Noodles & Company has had an on again, off again relationship with franchising. The 25-year-old fast-casual concept based in Broomfield, Colo., has periodically sought franchisees and then rethought its business model and retooled the concept, sometimes leaving those franchisees in the lurch. But the company has cleaned up operations: Average unit volumes surpassed $1.3 million at the end of last year and are on track to reach the goal of $1.4 million ahead of schedule, before mid-2023. That, and a menu that is at once streamlined to focus on noodles while being varied enough — with global flavors and low-carb options as well as the mac & cheese that is the chain’s bread and butter — to have broad appeal, make it an attractive addition to experienced franchisees’ portfolios, according to John Ramsay, who has been Noodles’ vice president of franchise sales for the past two years.
Indeed the chain has made progress in franchising, with a major deal with Warner Foods that included the sale of 15 company-owned Noodles locations and an agreement to open 40 more in California. It also has expanded for the first time to South Carolina with SA Restaurants Groups Inc.
As of the end of the first quarter of 2022, ended March 29, Noodles has a total of 93 franchised units in addition to its 360 company-owned locations.
Ramsay recently discussed the Noodles & Company’s progress with Nation’s Restaurant News.
Noodles & Company has made previous attempts at franchising. What’s different this time?
It's been really important as we're coming back [to franchising] to be very transparent with incoming franchisees, because they're pretty savvy and they’re going to ask the same question that you asked.
We're 25 years old. Over that time we’ve gone through a lot of changes — menu strategy, development strategy, supply chain issues, technology issues, and not all of it goes as planned.
I'll give you two examples of what didn’t work.
Number one was around the menu.
We went through a time period where part of the answer to the low-carb movement was to broaden the menu. So we started offering sandwiches, flatbread pizzas, we put a coffee and tea program in.
But we’re a noodle concept. It wasn't like putting a sandwich or pizza on the menu was going to bring us a new audience. People knew us for noodles.
What it did was muck up operations and affect margins.
So that was clearly a bad decision and was really an inhibitor to growth.
Number two was when we went public in 2012. The company raised a lot of cash and a lot of the senior management at the time had come from Chipotle.
Of course Chipotle is … company operated, and the thinking was, ‘Let’s take all of this cash and grow our company base of operations.’ So it really shifted away any focus or desire, quite frankly, to grow the franchise side of the business.
I don't know if that decision unto itself was a bad decision, but the impact was that we grew too fast: By being driven to meet a certain number of new-unit growth, we spread out too far. We went to too many markets too quickly, the growth outpaced the operations team, which is really probably the number one issue that we ran into: We didn’t have the staff to staff [the new restaurants] correctly.
The franchisees were kind of on the sidelines, and we were too busy to send a trainer to our own restaurants [let alone help them].
Both of those [problems] were solved within the last three or four years, so now [CEO] Dave [Boennighausen] and the rest of the team have really started thinking about franchising again.
What are you looking for in a franchisee?
Our best franchise partner is an existing multi-unit franchise operator. We want to do larger deals and really offer development opportunities for folks.
How many restaurants do you want your franchisees to open?
It's really about matching the franchisees’ abilities with the market they’re going into.
So for example, one of our newer franchise groups that just signed up is in El Paso, Texas, and they signed up for a four-unit deal, which is perfect for that market, whereas our franchisees that we just signed up for California signed up for 40.
What other markets are you looking at?
We have virtually nothing in Texas, nothing in the Gulf Coast states and nothing in Georgia.
So we have markets like Dallas, Houston and Austin in Texas. Then you go over to Birmingham [Ala.] and Atlanta. They are all larger markets that are available for an established franchisee group to pick up Noodles and really have that opportunity to grow themselves out.
That’s where we're really focused.
What about the Northeast and Northwest?
Having lived in the Northeast and having done a lot of business in the Northwest, I think those are unique markets. They're very expensive to do business in, and I think that they do have some unique challenges.
Maybe California could be put in the same category of unique parts of the country, but I think if the right operator was to come along we would do it.
But the low hanging fruit for us is that Southeast/Southwest area.
How has Noodles & Company’s technology changed since its last franchising push?
Back before COVID we took for granted that you needed online ordering, but it wasn’t that big a deal. Maybe you needed an app, maybe you didn't.
Well, now it's mandatory, and I think Noodles has done a phenomenal job of being ahead of the curve with our technology platform.
Specifically, we've brought all the technology under one umbrella. If you think of the back-of-the-house systems, front-of-the-house systems, online ordering, app ordering, Internet access, labor scheduling. All of these different applications that you have to link together we’ve put in an all-inclusive package. So even for a sophisticated new franchisee, like our group in California, it was seamless because they're basically signed up for our service and they get the entire package covered: All the support, all the maintenance, all the replacements, all the ongoing upgrades … I think that's another real positive that we have going for us.
Another thing that Noodles & Company stands out for is treatment of employees. You’re quite generous to them, but as a potential franchisee it could raise the cost of doing business. Is that a challenge in finding new franchisees?
When [our California franchisee] saw our package they were quite surprised at not only the breadth, but the generosity that we offer.
They’ve embraced it, and it’s really been fun to watch that.
They were able to look at the things that we're offering, specifically around the medical benefits and parental leave, and they very quickly adopted that because they saw first-hand how important it was to the teams who were now joining them, and the quality of the folks that we had in our system.
So I don't see it as a barrier. I think it's a real positive.
Contact Bret Thorn at [email protected]
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