The restaurant industry has faced enormous challenges since the start of the Covid-19 pandemic, including a rapid shift to online ordering and pronounced labor shortages. But according to Carl Lukach, CFO of fast food chain Noodles & Company, it is possible to run a successful restaurant business while attracting and retaining employees, making it a healthy, safe and attractive place to work. I recently spoke with Carl about the recent positive financial performance of Noodles & Company, as well as how, as CFO, he is helping to prioritize staff needs in this time of upheaval and change.
Jeff Thompson: The Covid-19 pandemic has seen an unprecedented shift to online ordering at trendy restaurant chains like Noodles & Company in 2021, with your organization reporting a 110% increase in digital sales in the first quarter of 2021, accounting for 62 % Sales. How has your finance team evolved into this new and rapidly accelerating sales channel? How have new developments such as “ghost kitchens” changed the fast-casual landscape and how is your organization taking advantage of these trends?
Carl Lukach: Our menu is perfectly suited for the off-site [dining], which led to our first investments in our digital and offsite activities long before Covid-19. These investments include a user-friendly ordering process through our website and the Noodles app, as well as the development of curbside pickup and fast, frictionless pickup from restaurants. As the change in channel mix continues to evolve and restaurant dining has increased, we have been able to retain the majority of our digital sales growth. In fact, throughout the second quarter of this year, we retained over 90% of our digital sales.
We consider our Noodles rewards program to be one of our best digital tools for engaging with guests and the platform has grown to 3.8 million members in the last quarter. As we introduce the brand to new guests, we continue to leverage the information for our rewards program to help increase frequency and brand loyalty. Ultimately, we believe that the strength of the brand, along with our continued focus on targeted and personalized marketing, has created a powerful combination that leads to strong digital sales.
With regard to ghost kitchens, we are at the start of operations. We’re focused on using the presence of our first Ghost Kitchens in Chicago and the next Ghost Kitchen in San Jose to better understand how to optimize operations. In particular, we are learning to operate in a smaller kitchen area, which could offer potential opportunities in our restaurants as our offsite and digital mix remains high. The construction cost is around $ 100,000, which is significantly less than that of a restaurant. We will therefore monitor the average unit volumes and margins there in order to better understand the return on investment.
Thomson: Labor shortages plague the fast and casual restaurant segment. What has Noodles & Company done to retain and attract staff? How has finance prioritized investment in people and corporate culture? As a CFO, how does your leadership contribute to a healthy company culture where people want to come and work?
Loukatch: As we all know, hotel workers and restaurant workers in particular have been among the real heroes of the past year and a half. Over the past quarter, our team members have proven that you can have a culture of caring for one another and caring for your fellow human beings, while delivering incredible growth and financial results.
Our industry-leading benefits, extended in 2020, from free mental health counseling and financial adoption assistance to six weeks of paid maternity and paternity leave, have brought value and confidence to the members of the team during these uncertain times. Our industry-leading training and development programs, from the use of cutting edge technology to consistent and standard restaurant validation to formal development programs, demonstrate our commitment to team members only when ‘they join Noodles & Company, they have the opportunity to develop their careers. .
While we are encouraged by our talent retention and acquisition metrics relative to the industry, we are constantly monitoring how to optimize opportunities for our team members and remain an attractive place to work. We believe that we are competitive both from a compensation point of view and [in regard to] our benefit packages, with an emphasis on flexibility, health and retention.
Thomas: Diversity, Equity and Inclusion (DE&I) have become increasingly important to business leaders over the past year and a half, including CFOs and other CFOs. How did Noodles & Company approach DE&I? As a member of the LGBTIQA community, what challenges do you think members of your community face as members of the workforce that businesses should face?
Loukatch: We are committed to caring for our team members, a value that is at the center of everything we do. It comes to life for us through our commitment to creating an inclusive and diverse environment that allows our entire team to be at their best and authentic in an environment that cultivates personal and professional growth and development opportunities for everyone at all levels. With industry-leading benefits and a culture dedicated to making everyone feel welcome and cared for, we’re committed to putting our team members first and celebrating the differences that make each person unique.
In addition to our benefits focused on diversity and mental health, in March 2021 we joined the CEO Action Pledge, created a function dedicated to inclusion and diversity, added the very first role of inclusion and diversity to our team, created gender identity options for team members, and increased our robust career development resources for team members, including free courses, language courses, training programs and more.[To show] Continuing dedication to diversity among team members, we have also extended these values to reflect our customer experience. At the end of 2020, we started to deploy gender-neutral toilets at all our sites. In June 2021, we also launched the Noodles & Company Pride Crispy and donated 100% of proceeds from the crisp to Out & Equal Workplace Advocates, the first organization working exclusively on LGBTQ + equality in the workplace.
From a personal perspective, I have come to recognize Noodles as a top-notch place to work for family-oriented employees and [those who want to belong to] a diverse workforce. I am a proud, gay father of three, and I was looking to work for a company where culture and key values would allow me to show myself every day as my authentic self.
This article has been edited and condensed.