An unexpected drop in third-party delivery sales were blamed in part for a 3.3% decline in systemwide same-store sales at Noodles & Company in the third quarter, the chain reported Wednesday.
The fast-casual chain also suffered as a result of discounting by competitors—so much so, in fact, that Noodles was forced to roll out some promotions of its own this fall, though CEO Drew Madsen had planned to move away from discounting as the chain works toward an attempted turnaround.
In September, the Broomfield, Colorado-based chain rolled out a kids eat free offer, for example. And, in October, it offered a buy one, get one (BOGO) deal to spark trial for three new pasta dishes that are the first wave of a transformation that is expected to touch two-thirds of the menu.
Combined with the lapping of discounting efforts last year, the short-term impact was painful. For company units, same-store sales were down 3.4%, which included a 5.8% decline in traffic.
But Madsen expressed confidence in the longer-term effort, saying traffic trends have improved in the fourth quarter so far, and the response to the new dishes has been favorable.
And there’s more food news to come.
Madsen said three new mac and cheese varieties are coming to test restaurants, including Garlic Bacon Mac Crunch, Pulled Pork Barbecue Mac, and Buffalo Chicken Ranch Mac.
“These three dishes have been our strongest performers in central location taste tests so far, and when combined with an improved Wisconsin mac and cheese, should account for our largest sales mix category,” he said. “So we believe improvements, enhancements and newly introduced mac dishes should have a very positive impact on our traffic when introduced nationally, assuming the success of these new dishes in our test markets.”
Madsen said they are expected to be introduced nationally in the first quarter next year.
The unexpected decline in third-party delivery sales, which first hit in July, had to do with menu price markups, Madsen said.
As a result, Noodles is now working with its leading third-party partner to test different markups on their platform, with encouraging results, he said.
“We plan to finalize the test and introduce the optimal menu pricing strategy next month, which we believe will meaningfully improve traffic in our third-party channel,” said Madsen.
Total revenue declined 4% to $122.8 million for the Oct. 1-ended quarter, and the chain swung to a loss, with a net loss of $6.8 million, compared with net income of $700,000 in the third quarter 2023.
The company lowered expectations for the year, saying same-store sales are projected to be negative between 3% and 1.5%. That’s down from the second quarter, when the company had projected declines of 2% to flat for the year.
Noodles expects to open 10 company and three franchised units in 2024, but Madsen said they are continuing to evaluate the portfolio.
This year, they expect to close 12 to 14 underperforming company-owned units, and seven franchised restaurants, and there may be more. Madsen said they are continuing to work with landlords, and closures will be decided on a case-by-case basis.
Noodles ended the quarter with 377 company-owned and 94 franchised units.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.