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    Noodles & Co. Turns to Zucchini Noodles, Tech to Lead Turnaround

  • The new healthy menu offering is coming to all restaurants in May.

    flickr: DebMomOf3
    Noodles & Company closed 55 restaurants in 2017. Are better days ahead?

    Dave Boennighausen said Noodles & Company is entering an “extremely exciting time in the history” of the company. The brand will be eager to put the early part of 2017 in its rearview, a period where Noodles & Co. shuttered 55 underperforming restaurants and posted a net loss of $26.8 million in the first quarter.

    Boennighausen said those restaurants were causing a burden on the brand’s human resources and financial performance. Since then, Noodles & Co. has raised capital to strengthen its balance sheet and provide a base to accelerate growth.

    Noodles & Company also bolstered its leadership team and launched several sales-boosting initiatives, with much more in store for 2018. Mary Egan, the cofounder and CEO of Gatheredtable, and Drew Madsen, who began his career with General Mills in brand management, joined the board in September. Paul Murphy, the former chief executive officer at Del Taco, was named executive chairman in June. Boennighausen took on the permanent role of CEO then as well. The company also named Brad West executive vice president of operations in September and just recently appointed Chas Hermann, who clocked time at Starbucks, chef brand officer, effective March 5.

    In the fourth quarter, total revenue decreased 12.8 percent to $112.8 million from $129.4 million in the prior-year period, primarily due to the closure of the 55 restaurants. Net loss was $500,000. Comparable same-store sales declined 0.9 percent systemwide, year-over-year, including 0.9 percent at company-operated units, and 0.9 percent at franchised stores.

    For fiscal 2017, total revenue dropped 6.4 percent to $465.5 million from $487.5 million in 2016. Net loss was $37.5 million and comps fell 2.5 percent systemwide (2.7 percent at company owned and 0.5 percent at franchised). Noodles & Co. opened 15 restaurants in fiscal 2017, including 12 corporate units. It expects to open one to five new restaurants in 2018, including four company-owned restaurants.

    As for the changes, Boennighausen said the brand is “perhaps most excited” about the rollout of zucchini noodles. They’re in the final stages of testing and will launch nationwide in May with a signature zucchini romesco dish. Guests can also substitute zucchini noodles into any of noodle entrée.

    “Zucchini noodles have the opportunity to increase frequency, bring lapsed users back to the brand, and introduce the brand to new guests who may have avoided us in the past due to dietary preferences,” Boennighausen said.

    Additionally, Noodles & Co. is introducing a new look and feel to in-restaurant merchandising, particularly with its welcome wall and menu panels in an effort to lighten up messaging.

    These fresh changes join others from 2017 that are starting to take hold. Noodles & Co. enjoyed a 260-basis point improvement in comps compared to the third quarter of 2017, and a 200-basis point improvement in two-year growth relative to the third quarter.

    Part of the credit goes to the continued traction of Noodles & Co’s rewards program, which has provided steady increases in acquisition and activation of rewards members, Boennighausen said.

    “We're seeing a direct correlation between activation of the program and traffic growth, and are excited about the opportunity the program presents over the next several years. We're also seeing improvements in our guest satisfaction scores, indicating that the initiatives we have enacted to improve operations and strengthen the guest experience, are driving results,” Boennighausen said, adding that Noodles & Co. reported improvement in turnover metrics and employee satisfaction scores in Q4 as well.

    The off-premise equation is factoring into Noodles & Co’s turnaround strategy. Total off-premise sales were about 50 percent in Q4, a 250-basis point lift over the prior-year period. In 2018, overall off-premise business is up 330 basis points over the previous period.

    Online ordering accounted for nearly 13 percent of sales year to date. In Q1 2018, the chain completed the installation of quick pick-up shelving units in restaurants to improve convenience for order ahead and pick-up dining. “Aside from reducing friction for our guests to utilize online ordering, these pickup units also reduce the line in our restaurant, taking some of the pressure off guests that are ordering at the counter,” he said.

    Delivery is also live in just about 15 percent of restaurants. Boennighausen said Noodles & Co. sees that number reaching half of the entire system in time.

    Operationally, the company began a phased approach in February, including updates to prep procedures, improvement in employee recognition programs, and changes to its staffing modeling. Self-bussing units are now in all company restaurants, which have boosted cleanliness scores and improved employee engagement.

    “During 2017, the team completed many steps to strengthen the company's foundation and position us to return to a leadership position in the fast casual space,” Murphy said.