In this Weekly Wrap, we’re looking at Gen Z’s nostalgia for chain restaurants, employment in the leisure and hospitality sector, Salt Bae restaurant closures, and more.
Gen Z and Chain Restos
The Headline: “Can Gen Z’s Nostalgia Save Chain Restaurants?”
The Source: The New York Times
What You Need to Know:
When you walk into a chain restaurant, time stands still. For some young people, that’s the whole point.
Ana Babic Rosario, a professor of marketing at the University of Denver, calls this “emotional time travel.”
With the country in an unstable economic time, potentially edging toward recession, those memories become more potent, Dr. Babic Rosario said. “We tend to crave some of those nostalgic moments because we think they’re more stable,” she said. “That’s how our mind tends to remember the past — more rosy than it really was.”
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“Now with fast casual, you may not sit down and you go your separate ways afterward,” Ms. Benares said, referring to eateries catering to office workers, like Sweetgreen and Cava. “It sounds kind of funny, but you lose a sense of community. It’s kind of sad.”
That missing sense of community may be why 10,000 people, mostly in their 20s, traveled to Randall’s Island in New York last fall to attend Chain Fest, a food festival started by the “Office” actor B.J. Novak that served “exclusive gourmet versions” of classic chain restaurant dishes from Red Robin, Cracker Barrel and others. The festival’s Los Angeles version had a 25,000-person wait list.
For many chain restaurants, a new generation’s interest is an exciting opportunity. The big question, though, is whether they can count on Gen Z beyond flashy events and viral moments. Catering to younger diners, some of whom say they want more updated food options, is a financial gamble that can alienate chain restaurants’ core customers — baby boomers, who want consistency.
Gen Z made up only 17 percent of patrons at sit-down, midprice casual dining establishments in 2024, and millennials made up 32 percent, according to Datassential, a market research firm. Baby boomers and Gen X make up a majority of the customer base.
That means if younger diners are going to revive the fortunes of chain restaurants, they will have to eat at these establishments more frequently. The industry has been struggling for a good part of the last decade as changing consumer tastes and a variety of delivery options and fast casual chains have become more popular. Contributing to the decline is that Americans are not eating out as much as they used to with their friends and family. A February survey by Datassential found that 29 percent are eating out less often with groups.
Our Take:
Nostalgia can be a powerful tool, especially when attracting a new younger customer base. Right now, Gen Z is the target. But nostalgia can only carry a brand so far. In the short term, it’s great for getting the attention of a new customer pool, but Gen Z is notoriously fickle and value-conscious. They’re always on the lookout for something new, and they’re quick to shift their love and attention elsewhere.
For macro-chain restaurants, maintaining the edge means balancing nostalgia with consistency, value, and innovation. If food quality is subpar, service is bad, and price is too high, it won’t matter how cool and retro it is, people won’t come back. Operators also need to remember their core base while reaching out to new demographics. I’ve seen many operators become too focused on courting a certain demographic only to alienate loyal customers who’ve been with them for years.
For smaller operators, the same rules apply, albeit with higher stakes. Many businesses have leaned into that retro or nostalgic vibe and, while there is often initial success, those results can be fleeting. If there is no substance backing up the theme, the appeal and excitement will disappear once the novelty wears off. The concept might look great and have great branding, but if it’s superficial with no real back bone, it’s just kitsch and not a truly sustainable business model.
Restaurant Employment Report
The Headline: “The restaurant industry workforce reached a record high in May”
The Source: Nation’s Restaurant News
What You Need to Know:
The May jobs report exceeded expectations, with 139,000 positions added to the United States economy during the month, and the unemployment rate holding steady at 4.2%. According to federal data released Friday morning, employment in the leisure and hospitality sector trended up last month.
Eating and drinking establishments added 30,200 jobs in May and now account for nearly 12.4 million jobs. Leisure and hospitality overall (including hotels) added more than 48,000 positions. Throughout the past 12 months, the sector added an average of 20,000 jobs per month.
The 30,000-plus positions added in May follows about 16,600 jobs added in April, and 29,800 jobs added in March. February and January both experienced job losses and marked the weakest two-month period for the industry in more than four years, according to the National Restaurant Association, which cited poor weather conditions for the downturn, rather than a slowing industry.
The May uptick comes ahead of the busy summer season for restaurants. That said, it also comes as consumer sentiment is low — especially for lower-income Americans — and many are choosing to eat from home versus restaurants as menu prices remain relentlessly high.
The National Restaurant Association predicts that about 490,000 jobs will be added to the industry’s payroll this summer, which would be an uptick from last season’s 459,000 positions. However, the industry is expected to remain below 500,000 seasonal jobs for the second consecutive year as operators also remain uncertain about business conditions due to softening consumer spending, tariffs, and other policy changes. In the five years prior to the pandemic (2015-2019), eating and drinking places added an average of 511,000 jobs during the summer season, while in 2023, the industry added about 502,000 positions.
