Closing underperforming restaurants has been good for Noodles & Company.
The company on Wednesday reported same-store sales up 4% systemwide in the third quarter, including increases of 4% at company owned and 4.3% at franchised units.
Those sales trends improved each month through the Sept. 30-ended third quarter. And, though traffic was down 0.6% at the end of the third quarter, trends had turned positive about halfway through and the upswing continued into fourth quarter.
In October, same-store sales were up 8% with traffic increasing 1.5%, the company said.
The improved results, however, come as Noodles & Company is executing a plan to close up to 49 restaurants by the end of next year.
The Broomfield, Colorado-based chain is also looking at strategic alternatives that could include a sale, though the company had no update on that process (except to say it was ongoing).
But, after a two-year effort to overhaul the menu and reinvigorate flagging sales, it seems the work is paying off.
Despite a challenging macroeconomic climate, Noodles actually upgraded its projections for the year, saying same-store sales are expected to range between 3.6% to 4.2%. That’s higher than earlier projections of a 2.5% to 4% increase.
Noodles CEO Joe Christina said the value-positioned Delicious Duos have been a hit, driving in new and repeat business. Guests also responded well to the Chili Garlic Ramen limited-time offer, which Christina hinted could be made permanent if it continues to perform.
Restaurant-level margins also grew to 13.2%, compared with 12.8% a year ago, and the chain’s average unit volume grew 5.4% to $1.34 million.
But those numbers were likely boosted by the closure of underperforming locations. During the quarter, 15 company units and three franchised locations were shuttered, leaving the chain with a total of 435 restaurants.
Through the end of October, 29 company units have closed, and the company is on track to close a total of 31 to 34 company units, and 7 to 8 franchised locations, by the end of 2025.
Christina, who in August replaced former CEO Drew Madsen after he stepped down for health reasons, said the closures are being done strategically, to shift guests to nearby units.
So far, he said about 30% of guests have been successfully transferred to neighboring locations following a closure.
Taking out the negative cash flow units from the system is expected to boost restaurant-level contribution by more than $2 million next year.
“These closures are never easy, but they are the right ones for the long-term health of the brand,” he said. “By tightening our portfolio and focusing on high-performing restaurants and markets, we can strengthen operations, elevate the guest experience, and focus on innovation that drive continued growth in sales and margins.”
Likely in part because of the closures, revenues dipped 0.5% to $122.1 million for the quarter. The company also widened its net loss to $9.2 million, compared with a net loss of $6.8 million a year ago.
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