 and 35 are cutting back on lunch at the Mexican-inspired fast-casual chain. But these millennial and Gen Z customers don’t like Chipotle over other fast food places; they stopped eating less often altogether.
“This group faces several headwinds, including unemployment, higher student loan repayments and slower real wage growth,” Boatwright told investors during the company’s earnings presentation on Wednesday. “We’re not losing them to competitors. We’re losing them to groceries and food at home.”
Boatwright noticed that Chipotle customers who make less than $100,000 — about 40% of Chipotle’s customer base — are also pulling back.
“They’re feeling the squeeze, we’re also feeling their pull,” he concluded.
Chipotle cut its same-store sales forecast for the third straight quarter as quarterly revenue missed expectations and traffic fell 0.8 percent, its third straight decline.
Other fast food chains have seen the emergence of a two-tiered economy in which high-income earners pay for their meals while low-income earners tighten their belts. This includes McDonald’s, which is largely supported by customers willing to spend more money at the chain.
“There’s a lot of commentary, ‘What’s the state of the economy, how is it doing right now?'” McDonald’s CEO Chris Kempczinski said. CNBC last month. “And what we’re seeing is this two-tiered economy. If you’re upper-income, you’re making more than $100,000, that’s fine. … What we’re seeing with middle- and lower-income consumers is really a different story.”
Fast-food restaurants have also gone to great lengths to appeal to Gen Z diners, including McDonald’s adult-oriented Happy Meals, Taco Bell’s customizable drinks and KFC spinoff Saucy Chicken Tenders. Chipotle has made similar attempts with limited-time new seasonings, but with success.
“We found in our research that over 90% of Gen Z consumers say they would visit a restaurant just for the new sauce,” Boatwright said Wednesday.
Chipotle did not immediately respond Fortunerequest for comment.
In an affordability crisis, it may take more than Chipotle’s Adobo Ranch or Red Chimichurri to attract young customers to stores more often. Gen Z in particular have switched from dining out to cheaper menu options, such as sharing appetizers and ordering kids’ meals, to save money.