TikTok, Tight Wallets And Tenets: How Gen Z Is Changing Restaurant Retail
When McDonald’s opened the first location of CosMc’s in suburban Chicago in December, 22-year-old food TikToker Nicole Ludwig was one of the first to grab a phone and document the new concept restaurant aimed squarely at young Americans.
Ludwig, whose more than 175,000 TikTok followers enjoy her daily food content, is a part of an ecosystem of young influencers tapped into the latest food trends and driving conversation around them. The four videos Ludwig posted on TikTok, reviewing CosMc’s specialty beverages, coffees and snacks on Dec. 12, have over 2 million combined views.
"I posted and a lot of people were like, 'I want to try this,'" Ludwig said.
Largely fueled by social media, CosMc's is a hit. Lines are reportedly two to three hours long for specialties like the Sour Cherry Energy Burst, Turmeric Spiced Latte, S’Mores Cold Brew and Creamy Avocado Tomatillo sandwiches, and McDonald’s plans to roll out the drive-thru-only concept to nine more markets this year, starting with Texas.
The rollout is emblematic of Gen Z’s growing influence on restaurant retail. And when the world’s largest fast food chain jumps onto a trend, there’s almost certainly money for companies to make.
As the oldest Gen Zers head into their mid-20s, enter the workforce and increasingly become economic drivers, the restaurant world is on the clock to figure out how to cater concepts to a new generation. The age group is more persuaded by social media, has a more acute social conscience and is less willing to open their wallets than any generation before it.
"We have to keep evolving. The people that don't are the people that are a little bit behind the curve now where they're trying to catch up and see how can we attract this new generation," said Stephany Ruiz, vice president of portfolio marketing and experience for Trademark Property Co.
"Gen Z has this reputation of being a short attention span type of group," she added. "But I do think that they have brand loyalty [and] brand equity. Similar to post-Covid, we need to adapt or die."
Gen Z, defined by the U.S. Census Bureau as people born between 1997 and 2013, has $360B in disposable income and is gradually gaining spending power as they age out of college and enter the workforce, according to a May 2023 presentation from restaurant consulting group The Culinary Edge.
Like every generation before it, Gen Z is clamoring for fresh ideas, turbocharging new chains and changing up the restaurant-retail mix in shopping malls and mixed-use centers. But they are doing so in new ways that demand new approaches.
Gen Z has a different palate: It’s flocking to chicken wing chains like Wingstop and Wing Zone, as well as donut shops like Winchell’s, Yum Yum Donuts and Shipley Do-Nuts, CNN reports. And it is famously mobile-only in the wake of the pandemic, shying away from sit-down restaurants in favor of mobile apps.
Gen Z is also spending 11% less on restaurants than millennials were at the same age, according to The Culinary Edge. That makes new strategies to capture a more limited dollar pool more important than ever for restaurant retailers.
Some retailers are turning to online loyalty programs to reward continued patronage, like IHOP’s International Bank of Pancakes, and others are putting out limited-time offerings, like the Charli D’Amelio-inspired drink at Dunkin'.
But new Gen-Z friendly chains are popping up around the nation, including the growing breakfast hotspot Snooze.
"Snooze is like the modern-day IHOP, Denny’s," CBRE Restaurant Practice Leader Thomas Nguyen said. "You could argue CosMc’s, if they continue on their runway, they could be the modern-day essentially, the younger Starbucks, right? Or the younger, modern-day Sonic."
Snooze opened its doors in 2006 and now has over 50 locations throughout the country, offering multiple elements that appeal to Gen Z. These include 95% of its sourced ingredients having to pass a rigorous set of standards as well as requiring sustainable standards for its partner companies, according to a company media kit. The breakfast joint also features several twists on classic breakfast favorites, like its Pineapple Upside Down Pancakes, Bravocado Toast and Brewmosa.
Features like that provide content fuel for food TikTokers like Ludwig, who have an outsized influence over the decision-making processes of their generational cohort. Over one-third of Gen Zers follow content creators who review restaurants, a slightly larger share of respondents than those who read articles about restaurants (34.7% to 32.2%), according to a November survey from PYMNTS Intelligence. In comparison, just 15% of Gen X respondents and 5% of boomer respondents follow that type of content creator.
"When my audience sees that these products are out, they're going to want to go and try it right away," Ludwig said.
Ludwig’s TikTok exploded in popularity in 2021 when she became one of the first influencers to begin reviewing Crumbl’s weekly rotating menu of cookies. Crumbl opened its first store in Utah in 2017 and now has over 800 bakeries in all 50 states, recently expanding internationally into Canada, according to its website.
Crumbl’s social media presence, particularly on apps that cater to younger generations, dwarfs its cookie-centric competitors. The company has 7.2 million followers on its official TikTok account and 4.2 million followers on Instagram, compared to Insomnia Cookies (110,000 and 393,000, respectively) and Great American Cookies (1,375 and 55,000, respectively).
"The idea that influencer campaigns before were just a 'nice to have,' now, it's a 'must have,'" Ruiz said. "Gen Z is really focusing on not only getting what is out there, getting a pulse on the market from these influencers, but they're taking their reviews and their content really personally."
