The worst of the coronavirus pandemic appears to be over for Noodles & Company, with the chain focusing on building smaller-format stores that cater to consumers seeking contactless and convenient ordering.
The Broomfield, Colo.-based chain reported a 30.9% drop in systemwide same-store sales. But, the company has seen sequential improvements in July, with same-store sales across the system down 4.4% for the two weeks ending July 28. For the prior two-week period ending July 14, systemwide same-store sales dropped 13%.
Much of the recovery has been driven by the brand’s robust digital business, where sales grew 135% for the quarter and accounted for 74% of sales. Dinner transactions are also driving sales.
“Our digital strategy has been a tremendous driver of our improving sales trends over the past several weeks,” CEO Dave Boennighausen said during the brand’s Thursday afternoon conference call with investors.
As of this week, a majority of the company’s 456 locations are open for limited on-premise dining. Many restaurants reopened dine-in in the last few days. The company had previously held off on reopening dining rooms even in areas where restrictions had lifted.
It’s unclear how digital sales growth will be impacted by the reopening of on-premise, Boennighausen said.
However, the chain is betting on the stickiness of its digital business.
Noodles said it plans to focus new unit growth on smaller-format restaurants geared toward off-premise sales, including locations designed with pick up lanes — a model the company has been beta testing for nearly two years. The lanes are similar to Chipotle Mexican Grill’s Chipotlanes, which are designed for pick up of mobile orders.
Boennighausen said wait times are about one minute for these drive-up lanes.
“We see great potential” in this off-premise format because the prototype is “perfectly situated for the needs of today's consumer,” the CEO said.
Stores with drive-thru pickup windows will account for at least 70% of new units, Boennighausen said.
Prior to the COVID-19 pandemic, the company projected 7% unit growth in 2021.The company won’t reach that target next year, but will come close as it seeks new stores with smaller footprints.
After a brief pause on menu innovation, Noodles said consumers can expect more updates to the menu. The company recently added animal noodle shapes to its kids meals. On Aug. 12, the chain plans to roll out another low-carb pasta alternative with cauliflower gnocchi.
“We’re particularly excited to get this dish in front of our guests,” the CEO said.
Total revenue fell to $80.2 million, compared to $120.2 million for the same quarter last year. Net loss of $13.5 million, or 30 cents per share, compared to net income of $0.4 million, or 1 cent per share in the same quarter, last year.
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