Stephen Schrutt on What Makes Gen-Z Tick
generation brings change, but Generation Z has an important distinction: It's
the first generation to have grown up in the digital era and members have high
standards for how to spend their time online.
millennials are considered digital pioneers who grew up as social media
developed and technology exploded, Gen-Zers, those born between 1997 and 2012,
were born in the midst of these developments and matured into a ubiquitous
social media environment, thus its preference for apps that bring restaurants
to their fingertips.
still outnumbered by both millennials and baby boomers, the two largest U.S.
cohorts, but makes up about 20% of the population, numbering 68.2 million. It's
also much more diverse than its elders, bringing a different perspective to all
aspects of life, poised to disrupt business approaches that have worked for
the go-to age group to target when opening up new dining concepts," Stephen
Schrutt, CEO & founder of Hunger + Thirst Restaurant Group, told The
Food Institute in an email interview. "Gen Z is focused on trends and
experiences. The social media savvy generation live for concepts that are
unique and memorable in all ways."
whose company operates hotspots like Parks & Rec, Dirty Laundry,
The Avenue and No Vacancy in the Tampa Bay, Florida, area – said
Gen-Z diners focus on every aspect of the dining experience like the smell when
they walk through the door and whether there's a feeling of nostalgia. Then
they focus on the service: Did it meet the expectations raised online?
generation is both more critical and supportive.
"Gen Z is
known to document everything, and their experience quickly becomes everyone
else's experience through social media. If something doesn't align or is
falsely promoted, they will be the first to call it out, and something hyped up
could quickly turn into something overrated," Schrutt said.
and Instagram reels becoming extremely popular, review-style videos
showcase their exact experience, through their lens and give their audience
insights into your concept. This gives other people insights into your dining
concept, and could either drive immense traffic to your location, or it could
make people not want to go."
will be key to restaurant evolution, with artificial intelligence allowing for
immersive experiences that make diners feel they are somewhere completely
to travel so it would be amazing for them to feel like they're enjoying
authentic Cacio e Pepe in Italy while they're actually still in Tampa,
Florida," he said.
predicts there will be fewer chain restaurants in the next five to 10 years and
more "unique dining experiences that create a memorable cuisine worth
documenting, rather than just a grab-and-go meal."
"Gen Z cares
more about quality than quantity which is why these unique dining experiences
will also cater to more trendy food options that fit upcoming diets such as
vegan, keto, paleo, etc. It is important to be inclusive of all kinds of diets
to guarantee that there is something tasty and enjoyable for everyone on the
menu," he added.
however, will not go away. Schrutt said he thinks there always will be a demand
for fast food, but it's likely menu options will get healthier, and offerings
will include higher quality ingredients.
"Gen-Z is a
more health-focused generation that likes to consume light snacks and small
meals rather than the more traditional three full meals a day," Schrutt said.
"Fast-food restaurants should have a variety of options to cater to this new
always will be a need for fast-food and technology will be integral to that as
well, allowing diners to order ahead for pickup or to use delivery apps like Ubereats
or Doordash to deliver higher quality food directly from a sit-down
factors also influence this generation's choices. Both Subway and Oreo
have done a good job of reeling in Gen-Zers with their approach to the
community and the planet.
these brands and feel heard by them. Each of these brands also has a big focus
on the community and makes a significant impact," Schrutt said, noting Gen-Z is
concerned about the community and the planet and more likely to support
companies that both give back to the community and support the environment.
owner of Hunger Thirst Group, my community matters to me. They are the backbone
of what I do, and I always ensure if I am benefitting from them, I am giving
back as much as I can. Community impact is huge, and I have developed so much
love for my community. ... Without them, there would be no me. They are the
drivers of success for each of my creative dining concepts, and they are a
crucial part of Hunger Thirst Group, from the inside out." Food Institute Focus
Future for Casual Dining Stocks Could be Grim
near-term pressures on casual dining operators right now are obvious. Fears of
a recession are rising. Consumer confidence is falling. Labor shortages have
driven up wages, and in some cases forced operators to limit to-go orders.
inflation means owners must raise prices to protect margins — but that decision
runs the clear risk of deterring cost-sensitive customers.
pressures have been reflected in stock prices across the space. By my
definition, there are eight US-based casual dining stocks which have declined
an average of 30% so far this year. That's about five percentage points worse
than the restaurant sector as a whole (again, by my definition, one more narrow
than might be used elsewhere) and 12 points behind the 18% decline posted by
the Standard and Poor's 500 index.
aren't surprising — but they still have to be concerning for both investors and
one consolation for most sectors is that this year's weakness follows years of
strength. That's not the case for the casual dining sector, which mostly had
struggled heading into 2022. The sell-off thus creates a big question: if the
industry wasn't able to drive shareholder returns looking backwards, how can it
do so looking forward?
past five years, an equal-weight portfolio in eight casual dining stocks would
have declined about 13% — even including dividends. To be fair, that to some
extent overestimates the pressures on the industry. The two big winners over
that stretch are the two most valuable companies: Olive Garden owner Darden
Restaurants and Texas Roadhouse. (Disclosure: I'm short Texas Roadhouse stock
in my personal account, for reasons I've detailed elsewhere — among them
precisely the pressures on the casual dining space looking forward.)
average return of individual stocks has been negative, the overall equity value
of the industry at least has grown.
