It turns out even fast-casual dining could be stretching young adults’ budgets.
Chipotle CEO Scott Boatwright has revealed that diners aged 25 to 35 are slashing their visits to the popular Mexican-inspired chain. However, it’s not that they’re flocking to other fast food options; many are simply choosing to eat out less often.
During a company earnings call on Wednesday, Boatwright explained that this age group is grappling with various financial challenges, including job instability, rising student loan repayments, and stagnant wage growth. “We’re not losing them to competitors, but rather to home-cooked meals and grocery shopping,” he stated.
He noted that around 40% of Chipotle’s patrons earn less than $100,000 annually, and they’re also cutting back on meals. “They’re feeling the economic squeeze just like we are,” Boatwright added.
Financial forecasts don’t look too bright for Chipotle, as the company has lowered its same-store sales expectations for the third consecutive quarter; they reported another revenue miss and a 0.8% decline in customer visits.
Emerging Two-Tier Economy
Other fast-food brands are noticing a split in the economy as well. While wealthier customers continue to spend on meals, lower-income consumers are tightening their wallets. This trend is evident at McDonald’s, where they’ve primarily benefited from higher spenders.
Chris Kempczinski, CEO of McDonald’s, discussed these dynamics with CNBC, revealing, “The economic landscape looks really different for those making over $100,000 compared to middle and low-income consumers.”
Many fast-food chains, including Taco Bell and KFC, are actively trying to attract younger folks, with creative menu offerings. Similarly, Chipotle has dabbled in limited-time ‘exciting’ sauces targeting this demographic, experiencing a bit of success. “Our research shows over 90% of Gen Z are intrigued enough by a new sauce to dine out,” remarked Boatwright.
As of now, Chipotle has not responded to a request for further comments from Fortune.
Younger Generations are Dining Out Less
With rising costs hitting, it looks like Chipotle’s unique sauces might not be enough to lure young diners in more frequently. Many are finding ways to save cash while eating out, like sharing plates or opting for kids’ meals.
Dining out has become a luxury for many Gen Z members and millennials, who are prioritizing paying their bills. A recent Redfin survey indicated that 40% of young renters are cutting back on meals out to manage their monthly responsibilities, with over 20% reporting they skip meals altogether to make ends meet.
Evidence supports Boatwright’s concerns regarding the financial burdens on Gen Z. A recent FICO report revealed that Gen Z saw the biggest annual drop in credit score since 2020, largely due to resumed student loan repayments. Moreover, these younger individuals are struggling to find stable employment in a pricey housing market while working their way through career challenges.
According to a type of report by the JPMorgan Chase Institute, young individuals aged 25 to 29 have experienced the slowest income growth in the past decade. Moreover, unemployment rates for 16- to 24-year-olds hovered around 10.5% this past August, a striking contrast to their millennial and Gen X peers, per Federal Reserve Bank of St. Louis data.
Amid speculation of a more stable job market turned shaky—marked by constant anxieties about AI taking over jobs meant for entry-level workers—Gen Z struggles to gain the advancement that comes from switching jobs for better pay. This situation limits their disposable income and confirms that their worries extend beyond just what to fill their burrito bowls with.
“Young people are having to rethink homeownership because they can’t climb the career ladder effectively, which just leaves them on the bottom rungs,” remarked George Eckerd, a wealth and markets research director at JPMorgan Chase Institute, while discussing the issue with Fortune.
This story was originally featured on Fortune.com
