The acquisition of 15 corporate-owned Noodles & Company restaurants in California—all of the brand’s stores in the state—was a key factor in Warner Foods signing a large multi-unit development deal with the fast-casual pasta chain, said Eddie Nieves. “Because it’s always better if you can start with at least a small foundation,” he said. “Our preference is always to do some acquisition, not just a development agreement.”
It was an acquisition that gave Sudesh Sood, who formed Warner Foods in 1981 with Ben Nematzadeh, a foothold in the Jack in the Box system and they’ve since grown their store count in that concept to 130-plus. “Sudesh came from London in the early ‘80s with a plan to get into the restaurant business,” said Nieves, a partner at Warner Foods who spent several years at Jack in the Box corporate and was vice president of franchise operations. “He looked at McDonald’s but then he found Jack in the Box. He acquired that first Jack in the Box in 1981 in Los Angeles … and literally they started growing right away.”
Nieves joined the company in 2017 when Warner Foods bought another 29 Jack in the Box restaurants, and acquisitions were also how the Encino, California-based group got into Panera Bread and Black Bear Diner, now with nine and four locations, respectively. Two more Black Bear Diners are in development.
The deal with Noodles & Company includes the development of 40 new restaurants throughout California over 12 years as the brand’s exclusive franchise partner in the state, with Warner Foods operating as NorCal Noodles under the agreement. The group looked at other quick-service and fast-casual franchises, plus a coffee concept, as it considered bringing a fourth brand into the portfolio and Noodles was the standout.
“I will tell you, I loved the food from the first time I tried it,” said Nieves. “It has to start there.” He went on to list culture, menu innovation and Noodles’ growth strategy—CFO Carl Lukach told Franchise Times it’s projecting 8 percent unit growth in 2022 and has an AUV target of $1.45 million by 2024—as other important factors. Noodles, Nieves continued, also wins with its simplicity.
“Jack in the Box is probably one of the most complex operations out there in fast food—and we’re extremely successful with it,” he said. “Noodles is much, much simpler. It’s easier to execute the concept.”
While the Noodles menu “looks complex” and features more than 20 pasta dishes, plus salads and soups, the preparation in the kitchen isn’t, said Nieves. “They have their processes really buttoned up.” The food also holds up well for delivery and takeout, he added.
With only 15 restaurants spread out from San Diego to Orange County and up to Sacramento, Nieves acknowledged Noodles lacks brand awareness in a state of nearly 40 million people but he isn’t concerned because those restaurants “already proved the concept. They have the AUVs, $1.2-, $1.3-, $1.4 million.” Noodles’ average unit volume from company and franchise restaurants in 2020 was $1.03 million.
Making another comparison to Jack in the Box, which has an initial investment range of $1.6 million to $2.6 million and mainly wants freestanding restaurants, Nieves noted Noodles & Company is mostly endcaps, which opens up more real estate options. “It should be easier, faster and make more sense financially to grow Noodles,” he said. The cost to open a Noodles ranges from $774,000 to just over $1 million.
Broomfield, Colorado-based Noodles & Company, which has 454 locations and is only 17 percent franchised, had systemwide sales of $458.5 million in 2020, a 13.8 percent decline. Its unit count has also been in decline since 2016.
The company in April 2021 announced a franchise development push as part of its overall growth plan. In August it announced a franchise agreement with Carlos Hill, president of Tsunami Enterprises, to open four restaurants in the El Paso, Texas, and Las Cruces, New Mexico. In January franchisee Phil Saad of SA Restaurant Groups opened the brand’s first restaurant in South Carolina as part of a multi-unit development agreement.