But while Darden
and Texas Roadhouse have succeeded relative to the industry, neither has
topped the returns of the S&P 500 over the past five years. And it's too
simplistic to blame the weak trading this year — or even the novel coronavirus
pandemic — for the sector's inability to drive acceptable shareholder returns.
this year's sell-off, the sector had underperformed. From 2017 through 2021,
Darden had basically matched the index, but five of the eight companies posted negative
total returns for the five years. Run the same exercise from 2015 through 2019
and the trend holds, with those five stocks declining, though Darden and Texas
Roadhouse over this stretch at least beat the market.
optimist could respond that the industry, as a whole, has seen its equity value
grow, thanks to the outperformance of the two leaders and the drag of smaller
and long-struggling Red Robin on group averages.
relative performance might be precisely the point.
Roadhouse was led by a charismatic founder in late chief executive officer Kent
Taylor, who installed an impressive system of relentless quality. And unlike
more mature rivals like Chili's owner Brinker International or The
Cheesecake Factory, that chain has benefited from consistent expansion into
stock, meanwhile, has been helped by financial engineering, notably the sale of
declining Red Lobster. An activist effort in 2014 also breathed new life
into the company's operations.
specific catalysts, casual-dining operators have struggled. Brinker has not
been able to drive consistent same-property growth at Chili's. Dine Brands
has never gotten Applebee's quite fixed; the same is true for Bloomin'
Brands and Outback Steakhouse. Ruby Tuesday is no longer
public, but it sold itself in 2017 for just $2.40 per share and then filed for
bankruptcy during the pandemic three years later.
struggles haven't been confined to legacy brands. Newer concepts — Maggiano's
for Brinker, Carraba and Bonefish for Bloomin' Brands — haven't
reached the growth required to continue footprint growth. Would-be leaders like
Red Robin, Chuy's and BJ's too have disappointed.
history thus tells us is that running a garden-variety casual-dining operation
shouldn't be a surprise, as the same trend holds throughout the consumer
industry. More than a decade ago, Citigroup called this the "consumer
hourglass theory": the coming shrinkage of middle-class-focused options that
offer quality and price that both are "good enough".
the bank argued that being in the middle was the worst place to be. It's not
hard to see that argument playing out in the restaurant space. Consumers have
been willing to pay a few dollars extra for more local, more unique, higher-end
sit-down experiences — or to save some money (and time) at the ever-expanding
universe of fast-casual alternatives.
performance of most casual-dining stocks proves how difficult the middle truly
is. Without a major differentiator — the scale and leadership of Olive Garden,
the tight execution of Texas Roadhouse — consistent growth in casual dining was
nearly impossible to drive when times are good. It's the key reason why
investors are so worried about what performance will look like when times are
not. Food Institute Focus
Expert: Authenticity Key for Food Brands Marketing to Gen Z
endless supply of content and more than 50 million daily users, there is no
shortage of ways for brands to market themselves on TikTok –
particularly to Gen Z.
half of Gen Z tends to use TikTok on a daily basis, with 55% having bought something
after seeing it on the app, according to a survey from Student Beans.
With that, The
Food Institute recently spoke with Eric Dahan, CEO of Open Influence,
a marketing company that was recently named an official TikTok Marketing
Partner, for his opinions on how food brands can successfully use the app to
market to Gen Z:
to Keep in Mind
modern customers want a brand experience that's authentic," said Dahan.
A recent WP
Engine survey found that 82% of Gen-Z respondents trust a company more if
it uses images of real customers in its advertising, while 72% are more likely
to buy from a company that contributes to social causes.
five ideas brands should keep in mind when creating content for Gen Z:
- Be authentic
- Create raw,
- Be on the
platforms where Gen Z spend their time
- Have real values
that you live by
- Have a positive
is, and is not, Resonating
The days of
picture-perfect Instagram content are done for younger consumers.
"Gen Z value
content that is real and relatable, preferring the raw feeling of TikTok or
Reels to highly edited images, said Dahan. "Focus on video ... demonstrate a
value proposition succinctly."
