McDonald's just reported a 3 percent revenue decline. This is a stunning reversal in the company’s history. From 2005 to 2013, McDonald's grew revenues by almost 50 percent, or $10 billion.
Why did McDonald's see its sales fall? In a word: millennials.
By 2014, when McDonald's began to experience declining revenues, the average millennial was 23 years old. As adults, millennials are now the most employed demographic group in our economy. They are financially recovering from the Great Recession and school debt. And they are taking over our economy!
With the emergence of millennials as the economic drivers of our economy, McDonald's faces a stark reality: Only 1 out of 5 millennials have eaten McDonald’s signature Big Mac hamburger.
Even more telling for future fast food sales: Millennial parents represent 42 percent of households with children.
The question confronting the fast food industry is whether millennial moms will take their families to eat fast food.
California millennials define the fast food industry’s revenue crisis
I raised my two millennial generation kids in Moraga, California. Moraga is a suburban town located in the East Bay of San Francisco. When I moved to Moraga in 1997, the town had three fast food chain restaurants. One is now closed. Another is about to close.
This is the fast food industry’s worst nightmare come true. Moraga used to be the industry's type of town. It is a town centered around neighborhoods, great schools and kids. “Moraga Mom” is a term of pride earned by dedicated mothers.
What happened to fast food in Moraga?
My own experience is a possible explanation. My millennial-generation kids became food activists during their teenage years. I bought them computers, and one of things they did with them was figure out how to think for themselves. And they decided fast food was a threat to their health and future. Because I was 30 pounds overweight at the time, my kids began banging on me to stop eating fast food. Every day they tried to get me to stop drinking my beloved Diet Coke.
This experience with my kids was not an isolated incident. Millennials at Moraga’s local college, Mount St. Mary, started a student-operated organic garden. The students invested their time at this garden to achieve both a healthier diet plus food cost savings.
Moraga Moms join millennials to focus on healthy food
At the same time I was becoming aware of how millennials were shifting away from fast food, I also began to see increased health activism from Moraga Moms. I was honored to serve on Sustainable Moraga, a volunteer organization growing awareness about what our town could do to be sustainable. When I first joined this group, it was a lonely experience of meetings attended by a small number of engaged citizens. But then something telling happened. A Moraga Mom showed up at our meeting in panic mode over the use of pesticides at the town’s middle school. A longer story made shorter, this mom galvanized her peer group and was able to stop pesticide use at our schools.
Examples of increased health activism by Moraga Moms extended throughout the community. My wife joined other local moms in volunteering at the organic Moraga Community Gardens. Moraga also started a farmers market, and it is anchored financially by Moraga Moms’ purchases.
It was this nexus of Moraga’s moms and millennials that undercut the sale of fast food restaurants in the city. Millennials saw fast food as not being cool and not aligned with their quest for purpose. Moraga Moms rejected fast food as unhealthy for their families. The area restaurants with growing sales are the ones offering locally-grown, fresh and healthier food. Their food still has to be tasty. But now it also has to be healthier.
The three drivers that are pushing fast food sales over the cliff
Based on my experiences, and key demographic trends reshaping our economy, these three drivers are pushing fast food sales toward a revenue cliff:
- Over 70 percent of the boomer generation, the anchoring fast food customer, is now overweight or obese. The boomer generation is slowly, but unavoidably, facing a diet-based health crisis that will force them to reduce or stop their purchase of fast foods and soda. The boomer generation is emerging into a era where they will be too sick to eat fast food or drink soda.
- The millennial generation is moving past fast food. Lower prices will not win them back. Doing less harm will not win them back. They want purposeful food that is diverse, socially engaging and healthy. Until the fast food industry can deliver that recipe, it will not win millennials as customers.
- Millennial moms are emerging as a disruptive demographic group that may forever crush the fast food industry’s revenues. If 80 percent of millennials have never eaten a Big Mac, then how likely will it be that they will ever serve it to their children? That question haunts the fast food industry’s revenue growth potential and may just determine its future.
Bill Roth is a cleantech business pioneer having led teams that developed the first hydrogen fueled Prius and a utility scale, non-thermal solar power plant. Using his CEO and senior officer experiences, Roth has coached hundreds of CEOs and business owners on how to develop and implement projects that win customers and cut costs while reducing environmental impacts. As a professional economist, Roth has written numerous books including his best selling The Secret Green Sauce (available on Amazon) that profiles proven sustainable best practices in pricing, marketing and operations. His most recent book, The Boomer Generation Diet (available on Amazon) profiles his humorous personal story on how he used sustainable best practices to lose 40 pounds and still enjoy Happy Hour!