American Millennials: the enigma generation. Otherwise known as Generation Y, the Millennials are those born between 1981 and 2001, the largest generation in America since the Baby Boomers. Now that the population segment is growing up, more and more researchers, analysts, and corporations are studying the Generation Y’ers, working to identify their habits and spending patterns as they recognize that they make up roughly 25 percent of the U.S. population, and have an annual direct spending power estimated at $200 billion.
The problem? No one can seem to understand them. According to a study conducted by Barkley in partnership with The Boston Consulting Group and Service Management Group, Millennials are starkly different than their older counterparts because they grew up in an era with great wealth and significant technological advancement. This affects the way they communicate, interact, and spend their money, and that in turn affects the way they contribute to spending and the U.S. economy.
Companies and restaurants are now especially feeling the Millennial affect because the population dines out and purposefully spends in ways more different than ever, and now that their spending power has increased, companies have no choice but to follow suit and appeal to them the best way they know how.
If you think the Millenials’ influence can’t be that dramatic yet, just ask McDonald’s (NYSE:MCD) if its business has been affected by the maturation of the huge generation. The world’s largest fast food chain once had drive-thru lines spiraling out of parking lots, but now the restaurant is faced with a new generation that is focused on health and fresh ingredients to such a degree that consumers have never been before. Barkley reports that 26 percent of the generation considers themselves health fanatics, and thus, the likelihood of those Generation Y’ers visiting McDonald’s every night is lower than ever, and that reality is only expected to continue.
However, despite the health craze that has largely taken Generation Y by storm, restaurants and fast food companies recognize that they can also benefit from another habit that has been highlighted as signature behavior of the Millennials: they like to eat out. A lot. According to Barkley, Millennials spend about $174 a month eating out, whereas non-Millennials only report an average of $153 a month. The Generation Y’ers value eating as a social event, and are more than happy to patronize their favorite restaurants many times a week — just as long as they offer what they’re craving.
For the most part, Millennials still gravitate toward fast, casual restaurants and save fine dining for special occasions, reflecting good news for the fast food industry which has taken a turn for the worse as of late. However, their idea of fast food is quickly becoming different than their parents and bosses’ idea of convenient dining, and their favorite fast food brands might surprise you. Spoiler alert: McDonald’s doesn’t even make the top-three.
7. Dunkin Donuts (NASDAQ:DNKN)
According to GlobalHue’s 2013 Brand Report, Dunkin Donuts comes in 7th in terms of Generation Y’s favorite fast-food brands, and what’s more surprising is that Starbucks (NASDAQ:SBUX) doesn’t even make the list. Seventeen percent of Millenials chose the Quincy, Massachusetts-based doughnut company and coffee chain as their favorite brand, and this is arguably unanticipated considering the generation’s claim to health fame.
To be fair, Dunkin is largely expanding its food options and now offers bakery sandwiches, hashbrowns, oatmeal, and more, along with specialty coffee drinks. But nonetheless, its food menu still doesn’t even come close to the magnitude of Burger King’s (NYSE:BKW), Pizza Hut’s, or Sonic’s (NASDAQ:SONC), and it still beats all three on the list. What’s evident though is that Generation Y’ers especially put a high premium on caffeine and their coffee.
Next up is Wendy’s, and its No. 6 spot on GlobalHue’s list is a little less surprising than its predecessor. The study reports that 26 percent of Generation Y consumers choose Wendy’s as their favorite fast food brand, and that reflects a 9 percent jump than those who favorited Dunkin.
Wendy’s, McDonald’s, and Burger King have long been known as the Big 3 fast food companies, and Wendy’s can at least pat itself on the back for surpassing one of those on Generation Y’s favorites list, but not another.
That brings us to good old McDonald’s. The Oak Brook, Illinois-based company makes the Millennial list at No. 5, but considering it is supposed to be known as the world’s largest fast food chain, a No. 5 rank is probably not exactly where McDonald’s wants to sit.
The iconic restaurant has suffered a sales slide recently, reporting consecutive quarters of flattened demand and same-store sales losses, and the Millennials can be blamed for at least some of that decreased consumer business, as they continue to visit their old favorite but have increasingly been cheating on Ronald McDonald with some of its newest rivals. CEO Don Thompson’s company just sneaks by the likes of Wendy’s thanks to the 27 percent of Generation Y’ers that cited it as their favorite fast food brand, and it also surpasses Burger King by more than 10 percent. Take that, copycat.
4. Taco Bell (NYSE:YUM)
We can’t blame all of McDonald’s diminished appeal on Millennials’ increased focus on health and fresh ingredients, because Taco Bell somehow manages to surpass the fast food company in GlobalHue’s rankings, and it earns the No. 4 spot in Millennials’ hearts with a 28 percent majority.
Like McDonald’s and Burger King, the Downey, California-based company has worked hard to roll out menu changes that were purposefully chosen to align with consumers’ new taste needs, and it’s apparently working, because the fast food chain just misses the top-3 distinction by one percent.
Speaking of the top-3, Subway makes it thanks to the 37 percent of Millennials who reported their loyalty to the sandwich chain. The Bridgeport, Connecticut-based company has been pleasing consumers with its sandwich-making skills for years, but Subway has also recently revamped its salad offerings, and Generation Y’ers have shown their gratitude by visiting the store’s locations that much more frequently.
In addition, Jared Fogel may be no Millennial himself, but Generation Y’ers still grew up hearing of his Subway weight loss success story, and considering the generation is known for its health-conscious lifestyle and focus on exercise, it wouldn’t be surprising if the large population still has visions of Fogel’s over-sized jeans dancing in their heads.
2. Panera (NASDAQ:PNRA)
Coming in at No. 2 is Panera Bread, the chain of bakery-café fast casual restaurants. The St. Louis, Missouri-based company has long been known to appeal to Millennials with its fresh offerings, customizable menu, and healthy alternatives, and Panera proved it once again as 38 percent of GlobalHue’s respondents cited the cafe as their favorite fast food brand.
Panera’s stock has actually slipped as of late, provoked by a poorer-than-expected third-quarter earnings report, but investors will likely welcome the news that the generation with the largest growing spending power especially values the cafe’s goods.
1. Chipotle (NYSE:CMG)
Last, but certainly not least, America’s favorite Mexican grill. Almost half of all those Millennials surveyed by GlobalHue noted Chipotle as their favorite fast food brand, and the company boasts an impressive 46 percent figure. Generation Y’ers are drawn to the Denver, Colorado-based company’s fresh salads, meaty burritos, and infamous guacamole, and colleges are even noticing the trend as more and more campuses recruit the Mexican restaurant to set up shop on their grounds.
Chipotle’s stock has risen significantly within the past few quarters as it continues gaining popularity and new consumers, and its latest earnings still even managed to live up to lofty expectations.
Don’t Miss: 5 Comfort Foods That Aren’t All That Good for You.