WSJ What’s News - Are We in a Fast-Casual Restaurant Recession?

Episode Date: November 16, 2025

Gen Z and Millennials are tightening their purse strings, and the first businesses on the chopping block are fast-casual dining spots. The usual fan favorites like Chipotle, Sweetgreen and Cava are suddenly falling out of favor with young American consumers. WSJ reporters Heather Haddon and Matt Grossman discuss how these companies are responding, and what this shift says about the broader economy. Caitlin McCabe hosts.  Further Reading Chipotle’s Big Bet on Younger Consumers Is Unraveling Are the Economy’s Salad Days Over? Chipotle Says Gloomy Consumers Are Buying Fewer Burritos Fast-Casual Chains Struggle as Diners Ditch Pricey Bowls for Cheaper Eats Learn more about your ad choices. Visit megaphone.fm/adchoices

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We'd love to talk, business. Hey, what's news listeners. It's Sunday, November 16th. I'm Caitlin McCabe for the Wall Street Journal, and this is What's News Sunday. The show where we tackle the big questions about the biggest stories in the news by reaching out to our colleagues across the newsroom to help explain what's happening in our world. On the show this week, we're taking a look at the young American consumer and why they're starting to break up with fast casual restaurants. You could it burrito belt tightening or a salad slump. But one thing is clear. Chains like Chipotle, Sweet Green, and Kava are falling out of favor with Gen Z and millennials. The younger cohort that's 25 to 35 attrition, they don't have the scheme that they had last year in the way that they were visiting or their frequency of visiting. So the 25 to 35 consumer is the most under pressure and they make up about 30% of our consumer base and they're down about 15%.

We believe that this trend is not unique to Chipotle, is occurring across all restaurants, as well as many discretionary categories. This shift is raising questions among analysts and investors about what's ahead for these companies. But more broadly, it's also sparked concern about the economic health of this age group and what it means for the U.S. economy. To help unpack it all, I'm speaking with two Wall Street Journal reporters who are experts in this space, space. Let's dive in.

A little over a decade ago, one of my colleagues at the Wall Street Journal wrote a story highlighting an interesting phenomenon. She had found more than 40 restaurants that have been described in news reports as being the Chipotle of their cuisine. Think the Chipotle of pizza, the Chipotle of sushi, the Chipotle of Asian rice bowls. It spoke to the restaurant zeitgeist of the moment. Customers, especially young ones, were craving build your own meals that featured fresher ingredients than what you could get at traditional fast food chains, even if that meant spending a little more. But now, financial results show young customers aren't visiting these restaurants as much as they once did. So what's going on here? I'm joined by

Heather Haddon, the journal's restaurants reporter, and Matt Grossman, an economics reporter, to help explain. Heather, let's start with you. You've been paying close attention to these earnings reports in recent weeks. What are you hearing from executives at these mid-tier, fast casual restaurant chains? They're all blaming 25 to 35-year-olds for a slowdown in their sales, and they've really gotten granular about what's happening to these folks, them having to pay student debt back, rising costs for everything from insurance to child care and just wage growth being stagnant. And they've said that these kind of pressures means that these folks, they're not abandoning the brands totally, but they're just not coming in as much as they work.

Matt, you cover economics. Heather just mentioned a host of pressure points that these younger Americans are facing right now. Can you just give us a little bit more context about what's going on in the economy with this age group specifically? It's been a really difficult time in the labor market for people in this age group. A lot of companies have really been playing it as a kind of wait and see a strategy where they aren't necessarily laying a lot of people off, but they're also not really in the mood to make big investments in the future of their workforce. And younger people really bear the brunt of that because when a company brings in somebody

new, it's often a younger person where the company might need to invest in training and getting them off the ground. And so younger people are having a tougher time now finding those opportunities than certainly they were a few years ago. And so with that being the backdrop, how significant of a dent, Heather, is this having on company financials? Can you get a bit more specific about what companies are saying in terms of how this is affecting sales and profit? Chipotle said that these 25 to 35 year olds were something like 25% of their sales. That's a lot. So Chipotle reported a same store sales decline. They also reduced their outlook for same stores sales increases this year for the third consecutive quarter. And Sweet Green, they are really challenged right now. Their same source sales are down 9%. And all these companies have taken a stock hit as well. You mentioned the stock prices. I've been pretty fascinated by watching what's been happening with these stocks. A lot of them down just double digits.

in one month alone. What are analysts saying about that? Well, some of them are saying it's a great time to buy. Get it while it's good. Talking to Chipotle and Kava executives, they say, it's a cyclical. They're going through something now. They're going to get these folks back and the stock's going to improve. But in general, restaurant stocks have just been hammered this year. They are just not in favor because they're viewed as discretionary spending. And discretionary spending is not what Americans really want to be doing right now. Matt, what do you make of these comments? Is this a cyclical period for Gen Z and millennials?

