Noodles & Company continued its winning ways in the quarter ended June 29, 2021, as same-store sales rose by 56.8%. Digital sales remained high, customers returned to dining rooms and the chain benefited from the successful rollout of its tortelloni line, which CEO Dave Boennighausen said achieved a higher menu mix than any previous rollout at the chain based in Broomfield, Colo.
“For years, stuffed pasta has been the most requested item from our guest, and we're extremely excited to meet that request through our three-cheese tortelloni with specialty ingredients like caramelized onions and a blend of ricotta, mozzarella and parmesan cheeses,” Boennighausen told investors in a conference call Tuesday.
He said the tortelloni were also a boon to Noodles’ loyalty program, whose members, now totaling 3.8 million customers, had exclusive access to the stuffed pasta for the first two weeks of the rollout.
Noodles also opened its first ghost kitchen during the quarter, a company-owned unit in a densely populated area of Chicago.
Boennighausen said the delivery-only restaurant gave management insight into improving operations.
“Just as importantly, this ghost kitchen is allowing us to sharpen our digital marketing for an urban delivery focused landscape,” he added. “And moreover, due to its small footprint, we are learning ways to be more efficient throughout all of our labor and food operations.”
A second ghost kitchen is slated to open in San Jose, Calif., later this year.
Boennighausen said the chain also learned from a franchise location that opened in North Dakota during the quarter.
“Due to construction delays, this restaurant opened with sales transactions solely coming through our order-ahead drive-thru window,” he said. “Despite this limitation, this restaurant has been posting annualized AUVs of $1.6 million since opening — further evidence of the power of our off-premise capabilities in general and our drive-thru windows in particular.”
Overall average unit volumes at the chain were $1.35 million, about the same as last quarter and an increase of 12.3% compared to the second quarter of 2019.
Of that, digital sales were 56% of total revenue, down from 57% in the previous quarter but up by 15% compared to the second quarter of 2020.
Profit margins rose to 18.9%, approaching the 451-unit chain’s goal of hitting 20% by 2024.
Total revenue at the chain increased by 57% to $125.6 million. Net income was $5.7 million, or 12 cents per share, compared to a loss of $13.5 million, or 30 cents per share, in the second quarter of 2020.
Chief financial officer Carl Lukach told investors that, although cost of goods sold at the chain was down by 10 basis points to 24.9%, the chain would be increasing prices of its core menu by 3% starting next week. That’s on top of a 2.5% increase earlier in the year.
“As we head into the third quarter, we are not alone in navigating industry-wide inflationary pressures and overall staffing shortages with our food vendors and other suppliers,” Lukach said. He also observed that the average per-person check was still just over $10, meaning the chain “continues to provide a tremendous value proposition to our loyal guests, which affords us with pricing power to offset these future costs.”
The chain is also working to enhance labor efficiency with the continued rollout of steamer equipment across the system, which allows restaurants to heat their many sautéed dishes more quickly by pre-cooking them in the steamers, resulting in savings of about two labor hours per restaurant. Lukach said steamers had now been installed at 162 locations, or 43% of the system. Barring no further supply chain disruptions, he said 90% of restaurants would have steamers by the end of the year.
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