Casual Dining Chain Considers Closing Underperforming Locations Amid Revamped Menu and Growth Strategy

Clear Facts

• Noodles & Company, a Colorado-based fast-casual chain, may close up to 20 underperforming restaurants due to reported losses of around $2 million.
• The company has embarked on a menu overhaul, with two-thirds of its offerings expected to be either new or improved within the next year.
• Noodles & Company plans to focus on reactivating lapsed loyalty members and increasing catering opportunities as part of its broader growth strategy moving forward.

The restaurant industry is battling losses and closures, and Noodles & Company could be the next to face this challenge. The pasta and noodle chain recently announced in its second-quarter earnings call that 20 restaurants, underperforming due to a combined loss of about $2 million, may close when their leases end.

The company’s Chief Financial Officer, Mike Hynes, explained that the restaurants’ fate is currently under discussion with their landlords, facilitated by a national broker. The timeline for these potential closures, however, remains uncertain and will be decided on an individual restaurant basis.

This year, Noodles & Company anticipates closing between 10 to 15 restaurants, some of which fall within the aforementioned 20 underperforming sites. Presently, the company operates 475 locations across 31 states.

CEO Drew Madsen revealed the strategy behind these potential closures. “We believe closing underperforming restaurants will allow us to focus more on our restaurants with the most growth potential and provide an increase in company earnings and cash flow post-closure.”

During its second quarter, which concluded on July 2, the chain saw a mix of developments. Six locations in Portland, Oregon were re-franchised, five new restaurants were opened, and one was closed. Same-store sales saw a modest increase of 2%, but traffic to company-owned restaurants dipped by 1.1%. So far, eight company-owned locations have opened this year.

Supplementing these strategies, Noodles & Company is also revamping its menu. The first two phases of this menu revamp are “largely complete,” and the chain is now entering its third phase. The upcoming stage involves testing new and improved menu items in specific locations to evaluate customer satisfaction, operational feasibility, and any related financial implications.

In the next year, the company plans to introduce or improve approximately two-thirds of its menu. New introductions include Lemon Garlic Shrimp Scampi and Chipotle Chicken Cavatappi, which customers have received well. The Crispy Chicken Bacon Alfredo dish has also been revamped and is now selling almost 50% more with higher customer satisfaction compared to the dish it replaced, Alfredo MontAmore.

These three menu items are expected to roll out nationwide in October. The company is also testing five more dishes while removing one from the menu. If successful, these dishes will be launched in the first quarter of 2025.

However, not every new dish has been a hit. The limited-time Baked Alfredo with Grilled Chicken didn’t perform as well as expected. This was attributed to its similarity to previous limited-time offerings.

In the future, the company will introduce Spicy Korean Steak Noodles but will discontinue selling Zucchini with Roasted Garlic Cream Sauce, Linguine Rosa, and Linguine Fresca. Besides tweaking its menu, the company is re-engaging lapsed loyalty members and expanding its catering opportunities for future growth.

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