Millennials could be forgiven for thinking it’s a terrible time to be young, as the nation recovers from an historic economic slump that has destroyed thousands of jobs usually intended to kick-start their burgeoning careers. But restaurant executives and experts beg to disagree, saying that despite their unfortunate timing and higher-than-average rates of unemployment, young restaurant employees and consumers have much to offer the industry.
Rather than worry about a whole age group’s struggle to launch careers and lifetime earnings, operators see an opportunity to buy low on millions of potential customers with a thoughtful value proposition. And instead of complaining about Millennials being addicted to smart phones and social networking, restaurant executives praise their ability to connect and openness to new marketing technologies.
Several definitions for Millennials exist, but Peter Francese, the demographic trends analyst for Ogilvy & Mather and the founder of American Demographics magazine, pegs the cohort to Americans born between 1976 and 1995. That age range encompasses 84 million people, compared with 80 million baby boomers born between 1946 and 1964.
Francese said Millennials tend to be holding their own in terms of discretionary spending at restaurants, and when the generation’s fortunes turn positive with more economic recovery, it potentially could prove a boon for the industry.
“You’re going to see incomes rise at some point post-recession, and the industry will benefit from this increase among Millennials,” he said. “We’re talking about several years, not decades.”
Even as they earmark much of their rising incomes to paying down debts on credit cards and student loans, Millennials would be more likely to delay major purchases, such as homes and new cars, than to slash discretionary spending across the board, which leaves room for restaurant visits, Francese said.
“These Millennials are finding space in their budgets ... for going out,” he said. “When they start forming households in bigger numbers and moving out of their parents’ homes, then you’re going to see more eating out, and the restaurant industry will do quite well over the next several years. They may not be able to buy a new car, but they can still go out to dinner.”
Though young people have slowed their rates of home ownership and of moving out of parents’ homes to start new households, experts like Francese can infer from U.S. census data and other statistics that Millennials generally are beginning to cluster in cities.
“Judging from overall population movements, they’re moving to cities or urban areas,” Francese said. “There are more ways to make a living in a fairly large urban environment than in a low-density suburb. And in an urban environment, there are restaurants everywhere.”
Seeking play in work
In the near term, unemployment will be a struggle for the generation, particularly among young men. According to the 2010 census, men aged 25 to 34 had an unemployment rate of 10.9 percent, while the rate for women aged 25 to 34 was 9.1 percent. The national average unemployment rate for 2010 was 9.6 percent.
Francese said the Millennial generation’s depressed wages — stemming from lower rates of education among men, fewer job prospects and globalization — are causing their baby boomer parents to pick up some of the spending slack.
Despite a difficult job-search process, however, Millennials who come to work in the industry adjust quickly, executives say.
Kat Cole, president of Atlanta-based Cinnabon, said Millennials’ prolific texting and social-media interactions don’t make them any more or less prepared to work or to grasp hospitality than she was when she entered the industry at age 17.
“What has to change is how managers and trainers teach them reactive skills and face-to-face interaction skills,” Cole said. “If their only customers were Millennials, there’d be no problem. The gap we’re trying to bridge is the multigenerational gap.”
The keys to connecting with this age group from an employee perspective, Cole said, are building a fun corporate culture and leveraging social media to match the commonly held notion that anybody can be a star online — think of how pop star Justin Bieber launched his career with YouTube videos recorded in his bedroom.
“Millennials value being recognized in mass forums,” she said. “Just draw that line to the way they’re getting attention, whether it’s through YouTube or Facebook. You have to offer the same opportunity as an employer; develop contests, activities and events that mimic that mind-set.”
With this demographic set, the marketing and human resources departments “have to play nice” and coordinate a brand’s public image online, Cole said, because Millennials evaluate restaurant companies simultaneously as places to shop and to work.
Dennis Lombardi, executive vice president at Columbus, Ohio-based WD Partners, agreed that Millennials are likely to assess restaurants as both dining destinations and workplaces.
“This is not a lost generation in terms of opportunities to bring them to a restaurant,” Lombardi said. “You have to manage your brand’s social image online as a great place to meet. If you’re getting slammed consistently on Yelp and other review sites, you’re going to have a hard time bringing in Millennials.”
He suggested restaurants go after young consumers by having a social-media strategy and building up late-night business with “reverse happy hour” drink and appetizer specials, knowledgeable bartenders and flexible seating that allows guests to come in and out of big groups. But don’t alienate other core diner groups by courting Millennials too overtly, he said.
“That’s not as hard as it sounds,” Lombardi said. “Let’s say the boomers have an earlier dinner and are gone by 9:30. Then you can pick Millennials up later when they’re off work — change the lighting and music levels and put more emphasis on the bar.”
Bring on the technology
From a human resources or operations angle, young people are quicker to embrace new technologies that make restaurants more efficient, Lombardi added. He cited touch-screen point-of-sale systems or mobile hand-held payment terminals as examples, as well as Web-based labor scheduling systems that empower crewmembers to switch and cover one another’s shifts with a social-network functionality similar to tweeting.