Not everyone in the CRE space is convinced that a major investment into restaurant concepts Gen Z might like in a given moment is worth the risk.
Nguyen said that as a former restaurateur, he’s wary of trying to pinpoint trends in the up-and-coming generation and cater to them. It’s hard to build loyalty with Gen Z, he said.
"When you're young you want what is hot, what's on TikTok," Nguyen said. "A danger with that is there's always something new. And so the fear with Gen Z is you're hot one minute and then you're not the next. And not because you've lost any value, just because there's someone else that has replaced you."
But Gen Z is a values-based demographic and may be getting a bad rap from the general public for age-old perceived flightiness, Ruiz said. The generation places a lot of value on businesses that are sustainable and socially responsible, and businesses that align with those values are set up well to capture Gen Z’s interest in the long term, she said.
"They have a really bad reputation of short attention spans or being flaky and quick to just bounce from either brands or experiences," Ruiz said. "But they are loyal to a brand that aligns with their core values."
A report from First Insight found that 62% of Gen Z shoppers prefer to buy from sustainable brands and 73% are willing to pay more for sustainable products.
To reach Gen Z, Trademark Property Co. has increased its digital marketing efforts to reach their customer base where they’re at, Ruiz said. It’s important for companies to adapt to a generation of digital natives without relying on traditional methods like flyers, mailers or email marketing, she said.
The responsibility to promote a space goes beyond individual tenants: Mall operators have a huge role to play in boosting the fortunes of their shops through social media, said Josh Dean, general manager at the Yorktown Center shopping mall in Lombard, Illinois. Dean said he is constantly advertising the business on social media and tapping younger team members to stay on top of relevant trends. The shopping venue also makes use of flexible lease agreements to stay nimble amid rapidly changing trends.
When a business is successful at drawing younger customers, it boosts the others at the mall, he said.
But, Dean cautioned, "If you're going to fail, fail quickly and move on. My advice is to not be afraid to really just think outside the box."
Restaurants that are consistently successful with Ludwig’s audience of digital natives are frequently coming out with new product ideas. Subway’s new footlong cookie was a big hit. On the whole, fast food brands with sizable national presences have done a good job at adapting to Gen Z’s need for novelty, Ludwig said.
"Brands do a good job at keeping people interested, especially with their marketing and Instagram posts," she said. "A lot of brands do a really good job of always coming up with something new."
The marketing component for Trademark Property Cos. focuses heavily on Gen Z, but once customers are on the properties, spaces are aimed at offering something to people from every generation, Ruiz said. This allows the company to capture a wider swath of business than a hyper-targeted approach, she said.
The problem for restauranteurs specifically is that actually executing that vision is very difficult, Nguyen said.
"It's almost impossible," he said. "I mean, that's the money question. That's why people spend so much money on interior designers and architects, and they're trying to create a space that has its own identity that makes you feel unlike any other place you've come to for dining."
The difficult balance that restaurateurs have to strike is creating a space with a unique atmosphere without making it so niche that the concept becomes outlandish or too trendy, Nguyen said. Regardless of how much money a restaurateur spends on their businesses, it doesn't mean they'll create a memorable place that maintains a "cool factor" year in and year out, he said.
If a restaurateur fails, the space may age poorly, he said.
"It’s like an ‘80s song," Nguyen said. "There are some ‘80s songs [that] you listen to … and it sounds like something that if it came out today would be a No. 1 hit record. And then there's some other ‘80s songs that when you listen to it, you laugh because you're like, 'Man, that is an ‘80s song.'"
The jury is still out on whether CosMc’s will become a karaoke classic or a fast-burning one-hit-wonder.
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The one CosMc’s in operation is in the Chicago suburb of Bolingbrook, which opened on Dec. 7. But McDonald’s is planning on a 10-store rollout, with the other nine stores opening in Texas in the first half of 2024, company CEO Chris Kempczinski said at an investor day in December. McDonald’s plans to analyze the results of the test for at least a year, he said.
Early results are promising. The sole CosMc’s location had more than double the number of visits a typical McDonald’s had chainwide in the same month despite not operating for the entire month, according to Placer.ai data. Since the CosMc’s location is smaller than typical McDonald’s at about 2,500 SF, Placer.ai found the Bolingbrook location generated triple the average revenue per square foot, adding, "Numbers would likely have been much higher if the location had additional capacity to satisfy the overwhelming demand."
McDonald’s developed the concept by identifying ways for the company to participate in fast-growing categories in the "informal eating out" sector, zeroing in on specialty beverages and coffee, Kempczinski said. The fast food giant pegged this niche as a $100B category growing faster than the rest of the informal eating out sector and with better margins, he said.
"It's a space that we believe we have the right to win," Kempczinski said.
Whether CosMc’s is a failure or success, Gen Z isn’t going away anytime soon. Entrepreneurs will have to hone their ability to consistently generate fresh ideas and quickly adapt to trends, Ruiz said.
"Gen Z is our future for now," she said. "They are going to have a lot of buying power here in the next few years. And being able to just align ourselves and be more authentic with what their needs are, it's going to be really cool the next few years in commercial real estate."
