Gen Z drives restaurant spending surge

Restaurant traffic and spending rose in July, driven by lower-income and younger consumers, according to a Bank of America Institute report.

Restaurant traffic grew 1.1% year-over-year in July. Spending at restaurants rose 3.3% in the same period, according to a Bank of America Institute analysis of consumer card data. The bank attributes these positive shifts to a combination of easing menu price inflation and wage growth, which has particularly boosted the spending power of younger consumers.

These gains come despite broader economic uncertainty. While some chains have reported falling traffic, other evidence aligns with the bank's findings. For instance, Cava saw strong traffic gains in lower-income trade areas by holding its pricing below the general inflation rate.

Spending by income and generation

Bank of America found that lower earners led the spending increase. Their restaurant spending rose 4.1% year-over-year in July, the largest improvement of any income group over the past year. Among generations, Gen Z is driving a disproportionate share of the growth.

Gen Z spending jumped 7% year-over-year in July. That is almost double the rate of millennials, the next fastest-growing generation. Gen Z has outpaced all other generational cohorts for several months running.

According to the bank's card data, Gen Z are the only generation to have increased spending across all restaurant types. Their spending at bars rose by between 9% and 12% over the last three months.

The bank links this generational divergence to faster after-tax wage growth, which benefits younger consumers who are more exposed to labor market shifts. Baby boomers, often entering retirement, have seen the slowest spending growth recently.

Segment performance and pricing

Independent restaurants are outperforming chains in terms of sales growth. Bars saw stronger sales growth over the last several months than any other segment. Bank of America suggests this could be an artifact of the 2026 FIFA World Cup creating more drinking occasions. It could also indicate that reported trends away from alcohol consumption have been exaggerated.

The report notes that menu price hikes may not be the dominant factor in recent same-store sales growth for major chains. Many reported that increased traffic was key to their gains. Higher prices are part of the picture, but the return to positive transaction growth suggests improving consumer engagement. More people are dining out, and some are doing so more often.

Consumers are shifting some of their grocery spending to restaurants relative to 2025. This shift comes despite increased emphasis by grocers on foodservice and ready-to-eat food programs. While menu prices are still rising faster than grocery prices, the rate of menu price increases has slowed in recent months.

Source: Restaurant Dive