Off-Premise Sales Top 54% at Noodles & Co.
As off-premise sales soar at Noodles & Co. the fast-casual concept is testing a new kitchen setup that is designed to increase throughput, improve order pickup and optimize labor.
For the third quarter, digital sales grew 47% and accounted for 23% of sales and contributed to an increase in total off premise sales to 54% of sales. Delivery accounted for 7.6% of Q3 sales.In late October, Noodles implemented a 10% delivery pricing premium system-wide, and “while still early, we are pleased with the results,” said CFO Ken Kuick in an earnings call with analysts. Noodles is continuing to test direct delivery, executed by third parties but ordered through its native digital channels to enhance delivery margins, he added.
In the face of digital disruption, Noodles is testing a new kitchen design that has been retrofitted into three existing locations. “While too early to speculate on its ultimate impact on unit-level economics, early results “indicate meaningful opportunity for saving and labor costs,” said CEO Dave Boennighausen in an earnings call with analysts.
“…We are optimizing our kitchen equipment package and our operating processes to improve labor efficiency in our restaurants, while also improving throughput, food quality, off-premises pickup, and importantly, flexibility for future innovation in our menu,” said Boennighausen.
Three of the five company restaurants Noodles opened in 2019 have pickup windows “which we continue to see as a strong avenue to meet the need for convenience with today's guests,” he explained.
“Moreover, we continue to execute our smaller square footage design engineered to increase efficiency, reduce costs, and deliver on the increased importance of off premise.”
Boennighausen was short on details about the kitchen design, saying its “very early” in the project that has been in the works for more than a year. Noodles “is starting to retrofit restaurants with design that has a few new pieces of equipment as well as a few changes in the processes and the flow within the restaurant.”
… “This is such an important project with such a big upside that we want to make sure we do it right,” he said, adding that this will ultimately determine what will be going into all of the locations.
“We're seeing good movement in (labor savings, speed, flexibility, temperature of food) in those existing restaurants that have been retrofitted. From the new restaurant perspective, that new layout, new design with the new equipment, will start coming into play early in 2020,” he said.
“We feel we are laying a strong foundation for the success of our new restaurants,” said Boennighausen. Additionally, the brand is uniquely positioned to meet the increasing consumer demand for convenience as our food travels well and meets the variety, speed, and price point necessary to compete favorably for the off-premise occasion.
Earnings for Q3 marked six consecutive quarters of positive comparable sales growth. Highlights for the quarter include a 2.1% system-wide comparable restaurant sales increase and 7.6% two-year comparable growth.
A full earnings report is available here.
The brand’s Q4 marketing initiatives will focus on promoting its new cauliflower noodle and its new loyalty program, both which made their debut in September.
The new NoodlesREWARDS platform is available on the Noodles mobile app and website, is now a points-based system.
"We listened to guest feedback and made changes to our app and website to ensure an experience that you can't beat," said Jonathan Tress, vice president of marketing at Noodles & Company. "The updates allow us to better reward returning customers with the food they love and provide first-time guests at Noodles with an easy way to access and understand not only our simple ordering process, but the variety on our menu."