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Gen Z’s lack of brand loyalty presents a challenge for restaurants

  • Alicia Kelso
  • 28 October 2024
  • 3 minute read
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This article was written by Restaurant Hospitality. Click here to read the original article

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Gen Z – which includes consumers 12- to 27-years-old – is expected to wield $12 trillion in spending power by 2030, according to Nielsen, likely making it the wealthiest generation ever.

Good news for discretionary businesses, right?

Well, it’s complicated.

Gen Z is simply not as loyal to brands as its predecessors. The latest signal of this unfaithfulness comes from Piper Sandler’s semi-annual “Taking Stock With Teens” survey, which shows that Chick-fil-A, McDonald’s, Chipotle, Raising Cane’s, and Texas Roadhouse are teens’ favorite restaurant brands. That affinity didn’t change from the previous survey conducted about six months ago, but scores for the top two – Chick-fil-A and McDonald’s – fell by 4% and 1%, respectively. Chipotle and Texas Roadhouse remained the same, while Raising Cane’s ticked up by a mere 1%.

Meanwhile, teens’ preference for Starbucks fell by 6%, while Dunkin’ fell by 2% since the spring survey.

These percentage declines come as teens are spending more money. Spending from this cohort increased 6% versus last year and 2% from the spring.

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Technomic data corroborates lower affinity from Gen Z, which expressed the lowest degree of loyalty across the board and with statistically significant gaps across each restaurant segment, as outlined below.

Related:Quick-service menu prices remained elevated in April

Quick-service

  • Gen Z: Intent to return, 33%; Intent to recommend, 29%

  • Millennials: Intent to return, 34%; Intent to recommend, 30%

  • Gen X: Intent to return, 37%; Intent to recommend, 32%

  • Baby Boomers: Intent to return, 37%; Intent to recommend, 31%

Fast casual

  • Gen Z: Intent to return, 32%; Intent to recommend, 30%

  • Millennials: Intent to return, 37%; Intent to recommend, 34%

  • Gen X: Intent to return, 37%; Intent to recommend, 34%

  • Baby Boomers: Intent to return, 38%; Intent to recommend, 34%

Midscale

  • Gen Z: Intent to return, 30%; Intent to recommend, 28%

  • Millennials: Intent to return, 35%; Intent to recommend, 33%

  • Gen X: Intent to return, 30%; Intent to recommend, 34%

  • Baby Boomers: Intent to return, 37%; Intent to recommend, 33%

Casual dining

  • Gen Z: Intent to return, 30%; Intent to recommend, 29%

  • Millennials: Intent to return, 34%; Intent to recommend, 33%

  • Gen x: Intent to return, 38%; Intent to recommend, 36%

  • Baby Boomers: Intent to return, 37%; Intent to recommend, 34%

According to Technomic’s senior director of consumer insights Robert Byrne, the sustained growth of third-party delivery may be one of the culprits behind teens’ lack of allegiance.

“Gen Z consumers are more likely than others to prefer third-party aggregators, which in my mind serves to commoditize the products in a way that dilutes ‘brand’ from the occasion. Consumers don’t even say ‘I ordered McDonald’s,’ they say, ‘we ordered DoorDash’ or whatever it might be,” Byrne said.

Related:Study: Consumers’ restaurant budgets fell 10% in two years

Gen Z consumers have also had to navigate historically high prices in a way their predecessors did not at their age, which may be eroding some loyalty. The Washington Post reported, for instance, that Gen Z is paying 31% more for housing and 46% more for health insurance compared to their millennial counterparts. Notably, limited-service prices have outpaced the general inflationary index for nearly two years, driving nearly 80% of consumers to now think of fast food as a “luxury.”

A lack of loyalty could present a major challenge for restaurants that spend a bunch of money on marketing. But it’s also an opportunity. According to a report by Morning Consult, Gen Z consumers spend most of their disposable income on dining out. They’ve also indicated a desire to eat out even more.

So, what are those opportunities exactly? Revenue Management Solutions data shows that Gen Z consumers prefer chicken tenders (no wonder tenders’ competition has picked up, as KFC points out in its latest promotion) as well as breaded and boneless wings. Gen Z also likes the ability to customize meals and choose from mix-and-match menus.

Related:Restaurant industry jobs growth slows in April as unemployment rate rises

As Gen Z is also the first generation to be considered digital natives, seamless experiences via apps and online ordering platforms are critical. Finally, and given their tight economic backdrop, these consumers seek out value meals and BOGO offers, but there must be variety to keep their attention long enough for purchase intent.

Contact Alicia Kelso at [email protected]

Please click here to access the full original article.

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