Dive Brief:
- Restaurant traffic grew 1.1% year over year in July, driven by greater spending among lower-income cohorts, according to a Bank of America Institute analysis of consumer spending.
- Restaurant spending also rose 3.3% during the same time frame, per the report.
- These shifts are driven by a combination of easing menu inflation and wage growth, which has raised the spending power of younger consumers — particularly Gen Z — who are more exposed to labor market shifts than older diners. Gen Z has seen the fastest increase in restaurant spending of any generational cohort in recent months.
Dive Insight:
These positive shifts come despite considerable macroeconomic uncertainty, including fuel price spikes caused by the Iran War.
While some chains have seen falling traffic and other analyses of consumer health have been more pessimistic, this earnings season yielded some anecdotal evidence aligned with Bank of America’s findings. Cava, for instance, saw strong gains in traffic in lower-income trade areas as it held its pricing below the general rate of inflation.
Overall, “lower earners’ restaurant spending increased 4.1% YoY in July, the largest improvement over the past year compared to other income cohorts,” Bank of America found.
Other major chains also reported that traffic was an important element in their same-store sales gains in recent months, indicating that menu price hikes may not be the dominant factor in recent same-store sales growth.
“Higher prices are part of the picture, but the return to positive transaction growth suggests consumer engagement is improving too, with more consumers dining out and some consumers possibly dining out more often,” Bank of America found.
Independent restaurants are outperforming chains in terms of sales growth, and bars saw stronger sales growth over the last several months than any other segment. While that may be an artifact of the 2026 FIFA World Cup resulting in more drinking occasions, it could also indicate that trends away from alcohol consumption have been exaggerated.
Younger consumers, particularly those in Gen Z, account for a disproportionate increase in restaurant spending. Gen Z spending jumped 7% year over year in July, “almost double the rate of [m]illennials, the next fastest-growing generation,” and has outpaced all other generational cohorts for several months running.
“Gen Z are the only generation to have increased spending across all restaurant types,” according to the bank’s card data. Of note, Gen Z spending at bars rose by between 9% and 12% over the last three months.
Bank of America attributed this generational divergence in spending to faster after-tax wage growth, which benefits younger consumers who are more exposed to labor market conditions. Baby boomers, who are often entering retirement, have seen the slowest spending growth in recent months.
Consumers are shifting some of their grocery spending to restaurants relative to 2025, the bank found. This comes despite increased emphasis by grocers on foodservice and ready-to-eat food programs. The report found that while menu prices are still rising faster than grocery prices, the rate of menu price increases has slowed in recent months.
