Millennials Are Trading Up from Fast Food

There was an interesting discussion in my undergraduate marketing class today. A student was presenting a paper on Quiznos, when she admitted she actually has never visited one herself. When I queried the rest of the class, they unanimously agreed they prefer Panera Bread and Chipotle to other ‘fast food’ restaurants.

Within the restaurant industry, Panera and Chipotle are not strictly considered ‘fast food. They are part of a segment known as ‘fast casual’. They have some aspects of casual dining — the food is ordered and made just for you while you wait — but there is no table service (or tips).  New research from Mintel confirms my students are part of an overall trend among young adults away from quick service.  The fast casual segment is outperforming the restaurant industry as a whole and is poised for even more growth. Within this segment, Panera and Chipotle are the category leaders. Both are especially strong among adults 18-34.

In contrast, The Wall Street Journal reported that Burger King is about to report two straight quarters of same-store sales declines as a result of both changing eating habits and the recession’s impact on young adult spending, BK’s core users.  While McDonald’s has not fared as badly as BK due to its broader customer base, other young adult-dependent burger chains, such as Hardy’s and Carl’s Jr, have experienced similar declines.

Research confirms young adults are indeed eating less often at fast food chains in favor of fast casual restaurants.

The Journal reports market-research firm Sandelman & Associates data showing that, on average, 18- to 34-year-olds went to fast-food chains about 13 times per month from January to September 2009, down from almost 19 times per month in 2006.  According to market research firm NPD, people 18 to 34 cut their consumption of fast-food meals from November 2006 to November 2009 while increasing the number of meals they ate at fast-casual chains.

The overall perception of fast casual as offering fresher, healthier fare appears to be driving at least some of the trading up.  NPD’s Bonnie Rigg’s says “young people are looking for healthier options, or at least what they perceive as healthier options.”

“Jason Carpenter, 24, of Tinley Park, Ill., says he used to visit burger chains a few times a week until early last year. “I realized it was pointless to do all this exercising and then go and eat all these burgers,” says the benefits programmer for a consulting company. Now he cooks at home more, and when he does go out, he favors sandwich shops or fast-casual chains that he says offer healthier food. “On occasion, I’ll hit Wendy’s or McDonald’s,” he says, “but I try to stick with Subway or Panera.”