Chipotle CEO worries about US economy: Generation Z and millennials are too burdened by unemployment and student loans to eat | Luck

Chipotle CEO Scott Boatwright said young diners between the ages of 25 and 35 are cutting back on dining at the Mexican fast-food chain. But these millennial and Gen Z customers aren’t rejecting Chipotle over other fast food places; they completely stopped dining so often.

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

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

“They’re feeling the pinch, we’re feeling the pull away from them too,” he concluded.

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

Two-tier economy

Other fast-food chains have seen the emergence of a two-tier economy — high-income people donating food while low-income people tighten their belts. That includes McDonald’s, which has been largely fueled by customers willing to spend more money at the chain.

“There’s a lot of commentary around, ‘What’s the state of the economy, how is it doing right now?'” McDonald’s CEO Chris Kempczinski told CNBC last month. “And what we’re seeing is really kind of a two-tier economy. If you’re upper-income and you’re making more than $100,000, things are good. … What we’re seeing for middle- and lower-income consumers is really 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 Saucy’s line of chicken dipping sauces. Chipotle has made similar attempts with limited-time offers of new spices with some success.

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

Chipotle did not immediately respond Luckuser request for comment.

Gen Z is cutting back on dining

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

Dining out is a luxury that many Gen Zers and millennials struggling to pay their bills forego. A Redfin survey of 4,000 U.S. homeowners and renters conducted in August found that 40% of Gen Z and millennial renters are eating out less to afford their monthly payments. More than 20% said they skip meals altogether to survive.

Mounting data may confirm Boatwright’s suspicions about Gen Z’s financial burden. Gen Z’s credit scores have seen the steepest annual decline of any generation since 2020, in part due to the return of student loan payments, according to a recent FICO report. And in addition to struggling with a stubbornly expensive housing market, younger generations are struggling to get or keep jobs to advance their careers.

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

In an era of “job hugging” in a weak labor market with low hiring and anxiety about artificial intelligence displacing entry-level workers, Gen Z is missing out on a key period of career advancement that comes from changing jobs to make more money, JPMorgan Chase noted in a report. This reduces their purchasing power—and makes it clear that their concerns go beyond whether they want carnitas or chicken in their burrito bowls.

“We’re already seeing young people struggle to get on the home ownership ladder,” said George Eckerd, director of wealth and markets research at the JPMorgan Chase Institute. Luck. “They’re putting off buying homes because they need to climb further up the career ladder to be able to afford it all, and that career ladder is getting flattered.”