Don’t underestimate the Zoodle. Fast casual Noodles & Company is hoping to spiralize its way back to profitability after a rough fiscal 2017—a calendar year that included the shuttering of 55 units in Q1 and a net loss $37.5 million for the full year. Dave Boennighausen, who took on the permanent role of CEO in September, called the introduction of zucchini noodles “perhaps the most important of these initiatives,” when referencing Noodles & Company’s sales-driving strategies.
From a national perspective, the move is a relatively recent one. Noodles & Company didn’t flip the switch at all 476 units until early May. Yet the brand was testing the product for nearly nine months prior, originally at the operational level and then moving it to consumer tests. Baltimore, a major market for Noodles & Company, as well as some smaller areas piloted the product to optimistic results.
“What was extremely exciting with what we saw is, without much marketing support, [we saw] really nice lifts in traffic from those particular restaurants. And it was being driven by frequency,” Boennighausen said in a conference call after the brand’s fiscal 2018 first-quarter results.
It was an uplifting period for the brand to several points. The chain trimmed its loss per share to 4 cents from 8 cents a year ago. Same-store sales fell 0.2 percent across the system, including a 0.3 percent decline at company-run stores, and a 0.9 percent lift at franchised units, year-over-year. Net loss was $3.6 million compared to $26.8 million in the year-ago period. Total revenue fell 5.3 percent to $110.5 million from $116.7 million, due primarily to the 55 closures in Q1 last year, and partially offset by the openings since. One company-operated restaurant debuted in the first quarter. Noodles & Company expects to open just one to five units in 2018, although it said recent stores are outperforming old ones. “This gives us confidence in the ultimate unit growth potential of the brand,” Boennighausen said.
The nearly flat comps performance was a 70 basis-point improvement over Q4 and a 330-basis point hike from Q3.
Returning to the zucchini noodles, Noodles & Company is spiralizing them in-house. They can be substituted for traditional pasta into any of the brand’s current dishes. Boennighausen said Noodles & Company is the first fast casual to launch the offering nationwide.
Aside from just being a first-to-market experience, Boennighausen believes the move will allow Noodles & Company the chance to launch a separate platform for the brand, “as many different vegetables or even fruit can be spiralized.”
What it also does is address a menu gap in the fast casual’s culinary offerings, which is a low-carb, low-calorie option that Boennighausen said was a veto-vote getter in the past. And as mentioned earlier, the runway is significant thanks to a soft marketing environment at the moment. Boennighausen said Noodles & Company isn’t pushing the product until operators are comfortable executing at the unit level.
“I want to make sure that that is 100 percent execution before we pull more of the marketing triggers,” he said.
Noodles & Company made progress in some additional areas. With off-premises, the company’s business increased 310 basis points over Q1 2017 to 50 percent of sales this past quarter. Boennighausen added the chain is taking a holistic approach, meaning its rewards program heavily influences online ordering.
As a result, the chain’s rewards push in recent months has driven its online orders, he said. That side of the business ballooned 460 basis points, year-over-year, in Q1 to 13 percent of sales.
“We are thrilled with the traction that our rewards program is having thus far and believe it presents a substantial opportunity to develop more targeted relationships with our guests,” he said, adding that Noodles & Company has installed quick pick-up shelving units at all locations to improve convenience and better the to-go experience for guests.
Noodles & Company continues to test third-party delivery and said it expects nearly half of the system to be onboard in the near future.
“As we've noted in the past, we believe that the variety inherent in our menu, our resonance with families and how well our food travels, provide a competitive advantage in off-premise that we intend to capitalize on in 2018 and beyond,” Boennighausen said. “We will continue to innovate around this tremendous opportunity for the brand.
When Noodles & Company launched zucchini noodles it also introduced a new look and feel to its menu boards, welcome wall, and digital ordering platforms. These include fresh colors and design elements designed to bring energy back to the brand, Boennighausen said. Fresh plateware also joined the picture.
“As we enter the next phase of our transformation effort, through the launch of our Zucchini noodles, further enhancements to our rewards program, off-premise capabilities and continued operational improvement, I am confident that we have the right strategy, the right focus and the right team to drive sustainable comparable sales and margin growth for years to come,” Boennighausen said.