After over a year of struggle, restaurants’ dine-in businesses are finally coming back. Now, restaurant businesses that have seized on consumers’ lifestyle changes throughout the pandemic, adapting to expand their digital ordering and off-premises offerings, have the opportunity to reengage consumers on-site and create an omnichannel experience for the consumer. Fast-casual chain Noodles & Company, for one, was quick to adapt, building out its mobile app, adding new drive-thru windows, and implementing curbside pickup while also implementing new in-restaurant technologies in its kitchens of the future.
The results of these adaptations are clear — the company recently announced that, in the first quarter of 2021, average unit volumes hit a record-high $1.35 million, a 12.7 percent increase from the same period in 2020 and a 6.1 percent increase from 2019. These sales were driven by the company’s digital channels, with digital sales growing 110 percent year over year to account for 62 percent of all sales.
“We feel very encouraged by the growth of our digital business,” Noodles & Company CFO Carl Lukach told PYMNTS in an interview. “This did not happen overnight. We have been investing in digital for a while now, particularly building a very functional app and building a lot of frictionless ways for our guests to engage with us … whether they want to come in and pick up, whether they want delivery, whether they want to see us on a third-party aggregator, or whether they want to just do curbside … we’ve given our guests a true omnichannel approach.”
With this digital growth comes increased insight into how guests are paying for their orders on online channels.
“I think the guests want to be as seamless as possible,” said Lukach. “They want to make sure that their payment is secure, they want to make sure their payment is easy. So the more that we can engage guests through our loyalty program to just pay directly — put in credit card information and pay automatically, you know, seamless and cardless transactions. I think that’s going to continue to evolve.”
To encourage customers to engage more with Noodles & Company’s mobile ordering channels, the company offers a tiered rewards program, Noodles Rewards, in which the most loyal customers receive the most points per order. Additionally, the company is looking to engage these customers with more than just points — Noodles & Company recently announced a menu item, to which rewards members will have exclusive access for two weeks. Lukach noted that this item “has done phenomenally in test — it’s really the best new menu test we’ve ever had at the business.”
The idea of this members-only launch, he explained, is to offer “a different look at value.” He added, “We’re not just saying here’s $4 off … You’re getting something that the other guests are not getting, and you’re getting a sneak peek. You’re getting more behind the scenes and more information about it.”
Out-Teching The Labor Shortage
As the industry struggles against the restaurant labor shortage, Noodles & Company is using technology to reduce labor needs.
“We have a new labor schedule … It’s called HotSchedules and then allows us to be very real and dynamic with our labor staffing as it relates to the sales,” Lukach said. “The model is predictive, meaning as we build into certain fluctuation periods, it gets to know the restaurant better, and it helps us staff really day part by day part and hour by hour.”
Additionally, the company has “restructured the way we think about front of house,” rethinking the workflow and bringing “a couple more hours out by rethinking really what the optimal labor model could be.”
Finally, Lukach pointed to the “steamer initiative” as a labor-saving change, explaining, “Steamers is a new piece of equipment that is going to decrease the time it takes to warm up the dish … and it reduces it by a little over a minute, so what that can do is it can speed up the time and ultimately get dishes out quicker and reduce hours in the restaurant.”
These changes are especially important now, as consumers return to restaurants.
“We are almost entirely open right now at whatever capacity where we’re allowed to, and we’ve changed our staffing model to flip back on where we’re covering dine-in guests,” said Lukach. “The channel mix is still nowhere close to where we were pre-COVID, but we’re encouraged by the direction of where it’s going.”
Building Toward The Omnichannel Future
As Noodles & Company looks to expand into Southern and Southwestern markets with its multi-unit franchise growth initiative, the company is also taking a more digital-forward approach to entering a new market in California — opening a ghost kitchen in San Jose.
“The San Jose market is new for us, so opening up a ghost kitchen is extremely asset-light, requires very little people, very little capital,” Lukach explained. “What we’ll learn by going in a new market could be really eye-opening to say … how is the brand resonating with guests and how should we think about our real estate strategy when we actually put more dollars to work in opening up new markets?”
The company is also opening a ghost kitchen in Chicago, where it already has several locations, as a test to get a sense of how the ghost kitchen model works for the brand. As Lukach put it, “This is a pure delivery model, pure off-premises, the kitchen’s smaller, the space is smaller — we have to be extremely efficient with how we prepare dishes. We’re going to learn a lot about what we can take away and apply to our own kitchens.”
These ghost kitchens, set to open this month, come as digital sales remain high while dine-in returns, shifting the mix back.
“Our digital business continues to be resilient,” said Lukach. “The mix of 62 percent has come down to around 57, and it’s really been holding at that 57 percent range, but the dollars have been flat, meaning we’re not actually losing that digital guest … And that’s because our in-restaurant mix has gone up … [Guests are] coming back and engaging with us in real life.”