Our research on behalf of New York-based Rosa Mexicano Restaurants, reinforces the importance of having the right mix of food and atmosphere to attract Millennials. The main reason young adults eat out is to ‘relax’. They want a place that isn’t too stuffy and the food is exciting and different. What stands out about Rosa’s are their signature items: tableside-prepared guacamole (photo left) and pomegranate margaritas. In addition, each of Rosa’s eight locations has unique decor and a lively bar. When I visited their Lincoln Center restaurant last month; there was no sign of a slow down.

Unfortunately, Rosa’s is the exception rather than the rule. Full service restaurant revenue has declined steadily since 2005, with fine dining being hit hardest. (IBIS)

With an average entree price of $19.52, 50% higher than at a casual restaurant, it’s no surprise that 47% of consumers say they are “spending less at fine dining restaurants” (Mintel). Consequently, fine dining is one of the sectors expected to be hardest hit by the recession. Technomic predicts revenue falling as much as 12%.

Who eats at fancy restaurants? Just about everyone it turns out. It’s true that frequency of eating at fine dining restaurants increases dramatically with income; all but the lowest income households eat at them at least a few times a year. The average household eats out at a fine dining restaurant about 8.6 times a year. Younger adults, 18-34 years, are especially important to fine dining restaurants with 10.9 visits a year. Their high level of eating out makes them 17% more important to casual restaurants as well.

Beyond mere frequency, younger age groups are also more likely to have larger dining parties than older age groups, a revenue driver that is only partially outweighed by the fact that “the larger the dining party becomes, the less is spent on a per-person basis.” Finally, Mintel reports menu item sharing is more prevalent with younger patrons, “as a form of socializing and experimenting, as well as a way to keep costs down. Older people may be more apt to view the occasion in more intimate terms with a loved one.”

In any event, younger patrons are critical to fine dining and casual restaurants, so it’s not surprising to learn marketers are finding innovative ways to keep young adults from trading down to fast food or cooking more special meals at home. The Wall Street Journal (“Bar Wars“) reports urban high end restaurants are converting some of their dining space to bars and serving more affordable ‘bar food’. Not only are the smaller portions and less expensive ingredients of appetizers more profitable, the margins on beer, wine and cocktails are much higher than on food. Here are just four examples of this new trend:

Alain Ducasse’s Benoit bistro in New York recently rolled out a bar menu that includes sliders and $1 deviled eggs.

Daniel Boulud, the Manhattan chef behind one of the city’s most formal restaurants, Daniel, plans to open DBGB Kitchen & Bar, featuring 24 beers on tap and homemade sausage and hot dogs, in May or June.

Christophe Émé, chef and owner of Ortolan in Los Angeles, has begun calling about 100 customers a week to tell them about his new bar menu.

Thomas Keller’s Per Se restaurant in Manhattan, where the only dinner option has been a $275, nine-course prix fixe menu, launched an a la carte menu for its lounge area last week. Diners are seated around coffee tables.

Eric Greenspan’s Foundry, in Los Angeles, featured high end cuisine until 3 months ago when it was turned into a lounge with nightly live bands, cocktail waitresses and promotions such as “fried-chicken-and-waffles night.”

Casual restaurants are taking a different road to attracting Millennials, emphasizing low prices and special promotional offers. For example, T.G.I. Fridays is advertising its top ten entrees available on Friday’s for just $9.99.