Restaurants should expect a modest negative impact on sales with student loan repayments

Dive Brief:

The resumption of student loan payments in October will have a negative, though modest, impact on restaurant spending, BTIG said in a report emailed to Restaurant Dive.
A BTIG survey of 1,000 student loan borrowers revealed that 82% plan to resume paying back their loans next month. Surveyed borrowers had average monthly payments of $250 to $300, in line with previous reports estimating that average monthly payments would be about $275.
Operators like Starbucks, Chipotle and Shake Shack that serve higher-income, more educated customers will likely see a greater impact on same-store sales growth, BTIG said.

Dive Insight:

BTIG estimates that 24 million out of 45 million student loan borrowers benefited from the payment pause that began in March 2020. With the resumption of their payments, impacted consumers will spend $80 billion on loan repayment annually, BTIG estimated. About 60% of the borrowers BTIG surveyed said they would dine out less often or would reduce how much they spend when eating out.

“While we don't expect these consumers to significantly change their habits, we do believe that some could manage their check, trade down within the menu, or modestly reduce their visit frequency,” BTIG said.

Student loan borrowers tend to be higher earning consumers. Three-fourths of impacted borrowers earn more than $60,000 annually; one-third earn $100,000 or higher; while 57% earn over $75,000 annually. The group of consumers earning more than $100,000 is of particular interest to Starbucks, Chipotle and Shake Shack, all of which have exposure to consumers earning $150,000 or higher. BTIG found that 72% of these high-income consumers ordered from the coffee chain, compared to one-third of consumers earning $45,000 or less. Comparatively, 30% of these high-income consumers visited Chipotle and about 20% of these guests visited Shake Shack frequently.

This exposure to high-income consumers could have some of these chains rethinking further menu hikes. Last year, Chipotle said its price increases had little impact on high-income households visiting the chain. Earlier this year, Starbucks saw a boost in sales from cold espresso drinks and other coffee add-ons, areas that could be impacted as student loan borrowers try to restrain costs.