Younger consumers also are more open to the latest restaurant marketing tools. A February 2011 technology survey by point-of-sale vendor ParTech showed that 16- to 24-year-olds are enthusiastic about interacting with restaurants on their mobile phones.
While 45 percent of all respondents said they had no interest in having location-based restaurant offers pushed to their mobile phones, 72 percent of the youngest demographic surveyed said they had some interest in those promotions. When ParTech asked about future mobile-phone technology that would allow coupon redemptions and payment processing, 37 percent of Millennials identified that as a positive development, compared with 29 percent of all respondents and only 11 percent of the 55-and-older demographic.
Younger consumers have said repeatedly that they are more comfortable using a computer or mobile phone to order food than their older counterparts and parents.
According to a 2010 survey conducted by Chicago-based research firm Technomic, cited in a recent report from the Center for Hospitality Research at Cornell University, 43 percent of respondents had ordered from a restaurant online, and 23 percent had ordered food via text message. By age cohort, 60 percent of respondents between age 18 and age 34 had used online ordering, compared with only 35 percent for respondents 35 and older. The study also found that younger consumers were more likely than 35-and-older consumers to order via text, 29 percent compared with 20 percent, or by smart phone, at 8 percent compared with 2 percent.
Of the respondents who had used electronic ordering, younger consumers were more likely than older customers to say online and mobile ordering were easier, faster and more accurate than placing an order with a live restaurant employee.
Food and then some
New research shows young consumers also are increasingly receptive to restaurant brands that provide content beyond the food they serve.
Spartanburg, S.C.-based Denny’s launched its “Always Open” Web series in early March as a way to leverage its new “America’s diner is always open” tagline. The videos are distributed on Dennys.com and College Humor.com and star comedians like David Koechner and Sarah Silverman. The humorous interviews that take place in the booth of a Denny’s are meant to attract young viewers and show that the family-dining brand is “open not just 24-7, but also open to different people and conversations,” said vice president of marketing John Dillon.
“By design, we created ‘Always Open’ to speak to the Millennial generation in a different way,” he said. “With that generation, it’s important to go beyond basic broadcast media and to generate a relationship and entertain them.”
The key benefit for Denny’s happens when viewers share the webisodes with friends via social media, allowing more people — especially Millennials — to see and relate to the brand in a new way, Dillon said. When young people start punching their weight economically, they’ll have favorable perceptions of Denny’s, he added.
“That’s why it’s so important to build a relationship with Millennials rather than ‘rent’ them,” Dillon said. “We believe that could help sales currently and [build] a foundation of guests for years to come.”
At least one marketing study shows the Web series is improving perceptions of Denny’s among consumers 18 to 34 years old. According to New York-based YouGov BrandIndex, which measures brand perceptions for hundreds of companies by interviewing 5,000 consumers per weekday, Denny’s “impression score” with that demographic went from a low of negative 4.3 March 1 to a high of 25.4 March 24. The impression score is calculated by asking consumers, “Do you have a general positive feeling about the brand?” and subtracting negative responses from positive ones.
YouGov BrandIndex senior vice president Ted Marzilli said this case shows young consumers could welcome similar projects if the brand is the setting and not the content.
“The entertainment has to be good,” Marzilli said. “If the content were horrible, they wouldn’t be tuning in. [But] they wouldn’t downgrade Denny’s, necessarily, because maybe that brand wasn’t even on the radar before.”
Marzilli surmised that 18- to 34-year-olds are open to this kind of marketing because they enjoy the comedy and don’t necessarily notice that Denny’s is the setting for it.
“For those people, it’s blissful; for Denny’s, it’s perfect,” he said.
Milford, Conn.-based Subway also has entered the online-video arena as a way to generate positive brand associations with a younger audience, and their effort actually puts young people to work creating the content. Its “Fresh Artists” partnership with the University of Southern California’s School of Cinematic Arts resulted in two student-filmmaker teams getting their Web series produced, distributed online and showcased at the South by Southwest digital conference in March. The videos did not contain overt product placement for Subway, but the restaurant served as a setting for a few scenes.
Marzilli said reaching Millennials requires such new approaches because young viewers are prone to multitasking and fast-forwarding through commercials.
“It’s harder to reach them than decades ago,” Marzilli said. “They’re probably a little bit more jaded, having lived through some times that are rough. You can’t be as obvious trying to reach this group.”
Demographics expert Francese suggests marketing intently to young women.
“Every restaurant owner ought to remember that this generation is very diverse and that women are extremely important in the decision-making process,” he said. “There are probably lots of situations where they are making more money than their spouses and will be key decision makers.
“If I were in the restaurant business today, I would focus a lot of my branding efforts on Millennial women,” he continued. “A higher percentage of them are college graduates, they have significant earning power, and they’re quite sensitive to being ‘dissed.’ If they think you’re marketing to the guy because you think he’s the decision maker, forget it.”
Contact Mark Brandau at mark.brandau@penton.com.
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