Noodles & Co. preps for ‘meaningful unit growth’

Buoyed by the success of zucchini noodles, the fast casual is adding more plant-based items and a new rewards program as it gets ready to expand.
Photograph: Shutterstock

Noodles & Co., which has maintained a steady number of units for the past couple of years, is ready to explore “meaningful unit growth,” with plans to add a significant number of stores beginning in 2021, company executives said Tuesday.

The Broomfield, Colo.-based chain, which has 395 company-owned units and 62 franchised locations, saw same-store sales grow 4.6% for the quarter ended July 2. Revenue increased 2.4% to $120.2 million during the period, with a 2.8% price increase and a 0.5-point dip in traffic.

Digital ordering grew 47% year over year and now accounts for 22% of total sales.

Starting in 2021, Noodles is planning for 5% unit growth systemwide, with the potential to grow to 7% unit growth in subsequent years.

“Our approach will be disciplined, factoring in strict site and economic characteristics, as well as ensuring that our people pipeline is robust enough to support the unit expansion and provide operational fulfillment of the brand promise,” CEO Dave Boennighausen told analysts during a call Tuesday.

New restaurants will feature a smaller footprint, pickup windows for digital orders, more efficient equipment packages and streamlined operational procedures.

New kitchen prototypes will be tested during Q4, with plans to roll out new designs in early 2020, Boennighausen said.

“We anticipate this project will meaningfully improve our restaurant efficiency, but until we have thoroughly vetted each initiative in a live restaurant environment, we believe it’s a bit premature to speculate as to the potential impact on unit-level economics,” he said.

In July, the fast-casual noodle chain refranchised five restaurants to a new franchisee. The company recently finalized its first new area development deal in several years, which will add six new franchised locations in South Carolina over the next few years.

Noodles launched zoodles, or zucchini noodles, in May 2018, sparking the chain’s best performance in six years. The plant-based menu addition revved up visit frequency and brought in lapsed users, the chain said at the time.

In September, Noodles will introduce a cauliflower-infused rigatoni. The new item has a flavor profile that more closely resembles traditional pasta than zoodles.

“As somebody who [has] an 8-year-old and a 6-year-old, getting vegetables into their diet is extremely difficult, [so] transitioning them to a zucchini noodle is not necessarily in the cards,” Boennighausen said. “But when you try the cauliflower noodle with the spaghetti or the mac and cheese or anything along those lines, you can’t really tell the difference. So, we are seeing the opportunity to hit a different type of guest here.”

Also in September, Noodles plans to relaunch its digital platform, including its app, online ordering platform and rewards program.

The rewards program will move from the current “surprise and delight” model to one that also uses a points and tier system popular with other restaurant brands.

“We believe our new rewards program and digital capabilities will transform our ability to communicate with guests from a marketing perspective in a more personalized, targeted and relationship-driven manner,” Boennighausen said.

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