The finances of younger consumers have taken a nosedive this year

Fast-casual chains like Chipotle are losing cash-strapped younger consumers. | Photo: Shutterstock.

One of the major themes of this past earnings season was the state of the younger consumer. 

Chipotle CEO Scott Boatwright, for instance, noted that younger consumers are “facing several headwinds, including unemployment, increased student loan repayment, and slower real wage growth.” 

Sweetgreen also mentioned “lighter spending among younger guests,” notably the 25-35-year-old age group. 

Cava did, too. “We recognize that today’s environment is creating real pressures for consumers, especially younger guests who are making more deliberate choices about where they spend.” 

There is little question that younger consumers have been hit hardest in the current economy, and that their economic challenges are creating headaches for the fast-casual sector. It’s also no surprise that those three chains this year are averaging a same-store sales decline of 1% so far this year, after averaging 9.4% last year. Remove the 10% that Cava did in the first quarter and that average falls to a decline of 2.2%.

If we examine two-year numbers, the slowdown looks worse, from 19.5% two-year same-store sales on average in 2024, to 8.3% this year. 

“These brands saw a shrinking in the proportion of sales coming from younger, Gen Z consumers,” said Rich Shank, senior principal with Restaurant Business sister-company Technomic. 

The “younger consumer” could be correlated to the low-income consumer that McDonald’s has been talking about for much of the past two years. As CEO Chris Kempczinski noted earlier this month, same-store sales at that chain are down nearly in the double digits among lower-income diners. 

“Think about the pressure they face,” Kempczinski said. “Rents are at pretty high levels. You’re seeing food prices, whether it’s in restaurants or grocery, you’re seeing food prices are high. You’re seeing child care high.”

The data bears all this out, though we’ll focus on the younger consumer. Average rent in the U.S. since 2020 is up 39%, according to the website iProperty Management. That average is up 7.5% this year alone. 

Consumers are now spending 26.6% of their income on rent, up from 25.1% in 2021, according to the site. So the price of housing alone is taking up another 150 basis points of income for the average American. 

Median weekly earnings for those 25 to 34 is up 23% over that period.

Federal data before the government shutdown showed younger consumers far more likely to be unemployed. Unemployment among people 20 to 24 has soared from 7.9% in August to 9.2% in September. Among men that age it’s nearly 10%. Recent college graduates, in other words, are having an awful time finding a job.

It’s a bit steadier, for the record, among those 25 to 34. But at 4.4% it’s still higher than the 3.6% rate for those 25 to 54, or the 2.9% for those 55 or older.

Unsurprisingly, more people are falling behind on their student loan repayments. According to the U.S. Federal Reserve, the percentage of student loans that are more than 90 days late has spiked, to 9.4% in the third quarter, compared with 7.8% in the first quarter—though, to be fair, that 9.4% is down from 10.2% in the second quarter.

Nearly a quarter of the total debt held by those 18 to 29 is student loan debt. 

Those same consumers are also falling behind on credit card payments. Nearly 10% of consumers 18 to 29 had credit cards 90 or more days past due, according to Wallet Hub. By comparison, the overall average was 7.05%. And among those 60 to 69 the average was just 5.47%.

Credit card delinquency rates are the highest they’ve been among most age groups than they’ve been since the Great Recession. 

All of which is to say that costs are outpacing income. The labor market is getting weaker. And the poorest and youngest of consumers is having a hard time paying for rising costs for roughly everything. Which is why many of them are cutting back.

Restaurant Business Editor-in-Chief Jonathan Maze is a longtime industry journalist who writes about restaurant finance, mergers and acquisitions and the economy, with a particular focus on quick-service restaurants.

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