August 3, 2014 in Business

Millennials test fast food industry

Leon Stafford McClatchy-Tribune
 
Associated Press photo

A Chipotle Mexican Grill employee cleans the windows at the restaurant in Mountain View, Calif. Fast-casual restaurants are at risk of losing more than $1 trillion in spending by millennials, who are more knowledgeable about food than the boomer generation.
(Full-size photo)

Most consumers will tell you they prefer fresh, tasty, healthy food over processed, greasy, assembly-line fare. Millennials, though, may be the first generation to back that up with their wallets.

Fast-food operators say they are getting increasing pressure from the demographic – generally defined as 18- to 34-year-olds – to boost the quality of menu items or risk losing millennials. At stake is more than $1 trillion in spending by the group to the fast-casual category, which includes chains such as Chipotle Mexican Grill or Moe’s Southwest Grill.

Readers of Consumer Reports, including millennials, the biggest generational group behind baby boomers, recently put such traditional chains as Burger King, Krystal and Church’s Chicken near the bottom of lists ranking fast food chains on quality, value and healthy options.

The magazine noted that, despite higher prices, fast-casual alternatives such as Firehouse Subs and Five Guys Burgers and Fries were gaining in popularity because quality increasingly matters more to millennials than the convenience that has been fast food’s advantage for decades.

“Millennials have a renewed fascination with food,” said David Farmer, vice president for product strategy and development for Atlanta-based Chick-fil-A. “They grew up on food television and are more knowledgeable about ingredients. And social media has put a lot of attention on quality and customization.”

Esther Yi, 25, counts herself among that group. Yi, a business affairs coordinator at Georgia State University, is a foodie who thinks knowledge of the subject has been assimilated into the everyday lives of millennials. She thinks that leads them to be more interested in menu innovation, service and an expectation that food be “fresh” and sourced as locally as possible.

And because of their Internet savviness, food is a social experience for millennials, who post dinner pictures to websites or critique menu items in reviews.

“I don’t go to a place unless I ‘Yelp’ it,” Yi said.

Working in fast food’s favor are the economic struggles of millennials. Though their economic clout is great because of their sheer number, they are faring worse financially than their parents — a reverse of typical monetary trends in America in which each successive generation does better than the last.

In fact, millennials’ economic struggles have been blamed in part for the market share losses of more moderately priced sit-down chains such as Olive Garden, Red Lobster and Ruby Tuesday, experts said.

But fast-food companies have struggled with the group because they are boxed into a menu that has to entice the broadest customer audience possible. And the more items they add to menus to grab more market share, the more crowded and confused their menus become.

“Most marketing leaders will tell you to figure out who you are and be true to yourself,” said Karen Bremer, executive director of the Georgia Restaurant Association.

While millennials are no more monolithic than any other generation, there are common characteristics.

They like food they can share, are more willing than past generations to experiment with different types of food, love snacking and seek out chains with strong social responsibility credentials.

Millennials’ heavy use of technology has led to an explosion of phone apps that allow them to record what they eat and share their meals and caloric intake with friends. The trick for fast-food companies is communicating that they have options that can fit with customers’ goals.

But Lisa Gearhart, who has studied the demographic for Jacksonville, Florida, public relations firm St. John & Partners, warns operators not to go overboard. She thinks millennials are driven more by flavor and “cravable” dishes than tasteless dishes that are good for them.

“Millennials are also very health conscious, but not health obsessed,” said Gearhart, vice president of consumer insight for St. John. “For them, dining out is as much a social experience as much as it is about fueling up.”


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