How Noodles & Company is building a pipeline for new unit growth

Armed with new restaurant designs, new menu items and new operational efficiencies, the fast casual said it is primed to start opening more locations.
Noodles & Company
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Dave Boennighausen, CEO of Noodles & Company for the past 17 years, said it takes three things to position a restaurant brand for new unit growth:

A winning economic model. Continued culinary innovation. And a solid investment in the workforce.

After years of investment in those core areas, Boennighausen said the 454-unit chain is finally ready to focus on opening new restaurants, with the eventual goal of reaching 10% annual unit growth. About half of those new locations will be run by franchisees.

That goal will take at least a couple of years to reach fruition, though. For 2021, Noodles plans to add 10 to 15 new restaurants, just a few of which will be franchised. Currently, about 85% of the chain’s restaurants are company-owned.

“Our most-recent class (of new stores) have been the best-performing in history,” he said. “We feel very comfortable with the economic model.”

By 2022, Noodles expects about 7% unit growth, with that 10% goal not being reached until 2023 or 2024, he said.

For the past couple of years, Noodles has been opening new stores that are about 2,000-square-feet, shaving about 500-square-feet of real estate off a traditional restaurant. Perhaps more importantly, 10 of those new units have order-ahead pickup windows that allow for 60-second transactions.

Noodles is slated to open two ghost kitchens during the second quarter, one in Chicago and one in San Jose, Calif. And Beonnighausen said the chain “wants to do some testing” on a restaurant model geared solely to digital orders, without a dining room, but larger than a ghost kitchen.

He also noted the chain is ripe for the creation of virtual brands, such as a spinoff focused on mac and cheese or veggie-based noodles.

“We can introduce people to the brand in a low-cost way,” he said.

The growth strategy is bolstered by back-of-house efficiencies. After testing, Noodles is working on adding steamers to every kitchen, likely by the end of the year. The steamers speed up the process at the chain’s saute station, where most of the dishes are created, quickly warming ingredients before they hit the saute pan.

The steamers can shave about a minute off the cooking of most of Noodles’ menu items.

“It does change the way we cook almost every single dish,” he said.

Noodles plans to debut stuffed pasta this summer, following the recent rollout of low-carb cauliflower gnocchi. Tests of tortelloni and ravioli “have performed better than any test I’ve seen in 17 years,” he said. “It’s the most requested item we’ve had.”

Noodles has seen a shift toward dinner during the pandemic, as well as increased demand for comfort food—particularly at the beginning of the crisis and during the heated presidential election.

For the quarter ended Dec. 29, Noodles reported total revenue decreased 5.9% to $107.2 million. Same-store sales fell 4.7% system-wide and 7.9% for franchised restaurants. The chain opened four company-owned restaurants.

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