Chipotle CEO Scott Boatwright: Gen Z, millennials are cutting back on dining out due to student loans, unemployment

Chipotle CEO Scott Boatwright said 25- to 35-year-olds are eating less at the Mexican-inspired fast food chain. But these millennial and Gen Z customers aren’t overlooking Chipotle for other fast food spots; They have stopped eating out so frequently altogether.

“This group faces several headwinds, including unemployment, increased student loan repayments, and slower real wage growth,” Boatwright told investors in the company’s earnings presentation on Wednesday. “We’re not losing them to competition. We’re losing them to groceries and food at home.”

Chipotle customers who make less than $100,000 — about 40% of Chipotle’s consumer base — are also pulling out, Boatwright noted.

He concluded by saying: “They feel upset, and we feel abandoned by them, too.”

Chipotle lowered its same-store sales forecast for the third straight quarter as quarterly revenue beat expectations and traffic fell 0.8%, also the third straight decline.

Two-level economy

Other fast food chains have noticed the emergence of a two-tier economy – where high-income earners spend on meals, while lower-income people tighten their belts. This includes McDonald’s, which has been largely supported by customers willing to spend more money at the chain.

“There’s a lot of commentary about, ‘What’s the state of the economy, how are things going now?'” McDonald’s CEO Chris Kempczinski told CNBC last month. “And what we’re seeing is that it’s really a two-tier economy. If you’re high-income, earning over $100,000, things are good…and what we’re seeing with middle- and low-income consumers, it’s actually a different story.”

Fast food restaurants have also made a concerted effort to attract Gen Z diners, with offerings including McDonald’s Happy Meals for adults, Taco Bell’s customizable drinks, and a range of KFC’s Thin Chicken Sauces. Chipotle has made similar attempts with limited-time offerings of new condiments, with some success.

“Through our research, we found that more than 90% of Gen Z consumers say they would visit a restaurant just to get a new sauce,” Boatwright said Wednesday.

Chipotle did not immediately respond luckRequest for comment.

Generation Z eats out less

In the midst of an affordability crisis, it may take more than just Adobo Ranch or Chipotle’s Red Chimichurri to attract young customers to stores more often. To save money, Generation Z in particular has changed the way they eat out, taking advantage of cheaper menu options by splitting entrees and ordering kids’ meals.

Eating out is a luxury that many Gen Z and Millennials are giving up as they try to pay their bills. A Redfin survey of 4,000 U.S. homeowners and renters, conducted in August, found that 40% of Gen Z and Millennial renters were eating out less to cover monthly payments. More than 20% of them reported skipping meals entirely to make ends meet.

Growing data may confirm Boatwright’s doubts about the financial burdens on Gen Z. Gen Z’s credit scores saw their biggest annual decline ever since 2020, partly due to the return of student loan payments, according to a recent report from FICO. Far from facing an expensive housing market, younger generations are struggling to get or keep jobs in order to advance their careers.

A JPMorgan Chase Institute report released Wednesday found that young people ages 25 to 29 had the lowest income growth over the past decade. The unemployment rate among 16- to 24-year-olds reached about 10.5% in August, nearly three times the rate of their millennial and Gen X counterparts, according to data from the Federal Reserve Bank of St. Louis.

In an era of “career hugging” in a low-employment labor market, and concern about artificial intelligence displacing entry-level workers, Generation Z is missing out on a key period of career advancement that comes from switching jobs to make more money, JPMorgan Chase noted in the report. This reduces their purchasing power — and shows that their concerns go beyond whether they want carnitas or chicken in their burrito bowls.

“We’re already seeing that young people are having a hard time getting a foothold on the homeownership ladder,” said George Eckerd, director of wealth and markets research at the JPMorgan Chase Institute. luck. “They are putting off buying homes because they need to move up their career ladder so they can afford it all, and that career ladder is getting flatter.”