Noodles & Company plans to raise prices by around 3%-4% in the second quarter of this year, officials at the fast-casual chain said Wednesday.
During a conference call discussing earnings for the year ended Dec. 28, 2021, which saw same-store sales increase by 22.1% on average unit volumes of $1.3 million, CEO Dave Boennighausen said the brand has a “strong value proposition, with the majority of our dishes having entry points of approximately $7,” which gives them the leeway to raise prices in the second quarter, and possibly again later on “to mitigate anticipated margin pressures.”
Chief financial officer Carl Lukach pointed out that price increases over the past few years had mainly been confined to higher premiums for third-party delivery service.
The chain raised the premium on those orders to 15%, from 10%, at the end of 2020.
He said that reduced hours and store closures resulting from the surge in the omicron variant of the novel coronavirus, along with food inflation, particularly of boneless chicken breast which makes up about half of the chain’s protein expense, had cut into margins in the first month-and-a-half of 2022. That and normally low traffic during the first quarter, meant he expected restaurant contribution margins of just 7% to 9% for the quarter. He said he expected them to rise to the “high teens” in the second half of the year.
Boennighausen said he also expected sales to be bolstered by the systemwide rollout “in the next few months” of LEANguini, a lower-carbohydrate, higher protein noodle that was tested starting in January in markets in Colorado, Illinois and Ohio.
“LEANguini has the taste and texture of traditional linguini and gets its name from having over 50% less net carbs and over 40% more protein,” he said.
“We feel LEANguini can have a similar impact to what zucchini noodles had on the brand a few years ago, expanding our market reach meaningfully by redefining traditional expectations [of pasta].”
Boennighausen has long credited the rollout of the Broomfield, Colo.-based chain’s “Zoodles” for helping to drive the chain’s turnaround.
That turnaround continued in 2021, despite challenges posed by the pandemic and, particularly in the fourth quarter, the surge in the delta variant of the virus which resulted in temporary closures and reduced hours of operation, mostly in late October and early November.
However, sales quickly rebounded as cases in the variant ebbed.
The chain saw a similar pattern with the rise and decline of the omicron variant, with same-store sales increases of 4% in January of 2022 rebounding to 8% for February as of Feb. 22 as cases declined.
For the fourth quarter of 2021, revenue increased by 7.1% to $114.8 million from $107.2 million in the same quarter of 2020. For the year, revenue was up by 20.7% to $475.2 million from $393.7 million. Same-store sales were up 11.2%. Restaurant contribution margins fell by 120 basis points to 12.4%
The company reported net income for the year of $7.8 million or 17 cents per share for the year compared to a loss of $17.8 million, or 40 cents per share, in 2020. However it booked a net loss of $4.7 million for the quarter, or 10 cents per share. Restaurant contribution margins were up by 400 basis points to 15.9%.
Noodles & Company opened six company-owned restaurants in 2021, closing out the year with 448 restaurants, of which 372 are company-owned and 76 are franchised.
Lukach said the chain would open seven restaurants in the first quarter of 2022, mostly company owned, and 35 total for the year, of which around 70% would be company-operated. He said about one-third of those openings would be in the fourth quarter.
He added that the chain had mostly completed its closure of restaurants that were no longer viable in the new climate, with just two planned closures in the first quarter of 2022.
Contact Bret Thorn at [email protected]
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