Fast-casual dining feels the pain of a nervous consumer
Add Axios as your preferred source to
see more of our stories on Google.
Fast-casual restaurants are slumping as consumers look to save money by eating elsewhere.
Why it matters: People are facing higher costs and concerns about their job security, prompting them to look for savings in their discretionary budget.
The fast-casual fallout is widespread.
- The stocks of Chipotle, Sweetgreen, Cava, and Noodles & Co. plunged this past week.
Zoom in: Gen Z and young Millennials — a core demographic for fast-casual chains — are "particularly challenged," Chipotle CEO Scott Boatwright said Wednesday on an earnings call.
- "We believe that this trend is not unique to Chipotle and is occurring across all restaurants as well as many discretionary categories," Boatwright said. "This group is facing several headwinds, including unemployment, increased student loan repayment and slower real wage growth."
For Chipotle, it translated into a 0.3% decline in comparable restaurant sales — which is particularly concerning, because inflation alone should be driving sales higher.
- Beyond just younger consumers, households with income below $100,000 are also showing up less frequently. They represent about 40% of Chipotle's sales.
- They're "dining out less often due to concerns about the economy, and inflation," Boatwright said, citing internal data.
The bottom line: "Pressure on consumer spending for many of our consumers has persisted longer than we expected," Sweetgreen CEO Jonathan Neman said on a recent earnings call.
- "I think it's pretty obvious that the consumer is not in a great place overall."
