Noodles & Company offers comfort food like mac and cheese, pastas and salad., Pictured is an outlet … [+] in the Denver area.Couresy of Noodles & Company
Noodles and Company, a public company (NASDAS: NDLS) with 454 locations including 76 franchised outlets, has learned to make adjustments in a difficult restaurant environment.
Like many restaurant chains, it has managed to survive the pandemic based on its take-out and delivery revenue since indoor dining was either prohibited or curtailed country-wide. In fact, prior to the pandemic, 60% of its revenue derived from off-premise sales.
Nonetheless, its fourth quarter earnings, announced on February 25, 2021, showed the effects of the pandemic and limited indoor seating. Its total revenue dipped 5.9% to $107.2 million from $113.9 million and comparable restaurant sales sagged 4.7% system-wide.
Overall for the entire year of 2020, its sales fell 14.9% to $393.7 million from $462.4 million.
Its CEO Dave Boennighausen said it was “particularly hard hit in the second quarter of 2020 just as restrictions started hitting all of our restaurants.” Before the pandemic, 40% of its sales stemmed from indoor dining.
It has done a successful job of “increasing off-premises sales and tapping into the savvy demographic that has adapted to our digital platform to help combat loss of dining-in sales,” he said.
Prior to the pandemic, it derived about 30% of its sales digitally, which now account for 62% of its revenue, including third-party delivery.
It partners with Door Dash, Uber Eats and Grubhub and offers its own delivery platform through its Noodles app, cutting out the fees of its partners.
“Our food travels extremely well, and we have a variety of items that appeal to young families,” Boennighausen noted. MORE FOR YOU
To adapt to the times, it also introduced ghost kitchens in Chicago and San Jose, a trend that many restaurant chains and independents are turning to. It’s designing smaller floor plans in its new outlets and emphasizing pick-up windows and drive-thrus.
Its stores used to average about 2,500 square feet, and now it’s finding that 1,600 to 1,800 square feet will suffice. “There’s not as much demand for dining in,” he said though he acknowledged that could return post-pandemic.
Much of its menu could be considered comfort food, which during a pandemic, resonates for consumers. Known for its pasta, salads and soups, its three most popular dishes are mac & cheese, penne rosa and pesto cavatappi.
It also customizes its meals so patrons can order what they want based on their own dietary needs.
Boennighausen acknowledged that during the anxious times of the pandemic, customers gravitate toward “food that makes them feel good.”
It’s based in Broomfield, Colorado, and the states with its largest number of locations include its home state, Illinois, Wisconsin, and Minnesota.
Unlike many restaurant chains which depend on franchise fees for steady revenue, its 2019 annual report revealed that 98.8% of its revenue derives from restaurant sales and only 1.2% from franchise fees and royalties.
Its CEO explained that many of its dishes are sautéed and aren’t easily replicable, like a burger franchise. Hence, its franchisees require more restaurant and operational experience, but it’s stepping up franchising and looking for franchisees who can handle multiple units.
Despite the pandemic, it managed to open four new company eateries in 2020. And it expects to open 10 new locations in 2021, most company-owned.
Boennighausen attributed the three keys to its future success as: 1) capitalizing on our people strength because that drives successful restaurants more than any other factor, 2) gaining momentum on the franchisee pipeline, 3) continued evolution of its digital and data platforms.
Overall for the entire year of 2020, its sales fell 14.9% to $393.7 million from $462.4 million.
Nonetheless, its fourth quarter earnings, announced on February 25, 2021, showed the effects of the pandemic and limited indoor seating. Its total revenue dipped 5.9% to $107.2 million from $113.9 million and comparable restaurant sales sagged 4.7% system-wide.
Its stores used to average about 2,500 square feet, and now it’s finding that 1,600 to 1,800 square feet will suffice. “There’s not as much demand for dining in,” he said though he acknowledged that could return post-pandemic.
Its CEO Dave Boennighausen said it was “particularly hard hit in the second quarter of 2020 just as restrictions started hitting all of our restaurants.” Before the pandemic, 40% of its sales stemmed from indoor dining.
Its CEO explained that many of its dishes are sautéed and aren’t easily replicable, like a burger franchise. Hence, its franchisees require more restaurant and operational experience, but it’s stepping up franchising and looking for franchisees who can handle multiple units.
It closed a lot of restaurants in 2017
In February of 2017, Noodles and Company announced it was shutting down 55 of its 528 locations (at the time). The company cited underperformance at the restaurants and claimed its overall earnings would have increased by $7.3 million if not for those 55 dead weights. Thats one tough noodle to swallow.
