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Noodles & Company Reports Negative 2017 Store Comps

Noodles & CompanyNoodles & Company (NASDAQ:NDLS) announced poor performance results for its fourth quarter and 2017 fiscal year.

Noodles' franchised same-restaurant sales dropped by 0.5 percent in 2017 compared to 2016. Company-owned same-restaurant sales fell by 2.7 percent. In the last quarter of 2017 franchised same-restaurant sales dropped 0.9 percent compared to the same quarter the previous year. Its company-owned same-restaurant sales fell by the same percentage. 

For the franchisor, revenue dropped 6.4 percent for the year, attributed to its closing of 55 company-owned restaurants. Noodles had a net loss of $37.5 million for 2017, more than half of its net loss of $71.7 million in 2016.

Noodles & Company’s CEO Dave Boennighausen stated that the company was focused on improving operations, was strengthening its leadership team to turn the company around, and had rationalized its restaurant count.

Noodles & Company U.S. Restaurant Count“Early in the year, we closed 55 underperforming restaurants which were causing a burden on our human resources and financial performance,” said Boenninghausen. In 2017 the company opened 15 new restaurants, including 12 company-owned and 3 franchised.

In an earnings call to stock analysts* yesterday, the leaders of the Colorado-based firm barely spoke of its franchise owners. In fairness, franchisees may not get much air time from company leaders when they speak with analysts because the chain predominantly consists of company-owned restaurants. At the end of 2017 the fast-casual chain had 478 restaurants, of which 66 were franchised and 412 were company owned.

In response to low- or non-carbohydrate diets that pull health-conscious consumers away from pasta meals at Noodles & Company, the brand will launch noodles made from zucchini nationwide in May. The company’s chairman Paul Murphy said that Noodles is also testing a number of measures this year that it has high hopes will pan out in 2019. “So we're taking the time right now to test a series of initiatives that we'll bring to bear kind of second quarter of 2019,” said Murphy.

Noodles expects to add one to five new restaurants in 2018, including one to four company-owned restaurants. It aims to have positive same-restaurant sales. On the downside, the CEO anticipates 1.5 percent commodity inflation in 2018, but is consolidating store costs to cover that. 


*Note: Leadership quotes to analysts were gathered from an earnings call transcription from SeekingAlpha.com.

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Don Sniegowski is editor of Blue MauMau, the daily news journal for franchise & small business owners. Call him at +1 (270) 321-1268, tweet @bluemaumau or email don@bluemaumau.org.