Bank of America: Gen X and Boomers are the only ones who can afford to eat at fancy restaurants

The bank looked at which eateries customers were picking amid turbulent economic conditions.

Households on the lower end of the income spectrum have been showing “cracks” in their spending for some time—Citigroup CEO Jane Fraser said she had witnessed the phenomenon as early as October 2023.

Warnings have also come from the CEO of Bank of America Brian Moynihan himself, who cautioned the Fed not to push consumers too far by maintaining the base rate at a two-decade high of 5.5%.

The latest research from Charlotte-based Bank of America found consumers across the spectrum are increasingly choosing to eat at more convenient, less expensive establishments—reversing a trend which emerged prior to last year.

“For six years, customers pivoted the majority of their restaurant spending to standard tier restaurants, taking market share from both premium and value tier restaurants,” Economist Joe Wadford wrote in the note seen by Fortune. “But this trend has reversed since fall 2023, as the market share of value tier restaurants has increased, while that of premium fell and standard flattened.”

Wadford defines restaurants by tiers: value, standard and premium, based on the median income of customers that frequently visit those establishments.

He added: “For example, restaurants with customers with the lowest median income were categorized as ‘value tier’ likely reflecting, in our view, restaurants with the least expensive menus.”

Citing internal transaction data, Wadford notes the growth in the number of customers spending in premium locations is slowing (down approximately 5% compared to a year ago) while value establishments have grown approximately 5% year on year.

The shifting outlook has a key driver, Wadford points out.

“This trend is being driven by younger consumers, as they take on more financial obligations and face rising costs, with their market share of premium tier restaurants disproportionately low likely due to choosing quantity over quality,” the analyst wrote.

BofA found that Gen Z—those currently aged between 12 and 27—were the least likely to eat in premium restaurants.

While Gen Z accounted for approximately 18% of restaurant visits in June 2024 the vast majority of their visits were to standard-tier eateries (where they represent 20% of all customers) followed by the value tier at approximately (where they are 13% of all customers). “Younger generations make up a disproportionately low share of customers who spend the majority of their restaurant budget at premium tier restaurants,” Wadford said in his note.

Millennials—aged between 28 and 43—eat out more than any other generation and make up more than 30% of customers. Yet they too now prefer standard and value tier restaurants, representing approximately 27% and 34% of customers in each category respectively.

This trend begins to flip among the older generations with Gen X, Baby Boomers and Traditionalists all representing a higher portion of premium customers than standard restaurant tier customers.

Interestingly Gen X—aged 44 to 59—represent a marginally higher portion of value-tier customers than luxury (29% vs 28%), but are still far more likely to dine at premium establishments than their Millennial and Gen Z peers.

Meanwhile Baby Boomers—aged 60 to 78—and the Silent Generation—aged between 79 and 99—by far prefer to dine at premium establishments, with around 40% of customers at these restaurants coming from these older two generations.

Skipping service

Wadford’s note also points out that with a rise in value chains a shift has moved away from restaurants with full service. Full-service restaurants (FSRs) are establishments where food is ordered and delivered to the table and then the bill comes afterward.

On the rise are limited-service restaurants (LSRs)—businesses where consumers pay for their meal before eating and then may have to carry it to a table themselves.

At the onset of the pandemic—unsurprisingly—demand for both LSRs and FSRs dropped, BofA card data showed, with FSRs rebounding more slowly because they couldn’t have people seated indoors.

But even compared to a pre-COVID average LSRs are maintaining an above-expected market share of around 53%, while FSRs have dropped below their pre-COVID average to between 42% to 43%.

Wadford notes: “One reason consumers are pivoting further to limited-service restaurants may be inflation. Consumer Price Index (CPI) data from the Bureau of Labor Statistics indicates that prices at these restaurants are increasing relative to June 2019 levels, but not as fast as at full-service restaurants.

“So, consumers are choosing more convenient options, but are they choosing cheaper options? It appears so.”

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