While one of its shareholders stepped in to quasi save the day with an $18.5 million boost in exchange for permission to buy additional shares and preferred stock, Noodles still had a lot of work to do to make up for the lackluster performance of its restaurants that went bust. According to CEO Dave Boennighausen, “These initiatives focus on our strong, go-forward restaurant portfolio; shore up our balance sheet; and give us the financial flexibility to further our in-restaurant operational and culinary initiatives.” That might or might not be corporate jargon for “weve got to get our s**t together ASAP,” but either way, signs of overall closure might be suspicious for customers who prefer to dine where business is booming.
When youre cooking at home, pasta is generally one of the cheapest options around. A bag of noodles at your average grocery store chain barely sets you back $2, which is why if youre a restaurant serving up pasta dishes, they better be so delicious that they justify the higher price tag. According to some, Noodles isnt delivering carb concoctions that are worth the extra dough.
A staff writer for the CU Independent claimed, “I could have gone to Safeway to buy some noodles, some marinara, and a chicken breast, cooked it all myself, added some spices and still spent less than $9. Plus, it wouldve tasted better.” One unsatisfied Noodles and Company customer took to Trip Advisor to air their complaints saying, “This place is too expensive for no more noodles than you get. The beef stroganoff was horrific. The noodles tasted like pure starch.” And another unhappy customer wrote on Pissed Consumer, “We have noticed that the quality (and quantity) of the food has been steadily going downhill… the prices sure arent going down, theyve actually gone up. We wont be back to Noodles anymore, we had given it too many chances.”
Budget-conscious diners might be tempted to save the money allotted for going out to eat for places that dont make dishes they could easily whip up at home for at least half the cost and possibly better flavor.
If you are living that #gflife (thats “gluten-free life” for those not in the know on the hashtag we just made up) for serious medical reasons and your body reacts negatively to any trace of the stuff, you know how hard it is to find a restaurant thats truly, for real, 100 percent free of gluten. Its nearly impossible.
So it would make sense that when you do decide to brave it all and go to a restaurant, it might not be wise to choose one whose primary product could also go by Captain Gluten, even if there are gluten-free options on the menu. Even Noodles and Company itself admits that individuals with gluten allergies or intolerance should dine at their own risk. The company states on its website, “Even with a strict adherence toward maintaining spotless restaurants, we simply have too much wheat and gluten present to be able to eliminate the cross contamination on our equipment and food prep areas.”
While this might not have been an issue when the restaurant started in the 1990s, it can be a serious deal breaker for the gluten-phobic sector of todays diners. As the anti-gluten lifestyle has become more common, its possible that a lot of consumers are much more likely to choose a restaurant that doesnt glorify the enemy (gluten).
More fallout from the data breach
As if the bad press from the actual breach wasnt enough, later in 2016, an Oregon credit union sued Noodles and Company for failure to facilitate the necessary security measures to prevent the breach from happening. The credit union sought class action status for the lawsuit, claiming financial institutions had to bear the brunt of the expense of replacing cards, halting transactions and refunding non-customer purchases, among other hassles. The plaintiffs also called out Noodles and Company for not having implemented the chip system for credit cards. (To Noodles credit though, chip readers are a pain).
A judge ended up dismissing the lawsuit, claiming that ultimately the law protected Noodles in this instance and that the financial institutions needed to take up their issues with Visa and Mastercard. Still, its never great PR to be entangled in the legal system for any reason, and the dismissal didnt happen overnight. The lawsuit was filed in September 2016 and not dismissed until July 2017. Its not hard to imagine that Noodles and Companys legal troubles could have left a bad taste in the mouth of many hungry, noodle-loving consumers.
Noodles and Company was up against another legal hurdle when former employees filed a lawsuit claiming they were owed some coin for overtime hours. The former assistant managers accused the company of dubbing them exempt from the Fair Labor Standards Act. While Noodles reps claimed because these workers were on salary, they were part of the laws “white-collar exemption,” the former managers argued that they were expected to do the same tasks as the hourly workers who did receive overtime, and that they “exercise no little or no managerial discretion.”
While Noodles and Company agreed to pay out $3 million (some of which went to the lawyers for the plaintiffs) in a settlement agreement in 2016, it never officially owned up to any labor law violations. Its possible that the accusations and subsequent lawsuit did give the company a reputation for not treating workers well, which could be why a lot of fast casual diners added Noodles and Company to their do-not-support list.
FAQ
Is Noodles & company out of business?
Is Noodles and Company owned by Panera?
Is Noodles and Co owned by Chipotle?
Do you tip at Noodles and Company?
