Noodles & Company’s multi-year turnaround centered on a few key tenets, from employee reengagement to trimming underperforming restaurants. But none grabbed headlines like menu innovation. The fast casual’s zucchini noodle launch in May 2018 was one of the most successful rollouts in sector history. Noodles & Company reported its first positive same-store sales quarter that July since Q1 of 2015. And it did so with 5.4 percent growth as traffic lifted 3.1 percent—its best result in six years.
The previous year, Noodles & Company swung a net loss of $37.5 million and headed into the winter with six consecutive quarters of year-over-year declines at units open at least a year. It then closed 55 restaurants in Q1 2017.
So it really can’t be understated how Zoodles helped right the ship. The aim was a clear one—erase a veto vote for health- and carb-conscious guests. But it also provided ancillary benefits. Noodles & Company inspired trial, welcomed a new generation of consumers, and had a chance to remarket to old or lapsed ones in ways it couldn’t before.
While the success of this journey is well documented by now, Noodles & Company’s follow-up continues to generate results. It brought Cauliflower Noodles to market in 2019 and, just a couple of weeks ago, debuted Cauliflower Gnocchi. All were years in the making and represented “firsts” at this scale in fast casual. And it’s built around what CEO Dave Boennighausen refers to as the “unique strength of the brand.” That’s something Noodles & Company never lost sight of since progress really kicked into gear. The idea of leading with variety and being the only national chain capable of delivering global flavors through a core menu focused on noodles and pasta.
If you go back to the early days of its reroute, Noodles & Company streamlined its menu and removed sandwiches and flatbreads in an effort to eliminate day-to-day operational fat that wasn’t generating guest value. What those products didn’t do, either, was speak to Noodles & Company’s equity or its differentiators—as the last three have. It’s not a sandwich brand.
Recent changes also focus on customization and the ability to tap into different sections of the menu. And that allows multiple builds for repeat visits or different occasions.
At the start of the COVID-19 crisis, Noodles & Company grounded itself in amplifying core products. But it returned to innovation in the fall as sales stabilized. “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,” Boennighausen said at the time.
The big launch arrived in mid-January with Cauliflower Gnocchi. Noodles & Company said the new category for its menu was also a first for the industry. Cauliflower Gnocchi dishes contain half the carbs of traditional pasta, are gluten-sensitive, and include a full serving of vegetables. They’re served with one of two sauces, Rosa and Roasted Garlic Cream. Noodles & Company spent two years testing and refining the recipe.
Noodles & Company is targeting at least 10–15 new restaurants in 2021, with a jump to at least 7 percent annual unit growth beginning in 2022. Of the brand’s 454 locations on September 29, 378 were company run.
QSR caught up with John Ramsey, VP franchise sales of Noodles & Company, to chat about the launch, future growth potential, and why the brand is ready to capitalize on life after COVID.
Let’s start with the Cauliflower Gnocchi. Walk us through the R&D process. How long did it take Noodles to perfect the product?
It took our culinary team nearly two years to perfect. We went through countless prototypes to find the right flavor, texture and shape. We challenged ourselves to provide a dish that had a full serving of vegetables in each dish and had half the carbs of traditional pasta, which wasn’t easy. Once we identified the ideal gnocchi recipe, we were able to test a few sauce options with guests, and results showed that their preferences were the Roasted Garlic Cream and fan-favorite Rosa sauces.
What audience do you think it will speak to? Is there a certain demographic you’re hoping to reach? Or does it have broad appeal?
We see our Cauliflower Gnocchi dishes as having broad appeal to many of our guests, from pasta and gnocchi lovers to guests who lean towards healthier options and those who are looking to bolster their vegetable intake. For guests who are looking for a light and flavorful meal, our Cauliflower Gnocchi is a perfect option as it contains half the carbs of traditional pasta, are gluten-sensitive*, and contain a full serving of veggies. This dish has helped to expand the other lighter Noodle options, such as Zoodles and Cauliflower Noodles, on our menu so guests can feel better about what they are eating.
*Gluten-sensitive: Made without gluten-containing ingredients but potential for cross-contact exists.
Menu innovation over the past few years has been one of the keys to Noodles’ turnaround post-2017. Zoodles laid the groundwork. How will the strategy now help the chain go from rebound to reenergized net unit growth?
Noodles & Company is unique in that we are a category of one—there are no other restaurant companies offering what we offer. Through our recent menu innovation, we can accommodate any dietary preference making noodles and pasta an option for everyone. We have so much growth potential and market reach—we’re really just getting started.
Talk specifically about the franchise opportunity ahead. Dave has mentioned it a few times in previous earnings calls, especially before COVID. Just how much whitespace is there?
We have tremendous opportunity to grow the brand, especially when you consider that so many markets in the Southeast and Southwest (i.e Dallas, Houston, Atlanta, Tampa) do not have a Noodles. These markets have experienced high growth over the last ten years, and have a proven base of guests that currently support other fast casual restaurants.
Is there interest from existing franchisees as well? How do you expect that split (new versus current operators) to develop in the coming years?
Yes, we have interest from our current franchisees. Our goal is to bring in new franchise partners with the interest and ability to develop multiple locations, so most of the new growth in the next few years will be new franchises. Long term, we will look for each new partner builds out their respective markets.
How will Noodles’ efficiency improvements in the back of the house, with labor and kitchen upgrades, as well as store layouts, help fuel expansion?
Our strength and appeal in off premise dining is a significant factor that new franchisees are looking for in a brand. We currently have an attractive sale to investment ratio, and that will continue to improve with the innovation that we are delivering today.
Do you see this unfolding in new-market growth? Or is there plenty of room to infill current trade areas?
Most of our new growth will be in new markets, as we have so many large DMA’s without a current Noodles location.
How have franchisees fared during COVID? What are some ways Noodles strengthened that relationship?
Our franchise partners have always been a strong contributor to our business performance, and throughout COVID that hasn’t changed. Since the onset of COVID-19, our franchise partners have aligned with us on implementing best-in-class safety standards that have kept our guests and team members safe. We’ve also seen tremendous support from our franchise partners in leveraging our marketing programs and offers, which have been aimed at offering our guests convenience and comfort during this challenging time.
Lastly, just from your perspective, what do you think the industry will look like on the other side of this? Where will the biggest opportunity for Noodles be?
From a franchise growth perspective, Noodles is ideally positioned for a post-COVID world with our off-premise platform, broad guest acceptance, technology, and culinary innovation. We will continue to focus on developing each of these areas and we are energized by the tremendous opportunity we have to grow the ways and areas we serve our guests with franchise development in these new markets. The industry is certain to look different for the years to come and we are ready to continually adapt with our guests.