Restaurant Chains Try to Woo a Younger Generation

For reasons as varied as the economic downturn and a heightened interest in local foods, a significant shift in eating patterns is under way among the millennials, those 18 to 30. Oddly, at least by historic trends, they are eating out less than the baby boomers did at that age. Many in the restaurant business worry that it may be impossible to reverse the decline, which affects 50 million to 60 million young people.

The statistics alone are stark. Restaurant visits among millennials have fallen 16 percent over the last four years, according to research by the NPD Group, a consumer marketing firm, and have failed to pick up as the economy has improved.

“The outlook for the restaurant industry over the next 10 years is dismal,” said Bonnie Riggs, a restaurant industry analyst at NPD.

Over all, sales are expected to grow less than 4 percent in the next decade, a troublesome projection for not only burger chains like McDonald’s but for the newer “fast-casual” dining businesses like Chipotle. McDonald’s stunned investors last month when it announced that its sales in stores open at least a year had fallen 1.2 percent after rising every quarter for almost the last decade.

And so far, restaurant chains have failed to benefit from the steady improvement in the overall economy.

“The informal eating out industry is either flat or declining in many markets around the world,” the chief executive of McDonald’s, Don Thompson, told investors last month.

It is true that restaurant chains like Chipotle, which has a devotion to explaining the origins of its ingredients that brings to mind the “Portlandia” sketch about a chicken dinner, and Subway, where customers plan their own sandwiches and watch them being assembled, are doing better among the millennials than traditional sit-down restaurants and fast-food chains.

But between the proliferation of artisanal food trucks and items like cupcakes made of Valrhona and Callebaut chocolates and topped with a fondant daisy for $2.75 at Georgetown Cupcake, or Fresh Direct’s offering of “heritage” pork from the Flying Pigs Farm in upstate New York, millennials tend to spend their dining dollars sparingly and in a more calculated way.

“This was the group hardest hit by the economic crisis, and there’s a debate right now about whether their purchasing behavior has changed fundamentally as a result,” said Tony Pace, chief marketing officer for Subway. “I think, personally, that there appears to be a structural change. There isn’t a single point — ta-da! — that points to it, but there are a lot of little things that do.”

Vera Chang, 26, who lives in Vermont, is one of those consumers who pays attention to the ingredients on the menu and the origins of the food they favor. She says she rarely eats at chain restaurants, finding places instead through Edible Communities, which gives advice on restaurants, chefs and food, or the local newspaper, which tells her about the chef and the provenance of the foods served.

“I like to know the story about the places I eat,” Ms. Chang said. “I think it’s key to feed one’s heart in addition to one’s stomach when going out.”

She said it was harder for chain restaurants to tell stories about the people behind the food they served and about themselves.

David Palmer, who follows the restaurant industry for UBS, underscored Ms. Chang’s points, noting how particular the younger clientele could be, especially during tough economic times. “The austere crowd has cut back, and pretty significantly,” Mr. Palmer said. “It’s partly that they’re economically challenged by the job market and student loans, but they also want authenticity in ingredients and the ability to customize meals in restaurants.”

According to NPD, it is not that millennials have abandoned fast food altogether: Hamburger chains like McDonald’s, Wendy’s and Burger King get nearly 28 percent of the millennials’ fast-service patronage. They just tend to eat there less often, or they have switched to newer burger places like Shake Shack, Mooyah, In-N-Out Burger and Smashburger.

This article has been revised to reflect the following correction:

Correction: June 7, 2013

An earlier version of this article misstated the surname of the chief executive of McDonald’s. He is Donald Thompson, not Donald Taylor.