Noodles & Company is quite bullish on its prospects in California.

The fast casual recently named Warner Foods, an operator of more than 150 Jack in the Box, Black Bear Dinner, and Panera locations, its exclusive franchisee partner for the entire Golden State. As part of the agreement, not only will the franchisee develop 40 new restaurants in the next 12 years, but Noodles will also refranchise all 15 company-run stores in the state.

Speaking about the deal at the ICR Conference, CEO Dave Boennighausen said Warner Foods is “a great partner” that understands what consumer want and where economic opportunities are throughout California. The CEO believes the state will provide much opportunity, including the rollout of a slimmer prototype.

The franchisee will aim for one opening this year, and three to four debuts per year starting in 2023.

“We’re proud as heck to have Warner Foods join the fold,” he said.

The CEO of the Broomfield, Colorado-based chain doesn’t expect many other opportunities for refranchising, but he does think the brand is well-positioned to attract franchisees of the same caliber as Warner Foods.

Part of the reason Boennighausen feels so confident is because of AUV. In Q3 2021 the brand saw AUVs reach $1.38 million, which is nearing the company’s stated goal of $1.45 million by 2024. New locations have realized a 30 percent cash-on-cash return on investment, he said.

Noodles plans to open seven to nine units in Q1, despite supply chain issues and delays in construction plaguing the industry. The goal for the entire year is to expand by 8 percent, meaning about 35 new restaurants. In the years beyond, the benchmark is 10 percent annual growth.

The company’s success can be partially attributed to the strength of its digital presence and loyalty program, Boennighausen said. Before COVID arrived, digital already mixed 30 percent, while off-premises accounted for 60 percent of sales. In Q3, digital represented 52 percent of sales, even as in-restaurant ordering returned to 70 percent of- pre-pandemic levels.

COVID variants have disrupted ordinary operating procedures, (several units were forced to temporarily close as the Delta variant ravaged an already thin workforce) but Boennighausen said the brand is poised for success due to its established digital channels and the portability of its food.

“Our brand resonates so well with trends that we think COVID ultimately accelerated,” he said. “We continue to see that digital occasion as one that is very sticky, one that you continue to see good momentum around. We think there’s still a lot of opportunity for us to do a better job and harvest more from those areas.”

The fast casual continues to build off a loyalty program that attracts new guests and increases frequency with more personalized and relevant communication. Rewards membership has grown to about 4 million customers.

The brand is also continuing to leverage third-party delivery partnerships to increase awareness. When new stores enter a market, it takes some time for customers to discover the restaurants because they don’t fall under common dining categories.

“We’re not sandwiches, we’re not Mexican, we’re not burgers,” he said.

Third-party delivery platforms, along with digital efforts, have helped Noodles reach a larger customer base because of its varied menu options.

“From an Uber Eats or DoorDash perspective, if you were to search for health … family, vegetarian, Asian, Italian, Noodles & Company would pop up,” Boennighausen said. “The way our food travels, which is extremely strong … really did bring the brand to life and bring in much larger awareness to the brand.”

The CEO said items like the stuffed tortelloni and zucchini noodles have appealed to a wider audience, and more innovation is on the way.  The brand is in the testing phase of a new “LEANguini” that has the “same taste, mouthfeel, and texture” customers expect from a traditional wheat pasta, while having fewer carbs and more protein.

Noodles is also working on a “salad refresh.”

“This we feel really rounds out our healthier options,” Boennighausen said. “Together with the salad refresh we’re doing in the next several weeks, you can look to LEANguini to really show off that our menu more so than almost anyone in fast casual can fit the needs of any dietary preference.”

Testing on an “Asian-based broth” will also begin later this year. The CEO described the new item as being similar to pho or ramen and “a natural fit for our menu.”

Like almost every other restaurant in the industry, Noodles has dealt with inflationary food and labor costs. To combat some of this pressure, the company raised prices twice in 2021—3 percent in August and another 2 percent in December.

The chain expects volatility as 2022 progresses, but Noodles will hold off on additional price increases until the market becomes clearer. If the fast casual does decide to take more pricing, CFO Carl Lukach said the brand has the dry powder to do so.  

Fast Casual, Franchising, Growth, Menu Innovations, Story, Noodles & Co.