Dive Brief:
- Noodles & Company expects to close a total of 28 to 32 company-owned restaurants this year, CFO Michael Hynes said Wednesday during an earnings call. The company also expects to shutter 12 to 17 company-owned restaurants next year.
- So far this year, the chain has closed nine company-owned restaurants, and expects to close 13 during the third quarter. The remaining stores slated to close will cease operations during the fourth quarter.
- The closures come after the chain shuttered 20 stores last year following an initial review of its portfolio during Q2 2024. Other chains, including Wendy’s, Denny’s and Red Robin have planned or have already closed a number of underperforming restaurants.
Dive Insight:
The closures so far have improved the performance of Noodles’ restaurant system by removing restaurants with negative cash flow, Hynes said. Nearby Noodles locations also saw a boost in sales and profits, he noted. Company-owned units totaled 364 at the end of the second quarter, down from 379 in the year-ago quarter, according to an earnings release. The projected closures will leave the chain with about 340 company-owned units this year.
“The portfolio optimization, reviewed by Mike [Hynes], combined with ongoing cost reductions will give us a stronger and more profitable foundation moving forward,” CEO Drew Madsen said during the call.
Noodles remains focused on menu innovation to drive traffic and boost sales amid Madsen’s impending departure as CEO. COO Joe Christina will take over the position on Aug. 31, while Madsen will remain on the board of directors.
Same-store sales increased 1.5% during the second quarter, which was lower than the company’s expectations, Madsen said. After its March menu launch, guest value perception unexpectedly declined, in part due to the changing consumer environment that has driven discounting and promotions within the QSR, fast casual and casual segments, he said.
To improve its value perception, the chain rolled out a Duos value platform on July 30 starting at $9.95. Guests can pick from a small noodle bowl, including its mac and cheese items, add a protein and choose a side, such as Caesar salad, garden salad or Lemon Parmesan Broccoli and chicken noodle soup. This platform could help the chain strengthen its lunchtime appeal, and offers an option for a lighter dinner, Madsen said, adding that he expects this platform to be permanent.
