Turning an interesting startup into a major industry player takes a lot of vision, leadership and a taste for the risky. This year, Kevin Reddy made it all look easy.
Coming in as an outsider and taking a maturing startup to a whole new level of growth and sales success is one thing, but doing it in the midst of a crushing recession is quite another. That’s just what Kevin Reddy, president, chairman and CEO at Noodles & Company has done.
Since taking the helm in 2005, he’s assembled a management team that together has bucked the recent industry-wide inclination to hunker down and play defense. He’s doubled the company’s size to 200 company-owned and 25 franchised units—including 20 to 25 new units added this year for double-digit growth. He’s entered major metro markets well beyond Noodles’ traditional Midwest base, being aggressively opportunistic during the real estate downturn. And he’s made bold menu, operations and marketing moves that have fueled same-store sales gains of more than 20 percent in the past three years with no price hikes, no couponing, no discounting, no bargain-priced LTOs.
Clearly, Reddy was the right guy at the right time for the globally inspired noodle shop concept. Founded by Aaron Kennedy in 1995, the chain had done well and had a loyal customer base. It had carved out a unique niche in the competitive fast-casual arena. But Kennedy and his board recognized that to take it from entrepreneurial startup to sharply focused, well-positioned growth brand required an infusion of new leadership.
Reddy came to Noodles & Company after more than 20 years in management positions at McDonald’s Corp. followed by seven years leading the quintessentially entrepreneurial Chipotle Mexican Grill, which McDonald’s acquired. That combined experience provided the right skill sets—in-depth knowledge of infrastructure, systems and procedures plus success in growing a startup—to enable him to quickly assess and strategize at Noodles.
“McDonald’s financial resources and supply chain made it possible for us to grow Chipotle with a high risk tolerance. It was an advantage that few entrepreneurial startups have,” Reddy says. “At Noodles, the board basically said, ‘We’ve had a great run. Now let’s make it better, and let’s start with a clean slate.’ So there was a lot of strategic work needed to figure out how to keep the brand relevant, how to make it compelling and to do so while managing the financial risk.”
Big moves, big results
Lack of massive financial backing hasn’t stunted Reddy’s willingness to take risks. On the contrary. Within months after joining Noodles & Company, he set in place a series of bold initiatives to recast the concept on three fundamental fronts– food, operations and atmosphere.
He tackled menu optimization first, streamlining it with fewer items and organizing it into flavor categories–Asian, Mediterranean and American. “And we went to line pricing,” he says. “One set price for a small bowl, one price for a regular, a set price for proteins and veggies. We wanted people to be able to experiment and enjoy the menu without being confused on price. When we did that, we actually lowered prices by 2.5 percent while other chains were raising theirs.”
Immediately after the re-engineered menu debuted, transactions began to grow and have grown steadily since, according to Reddy. Average checks stayed about the same and guest satisfaction scores soared. “Peoples’ view of our value proposition went up,” he says.
The second phase of Noodles’ menu optimization strategy saw the addition of Trios to the menu, enabling guests to customize a meal with their choice of a protein, a soup or salad and pasta side. Reddy says it was an education to get people to think differently about how they interact with the menu, but that sales quickly grew. Sales of Trios are now well into the double digits from a product mix standpoint, he says.
In operations, the focus was two-pronged: establishing systems to assure consistency and revamping kitchens to improve thru-put. “In fast-growing, entrepreneurial companies, sometimes you grow faster than your infrastructure and systems. We had a little bit of that, so we became very disciplined. We started to say, okay, if we’re going to replicate the brand we have to be consistent. These certain things are critical to success so we’re going to do them and do them well, and we’re going to do them the same way every time. We put together a disciplined training program and specific tools for food and labor cost management, preventative maintenance tools, guidance on scheduling—everything you need to run a restaurant on. Our intent was to get the foundation correct and to a very high level of consistency.”
Kitchens were redesigned, new equipment was brought in and the flow of people in the back-of-the-house was repositioned. Likewise, changes were made to the look and feel of the units to enhance the atmosphere. Inside the look is lively, with different seating styles and arrangements to accommodate different dining occasions. Outside, the look is bolder and more distinctive.
“We didn’t want to make it incrementally better,” says Reddy, “we wanted to make it significantly better.”
Creating the buzz
Much of Noodles & Company’s focus this year has centered on marketing. Its key initiatives strike a balance between online social networking via Facebook, flickr, YouTube and a new blog dubbed “& Company,” and a big push on local community marketing.
“The engagement of our guests with the brand via social media is really positive, and it’s a great way for us to reinforce our brand, especially our healthy-to-indulgent messaging,” Reddy says. “At the same time... we host a lot of benefits and we put much more money into people and the community than into traditional media. It’s labor intensive, but it enables us to get out and talk about the brand. We always work to move a guest from trial, to infrequent guest, to frequent guest, to loyal guest. To do that, you have to be patient and diligent in making those connections.”
As part of a newer, more deliberate focus on marketing its healthy menu options, Noodles recently launched a partnership with Slow Foods in the Colorado market in support of that organization’s school gardens program, Seed to Table. The chain hosts fundraising events, its team members volunteer to help build and maintain the gardens, and it participates in youth farmers markets, where Noodles chefs incorporate the students’ harvests into their dishes. Plans are for the partnership to expand to other Noodles markets next year.
The company also developed an educational Good Balance program to help guests make food choices based on dietary needs. Point-of-sale materials available in-store and a section on the Noodles’ Web site offer menu suggestions for guests watching calories, carbs, fat, or sodium. Such efforts helped the chain garner recognition as the #4 healthiest fast-food restaurant in the nation by Health magazine.
Looking ahead, Reddy says he’s not daunted by predictions that the economy will still be weak in 2010. “We’re not chasing a certain number of units, but we will definitely continue to deliver the metrics for a high-growth concept, whether that’s 15 percent or 20 percent. As long as we keep running restaurants we’re proud of, we’ll deliver the economic results.”
Since taking over as chief Noodle ambassador, Kevin Reddy’s been on a roll. Highlights under his watch to date:
- Doubled company size, with 20-25 units added this year
- Expanded into new major metro markets
- Re-engineered the menu—condensed, categorized by flavor, simplified
- Enhanced customization opportunities for guests
- Introduced balanced-meal Trios, family-style/catering portions
- Dropped individual item pricing, went to line pricing
- Lowered prices 2.5 percent
- Redesigned kitchens for better thru-put
- Created new training programs, operations guides to ensure consistency
- Updated interior and exterior trade dress
- Launched online/social networking marketing initiatives
- Pushed “community-focused Noodle ambassador” in GMs’ job description
- Partnered with Slow Food’s school gardens program, Seed to Table
- Increased marketing focus on health and nutrition
- Hit same-store sales growth of more than 20 percent in the past three years—with no discounting