You know that whole DIY, artisanal, indie, and hyper-local vibe beloved by people under 30? It’s hurting the big guys (cue tiny violin), those restaurants where you can order the same dishes from your server anywhere in the United States — in your T-shirt and flip-flops.
Casual, full-service chain restaurants such as TGI Friday’s, Applebee’s, Ruby Tuesday, and Buffalo Wild Wings saw the steepest drop in business in 2016 since the recession.
And like so many other industry changes, people are pointing the finger at millennials for this one too.
Black Box Intelligence, a restaurant industry data firm, reported same-store sales growth for 2016 was -1.1 percent, which is a 3.1 percentage point drop from the growth rate in 2015 — the poorest industry performance since 2009, when the recession was at its worst.
Why are restaurant executives blaming the tastes of consumers under 30? Millennials love unique experiences, cooking at home, fast-casual restaurants, delivery, and online shopping, Buffalo Wild Wings CEO Sally Smith wrote in a letter to shareholders. All those traits mean casual restaurants will suffer unless significant changes are made to this sector’s business model.
Casual restaurants have a dated ambiance. Young people want to experience the local area’s attributes when they’re at a restaurant. They want something different. “It’s tough to find one [chain] that’s doing alright,” Wedbush analyst Colin Radke told Business Insider.
Going back to basics with the whole farm-to-table aesthetic has translated to more home-cooking, especially with the explosion of food expertise via food media and video tutorials. Meal-kit delivery services such as HelloFresh, Blue Apron, and Sun Basket are to thank as well. And grocery delivery services such as Fresh Direct and Amazon Fresh help busy home cooks too.
All this staying at home, shopping online, and increased delivery service has contributed to the decline of malls and brick-and-mortar shopping, meaning less traffic around restaurants. Restaurants can try to adapt through Grub Hub and Seamless restaurant delivery services, but it’s not provided enough revenue to help so far.
There are too many cooks in the kitchen, and as these major chains figure out how to adapt to the desires of millennials, some will get kicked out of this overcrowded industry.
TDn2K’s Chairman Wallace Doolin said for the rest of 2017, “there will be a widening gap in brand performance as the industry settles into the new reality of overcapacity in a share of stomach battle.” TDn2K (Transforming Data Into Knowledge) is the parent company of Black Box Intelligence.
The fast-casual restaurant sector is booming, though, because millennials want healthy options and faster service. Places that combine characteristics of fast-food joints and casual restaurants are such as Panera, Sweetgreen, Mod Pizza, Jersey Mikes, Smashburger, and PDQ. According to Technavio, the market for fast-casual fare is expected to hit almost $67 billion by 2020.
Amy Sowder is the assistant editor at Chowhound in New York City. She loves cheesy things, especially toasties and puns. She’s trying to like mushrooms. Her running habit is the excuse for her gelato passion. Or is it the other way around? Follow her on Instagram, Twitter, and her blog, What Do I Eat Now. Learn more at AmySowder.com.