Noodles & Company believes the future of franchising is “under the rainbow,” according to a new development strategy. The national fast casual has been monitoring guest migration patterns, which show a pot of gold in the southern region of the U.S.
A report by North American Moving Services shows Texas, Florida, South Carolina, and Tennessee as states with high inbound migration in 2022. The exodus of customers leaving the Midwest in search of better living costs has left Noodles ready to pounce on new business opportunities.
When John Ramsay joined the brand as vice president of franchise sales three years ago, the first thing he did was devise a new franchise strategy. The brand offered franchising early in its 27-year history but had been on a hiatus for years.
“They were focused on company maturation, and because of that, there were a lot of markets out there which didn’t get developed,” Ramsay says. “When I joined the brand, it quickly became apparent there was a lot of underdeveloped territories.”
Ramsay took this as good news for franchising. To project growth, a company must have whitespace. Franchisees like room to stretch their legs without competition, the executive says.
He went to the drawing board, configuring 30-40 major metropolitan areas for Noodles to target. As he plotted the existing restaurant base and the open market areas, he noticed an arch from coast to coast.
Noodles locations were distributed heavily along the top of the arch in the upper Midwest, where the brand has found success for decades. Open, targeted markets fell underneath the arch, where the population has boomed in recent years.
“It was very clear the southern states are where all the population growth is, and that’s where the Noodles gaps are,” Ramsay says. “We decided to go under the rainbow, and this is the genesis of the strategy and what it looks like.”
While Noodles is moving away from its geographical norms, its targeted demographics are similar. Whether it is Dallas, Minneapolis, or Tampa, the company is settling in suburban areas where young families are the primary target audience.
The chain has noticed differences in menu trends as it expands from coast to coast—mac and cheese in Wisconsin and Pad Thai in California—but its broad menu is prepared to handle this change.
“Our menu, just by nature, has different offerings from several different categories,” Ramsay says. “It appeals to the same demographic with respect to age and income level, despite differences in eating preferences based on where they live.”
There are eight key markets under the rainbow for Noodles, starting with Texas. It’s the fourth-fastest growing state in the country, passing 30 million in 2022, according to the U.S. Census Bureau.
The fast casual will lean heavily into paid marketing and advertising for its franchise program in the Lone Star State.
“Texas is a business-friendly state,” Ramsay says. “There is a lot of new development happening, and it is quite easy to get permits. It is wide open.”
Franchise inquiries have been “a bit of a roller coaster,” Ramsay says. When inflation was high last year, franchise interest levels increased among those who were looking to exit the corporate workforce. However, since Noodles is specifically targeting existing restaurant operators, its franchise offering becomes more susceptible to the industry’s ebb and flow.
“Our target audience [existing operators] were running restaurants and experiencing sales declines because of inflation issues, therefore these people who would be our potential franchisees were slowing down their growth,” Ramsay says.
Moving forward into 2023, Ramsay is noticing the trend shift back into favor. There’s low unemployment, people are less likely to jump ship in the corporate world, and existing franchise operators are coming back into the game looking for opportunities to grow.
“We are not going into a recession. Now it is time [for operators] to start thinking about growing their portfolios and adding another brand to grow within these new markets,” Ramsay adds.
Noodles is offering franchisees a model with simple operations, average net sales of over $1.3 million, and an integrated tech stack aimed at reducing both labor and paper waste. Ideal owners have existing restaurant experience, goals for multiple units, and a taste for inclusivity and collaboration.
The “under the rainbow” strategy is beginning to show results. In mid-August, Paven and Navi Sandhu signed a franchise agreement with Noodles to open four new restaurants in Arkansas. Additionally, seasoned restaurateur Syed Ahmad inked a deal to bring 20 units to the Dallas area.
This news comes on the heels of a five-point plan to combat traffic declines in existing restaurants. Advancements in technology, investments in third-party internal research, and a focus on catering are all aimed at putting the company in a better position to finish the year strong and attract operators to its newfangled franchise program.
As of mid-September, Noodles had 460-plus restaurants and Ramsay has his sights on 2,000 in the next 10 to 15 years. This puts the company at a 5 to 7 percent uptick per year, between 20 and 30 new units. He hopes the streamlined expansion strategies and franchise program debut will ramp up expansion in a tasteful way.
“The strength of our growth strategy is to not over develop,” Ramsay says. “We have already franchised before, and we recognize if you grow too quickly, the wheels can fall off. We would rather have a steadfast, strategic growth rate instead of purely going off numbers.”
