Want an idea of what companies may be big in the future? Take a look at where the kids are spending money now.
And, one of the biggest recipients of teens' (or their parents') money besides clothing retailers are quick-service restaurants, otherwise known as fast food.
Recently, Nicole Miller Regan, senior research analyst at Piper Jaffray, conducted a survey of 7,500 teens and found some surprising results which she shares with “Talking Numbers”:
1. Starbucks leads the preference for teens in the limited-service segment
Miller Regan's survey shows that 59 percent of teens prefer the limited-service segment (which includes quick service and fast casual), up from 43 percent just five years ago.
"The big picture element here is, from a decade ago, we see a trend where limited service is taking share from full service," said Miller Regan.
Though 11 percent of average-income teens and 12 percent of upper-income teens prefer Starbucks, it's the leading brand in this segment. Miller Regan's research shows that over the past seven years, Starbucks is the only company to maintain double-digit market share preference in the category.
"Starbucks is benefiting from that trend," said Miller Regan. "But, there's also a Starbuck shift going on. ... They've evolved. There are noncaffeine options [and] there are nondairy options. And, as they go into this hot-food platform … that could continue to drive future preference."
2. Teens favor Noodles by cuisine type
For the first time since the Piper Jaffray survey began, Noodles entered the top five for upper-income teens in American cuisine. The chain just has 380 restaurants, a fraction of some of its largest competitors.
"Noodles showing as a favored cuisine is actually very promising given how small they are in size," said Miller Regan. "They showed up with 7 percent mindshare. That's considered very strong. They're actually the first fast casual as well that we've seen listed by American cuisine … I think that stems from the convenient locations being in lifestyle centers. ... [Teens] can eat in and linger, do Wi-Fi, socialize, or they can take out. And, it's a better value in that they don't have to tip."
3. Chipotle trumps preference among average income teens
"Chipotle continues to rival Starbucks," said Miller Regan. "They're actually the only one to challenge the Starbucks lead."
Miller Regan notes that Chipotle wins out dramatically when the survey is broken out by gender. "They're dominant when we look at the male versus female teen results," she said. "From a male perspective, they actually trump Starbucks nearly 2-to-1."
In areas like the Midwest, where Chipotle has its roots, it trades off with Starbucks for dominance with teens. "The two of them combined," said Miller Regan, "account for one-third of preference when we look at the Midwest region."
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Miller Regan says that this survey is part of the overall research process. But, it may have implications for the future.
"Teens take these preferences with them," said Miller Regan. "As they mature into young adults, as they become working adults, as they transfer into having families, they're going to carry these preferences with them. We think that's an important part for all three of these stories."
To see the full interview with Nicole Miller Regan on teen restaurant preferences, watch the video above.
The following companies have been investment banking clients of Piper Jaffray during the past 12 months: NDLS
Other material conflicts of interest for Nicole Miller Regan or Piper Jaffray regarding companies in the universe for which she is aware include: NDLS: underwriting
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: NDLS, SBUX
Piper Jaffray usually provides bids and offers for the securities of the following companies and will, from time to time, buy and sell the securities of these companies on a principal basis: CMG]
- Piper Jaffray