THE HEDGEYE EDGE
1. Refreshed Leadership Team = Breath of Fresh Air
Sometimes what a brand needs to create value for shareholders is an injection of new perspectives. This is exactly what Noodles & Company (NDLS) has done, with the appointments of Dave Boennighausen as permanent CEO (June 2017) and Brad West as EVP – Operations (Sept. 2017). Fresh faces and continuity in upper management will allow the Company to both bring new ideas to the table and focus on operational initiatives that had taken the backseat for far too long.
2. Streamlining Operations to Create Value
Towards the end of 2017, NDLS was faced with many organizational challenges, including a large number of underperforming restaurants and an increasingly complex menu. In order to combat these financial and executional challenges, the Company has closed 55 underperforming restaurants, begun to streamline their overly-complex menu, and simplified several operational processes inside of the restaurants, all in an effort to make their restaurants run more efficiently.
Simplifying the menu is the right move. Looking back at the 2016 menu, the big mistake NDLS made was getting away from owning the noodle. They diversified into sandwiches and BUFF Bowls (pasta sauces poured over spinach) which distracted the core consumer and created inefficiencies within the operation.
Fast forward to the current menu… It’s not always about how much you cut, but where you cut it. NDLS cut total menu items from 38 in February 2016 to 32 currently, a ~16% reduction. More importantly, they have refocused on ‘owning the noodle’ specifically mac and cheese and are investing in higher quality food.
3. A Focus on the Future
A core theme for our Restaurants team is off-premise and third-party delivery being top of mind for many operators in the restaurant industry. NDLS is no different. The NDLS management team realizes that there is still much work to be done to revamp the customer experience, so they are focused on off-premise and pushing their loyalty program. The Company anticipates offering third-party delivery in nearly 50% of their locations within the next few months, and also has plans to install quick pick up shelves to improve convenience.
ONE-YEAR TRAILING CHART
