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How Rebranding to Millennials Could Reinvent Fast Food

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Many names and adjectives have been leveled at the millennial generation. Few of those are complimentary, but one more may need to be added as the generation begins to mature into consuming adults: market-driving. With a great number of Generation Y, also known as Millennials, leaving college and entering the workforce, businesses are discovering that new policies and advertisements are needed to keep market share with a consumer that makes up 25% of the U.S. and possesses $1.3 trillion in spending power. 

With Baby Boomers and Generation X Americans retiring or cutting back in more difficult fiscal times, the millennial market has never been more vital. According to a recent study by RBC Capital Markets , however, restaurants visits are down and long-recognized brand names are seeing diminished market return per advertising dollar. Some companies are already looking to modify their behavior, but how can this be done in today's fast food market?

Adding in a digital component
Businesses are somewhat hesitant to add a digital component to what has historically been seen as a "friendly" industry based on the connection made between employee and customer. Companies such as Panera Bread (NASDAQ: PNRA  ) that are seeking to encourage a cafe style atmosphere have grown using this model. Unfortunately, for those same companies, it is increasingly apparent that while it is a bedrock among older consumers, a newer approach has become dominant as millennials become increasingly technologically connected. 

With the rise of smartphones, fast food chains have been increasingly open to the idea of utilizing technology to push rewards programs and the like. Though usually associated with businesses like Starbucks  (NASDAQ: SBUX  ) that are built on more minimal menus and quick customer turnaround times, businesses that are built on sit-down atmospheres are adding new electronic avenues to bring in and retain customers. 

The issue with this new option lies not in utilized technology, but rather in the most important factor of a dining experience: the food and how it is branded. 

Rebranding foods to create relevance
Fast food used to be a cheap and easy food investment for families looking for a meal on the go. However, markets have since spread into different perceived classes of restaurant. While research has been showing that (historically) standard quick-service restaurants (QSRs) such as McDonald's or Burger King have seen diminished market performance, fast casual dining (like the aforementioned Panera and Chipotle Mexican Grill  (NYSE: CMG  ) ) has been making a surge.  While part of this could be attributed to ambiance, each of these currently thriving fast casual experiences markets a specific set of guiding principles that purportedly guides business.

In the case of Panera, this is expressed as uniting people through breaking bread and recreating the home. For Chipotle, this has been in the principle of using local produce whenever possible and through the use of "Food with Integrity," or as naturally as possible. While one could equivocate the truth of the statements or the nutritional content of foods, the overriding messages evoke a very different set of emotions than those of standard QSRs. 

This emotional attachment could have very little to do with the situation, but retail consultant David Ian Gray of Vancouver DIG360 Consulting Ltd offers the following in support. "Millennials who can afford the option are choosing healthier dining options or even more 'authentic' options that align a restaurant's values with their values in a way that may not show up in their other shopping behaviors."

A redefined market
Should it be any surprise that fast casual dining establishments may be the response to a growing trend in fast food? Given the initial tendency for fast food dining to occur in the customer's car (as seen in the explosion of drive-in dining in the 1950s-60s), it should not be. 

Though somewhat pricier than its faster service counterparts, there is an undeniable new style of preferred dining by the younger generation.  Compromising between fast food convenience and perceived valuations of finer casual dining, the invention of fast casual cafes indicates the purchasing power of the millennial and how the generation as a whole is reshaping perceptions of the fast food market. Though the fast casual experience may make internal stratification by serving wine alongside coffee and snacks, the new trend of fast food may be a little slower after all.

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Kurt Avard

A January 2014 addition to the Motley Fool team, Kurt Avard prefers to focus on the "dark" side of business and how it interacts with politics. Rarely writing on the same thing twice, he feels that, if he manages to convince you that the two are inexorably linked, he has adequately done his job. Follow him on Twitter @kurtsavard

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