American Fast-Casual Chains Struggle as Young Consumers Cut Costs

American fast-casual dining chains are facing significant challenges as younger consumers tighten their budgets. Major players like Cava, Chipotle, and Sweetgreen reported disappointing earnings in recent quarters, attributing their struggles to a shift in consumer spending habits. Specifically, customers aged 25 to 35 are opting for more affordable dining options or preparing meals at home, impacting the sales of these once-popular dining establishments.

Cava, known for its customizable Mediterranean bowls, has seen its stock price plummet nearly 60% this year after an impressive 162% surge in 2024. CEO Brett Schulman noted the challenges facing their Gen Z clientele, including the resumption of student loan repayments and a significant rise in unemployment within that demographic. Despite optimistic projections earlier in the year, Cava has lowered its same-store sales outlook for the rest of 2025 to 3% – 4%, down from an earlier forecast of 4% – 6%.

The fast-casual sector has become increasingly viewed as “too expensive” by consumers. According to Brian Vaccaro, a restaurant analyst at Raymond James, the effects of slower wage growth are beginning to reach middle-income groups and young professionals who previously frequented these restaurants. He remarked that while sales in the industry have grown since 2019, transactions have declined by 7%.

Fast casual restaurants are not just competing against each other; they are also struggling against the lure of grocery stores. R.J. Hottovy, another analyst, pointed out that consumers are shifting their spending towards grocery chains like Trader Joe’s as they seek more affordable meal options. This trend was echoed in Chipotle’s latest earnings report, where CEO Scott Boatwright acknowledged that younger customers are “pulling back meaningfully.” He emphasized that the chain is not losing customers to competitors but rather to home cooking.

Chipotle’s stock has dropped 50% this year, and the company has revised its sales-growth forecast for the third consecutive quarter. Despite these challenges, Boatwright maintains that Chipotle offers better value than its fast-casual peers, claiming it remains 20% to 30% cheaper than competitors. Nevertheless, he acknowledged that the perception of fast-casual dining as an unaffordable option is a significant hurdle.

Sweetgreen, which saw its stock rise nearly 200% in 2024, has experienced a drastic decline of 83% this year. The company’s market capitalization has fallen to around $680 million, a sharp drop from its nearly $5 billion valuation at its initial public offering in 2021. CFO Jamie McConnell reported a 9.5% drop in same-store sales and nearly a 12% decline in customer visits. McConnell noted that the 25 to 35 age group, which constitutes about 30% of their customer base, has reduced spending by 15%.

In an effort to regain value-conscious customers, Sweetgreen plans to promote a 25% increase in protein portions in its offerings. Analysts remain cautiously optimistic about the long-term prospects of these chains, suggesting that consumer demand for high-quality, fresh ingredients at reasonable prices will persist.

The current struggles of Cava, Chipotle, and Sweetgreen highlight a broader shift in American dining habits, particularly among younger consumers. As economic pressures mount, these chains must adapt their strategies to woo back a demographic that is increasingly focused on affordability and value.