Noodles & Co. shares recipe for growth

by Monica Watrous
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Noodles & Co. restaurant
Noodles & Co. has beefed up its brand marketing.

NEW YORK — When sales began softening last year for Noodles & Co., executives of the Broomfield, Colo.-based fast-casual chain took action. The 20-year-old company, which has nearly 500 restaurants in 35 states, beefed up its brand marketing, shuttered 16 units and introduced to the menu what “may be one of the best innovations and offerings that we’ve come up with in years,” said Kevin Reddy, chairman and chief executive officer.

Kevin Reddy, Noodles & Co.
Kevin Reddy, chairman and c.e.o. of Noodles & Co.

“As we approach the back half of 2015, what we set as an important target for us is us to get back to positive transactions,” Mr. Reddy said during a Nov. 18 presentation at the Morgan Stanley Global Consumer & Retail Conference in New York. “We were running slightly negative transactions. We think the strength of the brand, getting us back to positive transaction was an important goal for the end 2015. That has happened.”

Mr. Reddy attributed the company’s recent sales slump to a shift within the fast-casual industry that found Noodles & Co. at a disadvantage.

“Much of fast-casual was built through word of mouth, through local-store marketing,” Mr. Reddy said. “With all the growth in fast-casual over the last 10, 12 years, it’s moved into a different stage. I would say, whether you call it fast-casual 3.0 or 4.0, some of the big players now began to spend anywhere from $30 million a year upwards to $100 million a year in events, in marketing, and promotion. We still were primarily a local-store marketer, is how we introduced the brands in our markets and how we brought it to life.

“As I reflect back on that, as that started to change, that’s probably one of the areas that I wish I would have supplemented both what’s happening inside the four walls from a local-store marketing standpoint with some traditional media and support brand positioning a little greater dollars in social digital to support the brand in the markets as we started to grow and get economies of scale.”

Noodles & Co. Made Different campaign
Noodles & Co. this year launched its Made Different marketing campaign.

To regain traction, Noodles & Co. this year launched its Made Different marketing campaign, which emphasizes the chain’s cooked-to-order menu and quality of ingredients.

“We don’t have any artificial coloring, flavors, sweeteners, or preservatives in any of our core food items anymore,” Mr. Reddy said. “We have always been cooking from cage-free eggs. We’ve had organic milk, organic tofu. Antibiotic-free pork is already in our restaurants, naturally-raised. And we have also made announcements around the further progress we’ll have in meat and poultry. We have antibiotic-free chicken in some of our markets. We expect to have that in the entire system by 2017. And we have some more announcements around kind of the meatballs and the steak and some of the improvements that we’re doing. So, our ingredients, I think, are highly-aligned already with what consumers want.”

And in October, after extensive testing, the chain introduced its first-ever children’s meal, which for $5 features a small noodle dish, a choice of two sides, including seasonal fruit, applesauce, vegetables or a crispy rice treat, and a choice of a fountain drink, organic milk or organic juice. The company partnered with the National Restaurant Association’s Kids LiveWell program to develop options that meet certain nutritional criteria.

Kids meal from Noodles & Co.
In October, Noodles & Co. introduced its first-ever children’s meal.

“At $5, the price point that we’re seeing here, just tremendous, tremendous uptick, tremendous consumer feedback not just on the offering itself, but on the value proposition,” said Dave Boennighausen, chief financial officer. “More importantly, when we saw some of the softness from a day part perspective, it was a lot of times that Friday and Saturdays where the families are particularly out. We’re seeing that this is really resonating with that particular day part, and we think very impactful in terms of turning some of the tide, getting back to that positive transaction growth.”
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