And that latter point sits on the doorstep of something bigger. Boennighausen said Noodles & Company expects “meaningful disruption” in the real estate environment for restaurants. “And we are excited about the opportunities for us to take advantage of that disruption with a more efficient off-premises oriented footprint,” he said.
A recent opening in Wisconsin set new company sales records during its first seven, 14, and 21 days of operations. Boennighausen called Noodles & Company’s recent class its best-performing group in the brand’s history.
The Wisconsin unit features an order-ahead drive-thru pickup window—a feature of many recent openings. It opens an outlet to meet increased need for speed and convenience from today’s consumers, Boennighausen said.
Seventy-eight percent of digital orders for this venue have been processed through the drive-thru window, with an average time of 62 seconds despite heightened volume.
When you break down how important of a lever digital mix represents in light of delivery costs, it’s no surprise Noodles & Company plans to target at least 70 percent of new restaurants to include order-ahead drive-thru windows (akin to Chipotle’s Chipotlanes).
“These types of numbers give us greater confidence not just in a reduced square footage in general, but additionally in the potential to test materially cost-effective buildouts that only incorporate off-premise and/or digital sales,” Boennighausen said.
So the potential of a restaurant with no dining room, like the model Taco Bell unveiled a few weeks ago.
Noodles & Company is also exploring virtual restaurants or kitchen alternatives that could provide certain high density or retail opportunities that it didn’t consider viable a few months ago, Boennighausen said.
All this in mind, the brand is targeting at least 10–15 new restaurants in 2021. But an jump to at least 7 percent annual unit growth beginning in 2022. “In the current environment while it’s difficult to reliably anticipate exactly how the recent disruption will influence timing and availability of real estate, we do feel well positioned to take advantage of additional growth opportunities as they arise,” he said.
You could argue, without the awareness third-party delivery affords, Noodles & Company might not be so optimistic about building far from core markets. You can’t migrate digital guests you don’t have.
“We do feel those third-party aggregators, as I said, are extremely important in terms of getting people to discover the brand,” Boennighausen said.
Naturally, there are other brand traits and recent changes Noodles & Company hopes guests will uncover—differentiators to keep them coming back.
The “unique strength of the brand,” Boennighausen said, centers on variety. It’s the only national chain delivering global flavors through a core menu focused on noodles and pasta. Plus, its food travels better than most, which is why Boennighausen believes off-premises mix was so high to begin with.
Early on during the crisis, Noodles & Company grounded itself in amplifying core menu items. It’s returning to innovation now.
“We believe there remains significant opportunity for us to broaden reach and frequency through menu innovation, while at the same time simplifying our existing menu and reducing our necessary execution hurdles for our operations teams,” he said.
The brand is most excited about cauliflower gnocchi, expected to roll out nationally in Q1 of 2021. It adds a plant-based alterative to the menu that is low-carb, low-calorie, gluten free, and contains a full serving of vegetables in each regular portion.
“We are confident that the cauliflower gnocchi will broaden the appeal of our brand, particularly with our attractive target market,” Boennighausen said.
Noodles & Company over-indexes with millennials and Gen Z, with notable strength among young families, he added.
Despite continued limitations on dine-in capacity, the brand’s afternoon and dinner dayparts were up 4.8 and 7.3 percent, respectively, in September. “Our dinner strength gives us increased confidence and we will be well positioned for outside sales growth as consumer patterns ultimately normalize in a post-COVID world,” Boennighausen said.
“While we do expect that there will remain a work from home trend that continues after the pandemic, resulting in continued industry pressured lunch, we are actively working on a refresh of our salad category to position us to capitalize on increased lunch demand for those who do return from more traditional lunch patterns,” he added.
In Q3, Noodles & Company’s total revenue was $106 million compared to $118.3 million in the year-ago period. Same-store sales declined 3.8 percent systemwide, comprised of a 3.6 percent decrease at corporate units and a 5 percent drop at franchises.
Net loss was $100,000 compared to net income of $4.2 million last year.
Trends have improved in recent weeks.
Four weeks ended July 28
- Company-owned: –8.4 percent
- Franchise: –7.2 percent
Four weeks ended August 25
- Company-owned: –4.6 percent
- Franchise: –5.1 percent
Five weeks ended September 29
- Company-owned: 1.1 percent
- Franchise: –3.2 percent
Noodles & Company turning positive at corporate units was an encouraging stat. Of the brand’s 454 locations on September 29, 378 were company run. Average-unit volumes were up 2.4 percent in September, year-over-year, to $1.187 million as well.
Boennighausen said more than half of the chain’s markets saw continued sequential improvements from September through October despite increased COVID cases across America. Comps are roughly flat quarter-to-date.
Currently, about 85 percent of restaurants are open for limited in-store dining.