Do we expect their financial and economic prospects to get better? It could really go either way. On the one hand, if this is more about companies not being sure about which way the business climate is going to go because of tariffs, but at some point soon we're going to get answers to that. Either tariffs will stabilize or will learn. that there's some drag on the economy. On the other hand, in the situation we've been in where it's taking younger people longer to find jobs, perhaps they're not having those thriving

early career experiences where they're going to the office every day and then eating at these restaurants for lunch and dinner, is that because companies are starting to experiment with using artificial intelligence to do some of the entry-level functions that these young people might have done in the past? That's a question that economists feel like they do not have good answers about yet. Matt, do we know if this is translating across other categories like retail or travel or entertainment? Because the government shutdown, we haven't been getting the government data that we rely on for the past six weeks or so. We have to look at other sources for this instead. When you look at credit card spending data, for example, this is the information that

the banks put out based on how their credit card users are spending. A lot of these categories are down a little bit from a year ago. If you look at things like lodging, travel, airfare, seeing that the spending's down in the mid-single-digit percentages, 3%, 5%. So not anything drastic there, but that's certainly not trending in the right direction. Prices are still going up faster than anybody wants, and that definitely doesn't help. When you look at what other companies in the space are saying, it does vary a bit. Delta Airlines has said a couple times in the past few months that young people are actually very strong customers for them, that you're seeing strong loyalty and propensity to travel. On the other hand, six flags executives have said that

they're really seeing a lot of price sensitivity, that a lot of their younger customers are less willing to go out and spend a lot of money on a fun day out. Coming up, we explore how this shift is echoing through the broader economy and how these companies are responding. That and more. after the break. With Amex Platinum, $400 in annual credits for travel and dining means you not only satisfy your travel bug, but your taste buds too. That's the powerful backing of Amex.

Conditions apply. Picking up where we left off, Matt, I think the big question that everyone is wondering, is what does this mean for the broader American economy? How much do 20 and 30-year-olds drive economic spending? They're not the most important spending bucket, in part because they're just not the wealthiest Americans. On the other hand, younger people's spending can be a lot more variable. If you're a younger person, an extra $100 or $1,000 could really go a long way in determining how much you're spending and what your plans are. And so in that sense, young people's spending can swing a lot faster.

So, Heather, how much of this do you think is a pullback from this group due to economic pressures or how much of it is just shifting consumer preferences? Do we know anything about that? It's hard to totally know, but once Chipotle came out with this 25 to 35 year old slowdown that Haccava and Sweet Green then all adopted it as well. So that does seem to say that maybe they've all decided that this is a good thing that they can point to. And I'm sure there's truth to it. These restaurant chains now have credit card data and other ways to analyze their consumers in ways that they didn't prior. And you look at what Chipotle is doing to try to improve sales. It's very focused on some of these younger consumers, including like digital

games to get free food, like share your knowledge of Chipotle trivia and this like college you program to try to get college students. A lot of these chains have been growing very fast, but naturally there is going to be a bit of a slowdown as just a fast casual gets more and more crowded. There's more competitors. There's more options. And probably some people have learned to cook more at home. If this trend is relatively long lasting, this seems bad for places like Chipotle and Sweet Green that really built a business model on courting younger customers. customers, how should we expect companies to respond? It is interesting that a lot of these chains like Sweet Green or Chipotle are now looking at

overseas. Maybe that's where their future lies is expanding in the Middle East, even Mexico or places they're looking at to grow. When I was talking to the CEO of dime brands, which owns Applebee's, it's like, we've created a whole in-house social media team because we realize that's where consumers are and that's where you have to advertise and figure things out. But it's not cheap. You have to get your board to agree to spend a lot of money to invest. And so we'll also have to see if they have the balance sheet to do that. That's Heather Haddon, the journal's restaurants reporter and Matt Grossman and economics reporter. Thanks to both of you for being here.

Thanks so much. Thank you. And that's it for What's News Sunday for November 16th. Today's show is produced by Zoe Colkin with supervising producer Sandra Kilhoff and deputy editor Chris Sinsley. I'm Caitlin McCabe. and we'll be back tomorrow morning with a brand new show. Until then, thanks for listening. Okay, only 10 more presents to wrap.

You're almost at the finish line. But first... There, the last one. Enjoy a Coca-Cola for a pause that refresh. brushes.