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An aging population presents traffic challenges for restaurants

Technomic’s Take: Baby Boomers are dining out less often as they’ve aged. That’s a potential problem for restaurants as population growth stagnates.
baby boomers restaurants
Aging Baby Boomers are dining out less, which could be an industry problem going forward. / Photograph: Shutterstock.

Technomic's Take

Last week I wrote about an issue that is top of mind for a whole lot of people in the industry, inflation. Today, I’m writing about an issue that is not top of mind but should be, population growth and aging. The structure of the population is at the heart of both supply and demand. But we often take them for granted until they become a problem.

To use another metaphor, population aging and growth is like a subtle, nagging source of stress that eats at you day-after-day until it just becomes too much. The time for “too much” was before the pandemic if you can remember that. Traffic was sluggish and our clients had questions. Where is it going? Why? Is it me? Our response was something like “We are in a take-share environment” or “Hey, maybe we built too many restaurants”.

The U.S. Census projects that consumers in their prime spending years (18 to 64) are going to shrink as a proportion of the population from 52.4% in 2016 to 49.5% by the end of this decade. This seems like a small difference. But as Baby Boomers continue to age, they are driving the proportion of the population ages 65+ from 17.2% to 23.2% over the same period.

Baby Boomers were crucial to the growth of this industry but now they are doing what they always said they would not do. They are acting like their parents and dining out less and less. Today, the Boomer’s average spend per visit is roughly the same as their older generational neighbors, the Matures; both now spend 23% less than middle-aged consumers – restaurants’ biggest spenders. 

If you couple this with population growth slowing to a trickle this past year (.1%). then we have serious reasons to reconsider our growth expectations year-over-year. It is likely not just inflation that is making last year’s industry performance hard to beat. In fact, when we back inflation out of the restaurant industry’s growth story the industry saw about 12% total growth (inflation adjusted) in the decade before the pandemic, compared to 9% overall growth in the population. A big chunk of that growth was simply just more people to feed. Today that structural advantage is gone.

So, the question is what does this mean? Narrow marketing strategies focused on younger consumers may make for more cutting-edge advertising; however, we must do a better job at keeping Baby Boomers excited about dining out and ordering in than they did with their own parents. Absent that, double-digit growth or even mid-single digit growth will be much harder to come by. Sure, there are restaurant concepts that will thrive by catering to younger generations by stealing share and building units. But as a broader industry we should think seriously about the intergenerational strategy that will be required to protect our traffic from further erosion.

For example, it should not be surprising to learn that adoption of digital ordering technologies is unevenly distributed by generation. When I see the lag in older adult adoption of new ordering technologies, I am reminded of my childhood in the late 80s and early 90s and a memory of watching my farmer of a grandfather navigate the McDonald’s drive-thru.

Microphones and PA systems weren’t for ordering burgers. They were for calling square dances, as I imagine he must have thought. It was all very confusing to him. That confusion was by accident but it was built into the design. No one had asked him or his generation how to optimize the drive-thru experience to his liking.

But they certainly knew enough about me to guess that I’d love the clown and his playgrounds and that I’d make my grandfather drive into town for a burger. In today’s new digitally enhanced world, investing in the Baby Boomer experience, in addition to the younger folks on your marketing radars, is far more important than before.

The bygone days when Boomers were in their prime spending years are over and so are the related growth cycles that we have become accustomed to. The population growth that made past executives look like geniuses is also behind us.  McDonald’s may not have lost a dime when they lost my grandfather’s drive-thru business back then, but restaurants cannot afford to do the same with his daughter today. Besides, she already has a smartphone and I assure you she has little time for square dances.  

For more information, check out Technomic Ignite Consumer and Technomic Advisory Services. Technomic is a sister company of Restaurant Business.

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