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Most of these jobs have been created in the limited-service sector, with coffee and snack segments outpacing pre-pandemic readings by 21%. Quick-service and fast-casual restaurants are 2.6% above pre-pandemic levels.
Conversely, full-service restaurant employment levels remain 237,000 jobs (or 4.2%) below pre-pandemic readings.
Our Take:
Quick-service, fast-casual, and home-cooking are all on the rise, at a far higher rate than the last year or two. It’s great for QSR and fast-casual chains, but it’s not so great for full-service spots.
It’s not the worst news, but it's a definite concern. Right now, restaurants should be bulking up for the busy season, but many are staying stagnant. It’s possible that some operators, squeezed by inflation and tariffs, may be banking on a busy season, but have opted to hold off on hiring to keep labor costs low after a rather rough Q1. Or maybe they’re just wary of potential demand dips. Either way, it’s something we will be keeping an eye on.
Salt Bae Closures
The Headline: “Nusr-Et Steakhouse closes all but 2 US restaurants”
The Source: Restaurant Dive
What You Need to Know:
- Nusr-Et Steakhouse will close its Beverly Hills, California, location this spring, leaving it with two U.S. locations in Miami and New York City, according to a Wednesday press release.
-The fine dining chain, which had seven U.S. locations in 2023, closed its restaurants in Dallas and Las Vegas in January as well as one location each in Boston and in New York City’s Meatpacking neighborhood last year.
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Nusr-Et said its international expansion is part of its “commitment to evolving its footprint in line with guest demand, travel trends, and regional opportunity.” That will include entering new markets in Rome, Italy, and Ibiza, Spain. The chain also has a SaltBae Burger location in the iGA Istanbul Airport, with plans to open the concept in other major airports around the world.
Our Take:
Salt Bae made a massive splash when his restaurants first landed in the U.S., with diners lining up to see the now-iconic forearm salt sprinkle and the dramatic tableside steak slicing. The U.S. expansion came fast, seven locations within a few years.
But, as mentioned above, kitsch and showmanship without substance wear thin very quickly, and this is the perfect example. Throw in exorbitant prices, poor reviews, and scandals surrounding tip wage theft and discrimination, and it became clear: while the concept thrives overseas, it might not be a fit for the U.S. market.
It’s a cautionary tale. Leaning into a gimmick-heavy concept can yield massive short-term success, but without more substance, it won’t have staying power. For international brands looking to break into the U.S., understanding the market is paramount, and understanding local labor laws and how to navigate them, rather than circumvent them, is vital. U.S. labor protections are far stricter than those in many other countries, and not abiding by them either through incompetence or malice can lead to costly fines and some very bad PR. Lastly, even in luxury markets like Beverly Hills, value prop matters. There is such a thing as being too expensive, especially if you are a volume space.
Cracker Barrel Earnings Report
The Headline: “Cracker Barrel expects better profits despite a $5M tariff hit”
The Source: Restaurant Business Online
What You Need to Know:
Cracker Barrel Old Country Store’s latest earnings report contained a notable contradiction.
The 660-unit family-dining chain predicted on Thursday that tariffs will take a $5 million bite out of its earnings for the quarter, in part because many of the products sold in its retail shops come from China.
And yet in the same breath, Cracker Barrel also raised its profit guidance for the full fiscal year. It’s now expecting earnings before interest, taxes, depreciation and amortization (EBITDA) of $215 million to $225 million, up from $210 million to $220 million.
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During the quarter, the chain expanded the first phase of a kitchen optimization plan to all of its restaurants. The plan is designed to simplify old processes. For instance, cooks now prep food closer to when it’s ordered, rather than in big batches early in the morning.
“It’s made their jobs easier,” CEO Julie Masino said in an interview Thursday. “You’re not making these massive batches of food, and it’s improved quality, because the food is fresher.”
And employees are happier. Hourly turnover in the period improved by 14 percentage points, she said, and sentiment scores rose 2.3%.
In another move aimed at boosting profits, the chain has put more premium-priced items on the menu, such as shrimp entrees and a pot roast. That strategy has been effective: Menu mix was up 1.7% in the quarter, meaning customers ordered more expensive items.
Our Take:
It’s a crazy idea: make the food fresher and better tasting and people will come! Who would have thought?
But in all seriousness, considering the not insignificant retail store losses for the brand, coupled with the bad press from late last year and early this year, that's no small feat. Cracker Barrel has little to no brand relevance; its failure to attract the next generation, a general sales slump, and a particularly nasty accusation about refusing service to a person with special needs all factor into this news.
But they’ve clearly made some changes. Modernization and increased food quality are just the first steps they’ll need to regain relevance and win over the younger crowd. Their game plan is a solid one, a three-year plan with a major focus on food quality. Yes, they have the capital to take the time and modernize. But it still applies to owners of all sizes. Identify the problems, prioritize them, and provide a plan of action with a timeline. There will always be resistance during this process, whether from staff, partners, or guests. Change is scary, but if it ain’t working, it ain’t working. Assess, plan, attack.