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The Fast Casual Generation

Millennials’ Goldilocks syndrome is dictating the future of fast food.

Pre-recession, Millennials had been perceived as a generation that mixes high and low brow with ease, eating fast food while wearing Marc Jacobs, or pairing a $2 vintage shirt with a $300 bag. While this predilection for mixing the extreme ends of the luxury spectrum hasn’t gone away completely, their financial caution and perception of luxury has changed drastically. Now, luxury has a much looser definition—we had one 18-year-old Millennial tell us, “Luxury means something you are privileged to enjoy that you may not be able to enjoy as often as other things. Like In-N-Out is a luxury compared to McDonald’s because McDonald’s are everywhere but In-N-Outs are not.” Luxury can mean rarity, convenience, ease of access, material sourcing—all separate ideals than the age-old notion of expense. Now, we see a general movement away from the far ends of the luxury spectrum to brands and products that feel like they lie somewhere in the middle. The attraction to fast casual is one example of this shift—they want quality, and to feel like they are experiencing something beyond the common, but their caution makes them a group looking to the middle of the road to give them what they crave. They’re the Goldilocks of consumers—finding the products that are “just right” rather than too high or too low, and forcing the industry to create new ventures to keep them happy.

Millennials’ restaurant attendance has dropped across the board over the last year, with Ypulse research showing that 42% say they eat at fast food restaurants like Burger King less. Meanwhile, only 26% say they are eating at fast casual restaurants like Chipotle less, and on top of that, 22% say they are eating at fast casual restaurants more. The aversion to traditional fast food chains isn’t necessarily all about health—while 62% say that it is very important to them that they eat and drink healthy foods and beverages, 78% say that they allow themselves to indulge in unhealthy foods, and more place a priority on eating food that tastes good than those who prioritize eating healthy. While health is clearly majorly important to the generation, it isn’t the sole factor making fast casual the more attractive option. Instead, the movement towards fast casual might have more to do with their general shift towards safer splurges that lie closer to the middle of the price and experience range.

In 2013, fast casual restaurants saw 11% sales growth, one of the only areas in the restaurant industry to grow. Millennials are a major part of that growth, and their preference for good tasting food with higher quality ingredients in a not-so-fancy, but not so quick-and-dirty environment is reshaping the food industry. Fast food restaurants have seen a 5% decrease in traffic amongst low income Millennials and a 16% decline from higher-income Millennials over the last seven years. Many chains are realizing that the generation will “dictate the future of fast food” and are more interested in chains that invest in ingredients than those that spend on marketing. In the last year, one fast food retailer after another has made moves into the fast casual market to appease them.

Taco Bell is opening a new fast casual concept to capture diners not likely to eat at Taco Bell (read: higher income Millennials)—and to compete with the Millennial-beloved Chipotle. Called U.S. Taco Co. and Urban Taproom, the concept will feature fusion-style, regionally inspired premium tacos, thick cut fries, shakes, and craft beer. Yum! Brands Inc., the parent of Taco Bell and KFC, also opened a new restaurant called Super Chix in Texas this April, offering chicken sandwiches and tenders and being called an “innovation incubator” for possible growth abroad and could be a competitor to Chick-fil-A. KFC’s own fast casual spin off, KFC Eleven, will open in August and serve new more diverse and fresh menu items in an environment that encourages “slower-paced dining.” Meals will be assembled to order, “like a Chipotle line.” Sbarro, whose sales have suffered dramatically in the last few years, is entering the fast casual pizza game with Pizza Cucinova, where pizzas are made to order, thin crust, and can be enjoyed with craft beers or signature salads like burrata with frisee—a pretty far cry from your average Sbarro visit, which calls up memories of mall food courts for many Millennials. A major rule of the middle of the road consumer mentality that Millennials have adopted is an unwillingness to sacrifice good taste and better ingredients, so these new chains will have to prove that they are bringing all of that to the table in order to keep the generation happy.

Fast food is not the only industry beginning to shift towards middle ground to pull in Millennial consumers. J.Crew is currently exploring a “value fashion” concept, likely as a reaction to the fact that sales in the value segment of retail performed far better than other women’s apparel in 2013. (When we asked the importance of various factors when deciding where to shop in-store, 80% of Millennials named low prices.) The name “J.Crew Mercantile” has been trademarked for the concept, which the brand is keeping fairly quiet, but will likely offer clothing and accessories at prices that are similar to its outlet offerings. It is not clear yet how many industries Millennials’ growing Goldilocks syndrome will effect in the long run, but it is clear that meeting the generation in the middle of the road is the way that many brands are hoping to entice them to buy.