"Gen Z hates
feeling like their being advertised to," he added. "Make sure the messaging
feels relatable," he added. "Also, avoid traditional gender roles like branding
your product as ‘for girls' or ‘for boys'."
believes niche content resonates with viewers.
niche following makes sense for influencers, so they often dig as deeply into a
specific realm of content," said Dahan. "This is good news for brands that want
to develop longstanding relationships with devoted niche groups." Food Institute Focus
- Chick-Fil-A is testing an express drive-thru
lane that ‘significantly' speeds up orders. The company calls its
"Drive-Thru Express" model a game changer that will streamline the
experience for its nearly 50 million mobile app users, reported Forbes
(June 22). Full Story
King expanded its
plant-based offerings with the debut of two new Impossible burgers: the
Impossible King and the Impossible Southwest Bacon Whopper, reported Nation's
Restaurant News (June 23). Full Story
- McDonald's plans to make changes to its
franchising system as it seeks to reinvigorate its base of restaurant owners.
Under the new rules, existing franchisees will need to go through a stringent
review every 20 years to keep their restaurants, reported The Wall Street
Journal (June 23). Full Story
- Meanwhile, McDonald's
dollar drinks are dropping off menus. Many of the company's locations are
removing the U.S. $1 deal for soda and other cold beverages of any size to help
manage rising inflation, reported The Wall Street Journal. Full Story
agreed to buy out one of its longtime franchise groups, the Caspers Company
of Tampa, Florida, reported Nation's Restaurant News (July 12). Full Story
Salad Chick signed
franchise agreements that will bring nearly 20 new restaurants to Texas over
the next five years, reported Meat + Poultry (June 23). Full Story
Garden parent Darden
Restaurants reported quarterly earnings and revenue that beat analysts'
expectations, despite experiencing high inflation that weighed on its profits.
Net sales rose 14.2% to $2.6 billion, topping expectations for $2.54 billion.
Across the company, same-store sales climbed 11.7%, fueled by the rebound of
its fine-dining business, reported CNBC (June 23). Full Story
- Sweetgreen is leveraging gamification and
personalization with its new Rewards and Challenges program, and hopes to build
on its digital sales mix, which is currently at 66%, reported Forbes
(June 27). Full Story
Fridays parent TriArtisan
Capital has found success in partnering with C3 virtual sushi brand Krispy
Rice. Nearly one year after announcing the initial partnership, sushi is
now available for dine-in at 17 Fridays locations, reported Nation's
Restaurant News (June 27). Full Story
- Taco Bell is testing two new menu items using
Kellogg's Cheez-Its cracker: Big Cheez-It Tostada and Big Cheez-It Crunchwrap
Supreme, reported Nation's Restaurant News (June 28). Full Story
Mexican Eats announced
its first foray into the virtual dining space with Pure Gold: a queso-themed
delivery-only menu, reported Nation's Restaurant News (June 28). Full Story
chain Cowboy Chicken is rolling out a new virtual brand for delivery and
pickup only dubbed Smackbird, featuring Nashville hot chicken sandwiches
and tenders, reported Nation's Restaurant News (June 30). Full Story
- Subway launched the "Subway
Series" menu board, giving guests the option to pick from a dozen numbered
subs. At the same time, the chain is de-emphasizing the customization that
helped drive growth for decades, reported Restaurant Business (July 5). Full Story
Danny Meyer's special purpose acquisition company and Panera Bread
have called off a deal to take the sandwich chain public again, citing market
conditions, reported CNBC (July 1). Full Story
- Duck Donuts is keeping its 2022 growth momentum
strong with the signing of 13 franchise agreements for 19 shops during the
second quarter, reported Nation's Restaurant News (July 7). Full Story
will close 16 U.S.
stores by the end of July after workers reported safety incidents at the cafes.
The company will close six locations in the Seattle market, six in Los Angeles,
two in Portland, Oregon, and single stores in Philadelphia and Washington D.C.,
reported The Wall Street Journal (July 12). Full Story
on the Move:
- KFC named Tarun Lal President of KFC U.S.
- Red Robin CEO Paul Murphy plans to retire at
the end of the year, reported Restaurant Business (June 22). Full Story
announced that Kevin
Ozan will take on the new post of senior executive vice president of strategic
initiatives, Ian Borden will succeed Ozan as chief financial officer,
and Marion Gross will take on the top supply-chain post, reported MarketWatch
(June 27). Full Story
McDonald's named Jill McDonald executive vice president and president of
international operated markets, reported MarketWatch (July 13). Full Story
King has named
Thibault Roux as chief digital officer for the U.S. and Canada, reported Nation's
Restaurant News (July 8). Full Story
Pizza has appointed
Edward Jamieson as chief financial officer, effective in October, reported MarketWatch
(July 11). Full Story
& Buster's announced
an all-new leadership team, including four new executives and four established
D&B team members, many of whom now have new position titles, reported Nation's
Restaurant News (July 11). Full Story