Noodles & Co. is banking on a new 10% delivery surcharge, as well as continued culinary innovation and aggressive franchising, to keep up its positive sales momentum.
The Broomfield, Colo.-based fast-casual chain notched its sixth consecutive quarter of positive same-store sales growth this week as it announced a comps increase of 2.1% systemwide for the quarter ended Oct. 1. Total revenue increased 1.4% to $118.3 million during the quarter.
Perhaps most notably, Noodles’ digital sales grew 47%, accounting for 23% of total sales, and contributed to total off-premise sales of 54% of sales overall.
Delivery made up 7.6% of sales in Q3, and in late October, the 458-unit chain added a 10% delivery surcharge systemwide. The chain reported little to no reduction in delivery sales after implementing premium pricing.
“While still early, we are pleased with the results,” Noodles CEO Dave Boennighausen said in a call with analysts Thursday. “Additionally, we are continuing to test direct delivery, executed by third parties but ordered through our native digital channels to enhance delivery margins.”
The chain is seeing solid sales of its new cauliflower-infused rigatoni, on par with the successful introduction of its zucchini noodles last year, Boennighausen said.
“We think it’s a bit unfair to absolutely compare it to the zucchini noodle, which had the ability of bringing in lapsed users that really haven’t thought through the brand in a while because of the perception of the lack of health from the menu,” he said. “Cauliflower, on the other hand, is an extremely versatile noodle. We see that much more as a frequency driver.”
Noodles has been conservative about franchising growth in recent years as it worked to streamline operations and introduce new menu offerings. But that slow franchise growth is about to change, he said.
“You will see us be more aggressive on the franchise side,” he said. “That’s where a lot of the new market growth will occur.”
In addition to boosting digital growth and furthering its plant-based menu platform, Noodles is working to grow its catering program. Catering currently makes up just 2% of sales, but Boennighausen called it a “significant driver for 2020.”
“For a brand [whose] choices are one of the absolute strengths of the brand, we are absolutely a great fit for catering,” he said. “We haven’t really invested much in the past.”