Noodles & Company Sees High-Income Consumers Sticking With Takeout

As many consumers seek cheaper meals, Noodles & Company is seeing high earners springing for restaurants.

The Broomfield, Colorado-based fast-casual chain, which has more than 450 locations, shared on its fourth-quarter earnings call Thursday (March 9) that its focus on meeting off-premise demand continues to resonate with higher-income consumers even now.

“The work we were already doing even before COVID — [our] smaller square footage, pickup windows, incorporating digital into many of our new restaurants — those are all paying dividends in terms of that overall shift towards off-premise and digital,” CEO Dave Boennighausen told analysts.

He added that going after suburban markets where the consumers are “higher income, a little higher education” and the stores have “that smaller square footage, off-premise-oriented footprint,” many of which offer “that order-ahead pickup window” has proven to be an effective strategy.

While off-premise surged in popularity during the early phases of the pandemic, the rise of inflation has many consumers opting for more affordable alternatives, be it cooking from scratch or picking up a prepared meal at the grocery store.

PYMNTS’ study “Consumer Inflation Sentiment: Inflation Slowly Ebbs, but Consumer Outlook Remains Gloomy,” which drew from a survey of more than 2,100 consumers, found that 78% have been eating at home more often to save money amid inflation.

Plus, data from the report “The 2022 Restaurant Digital Divide: Restaurant Customers React to Rising Costs, Declining Service,” for which PYMNTS surveyed more than 2,300 restaurant customers, revealed that the vast majority of diners have made changes to their dining spending in response to inflation.

Yet, that same study found that higher-income consumers are less likely than their lower-income counterparts to make such adjustments. Twenty percent of those who earn more than $100,000 annually reported that inflation has had no impact on their dining habits, compared to only 15% of those who earn $50,000 to $100,000 and 13% of those earning less than $50,000.

“We’re seeing that frequency of our guest is stable, if not increasing,” Boennighausen said. “We’re not really seeing any trade-down. So, as the consumer potentially would be under pressure, we’re not seeing any trade-down within the menu. In fact, mix is actually positive.”

He added that the company is seeing “really good momentum” in all its channels including delivery, a trend that bucks the industry-wide trend of consumers shifting to pickup amid inflation.

Research from PYMNTS’ February study “Connected Dining: Rising Costs Push Consumers Toward Pickup,” which drew from a survey of more than 2,100 U.S. consumers, found that 48% of diners said inflation has made them more likely to choose pickup. Plus, 42% said they have been ordering for pickup to avoid tipping a delivery person.

Apparently, by going after that higher-income demographic, Noodles & Company has been able to protect itself from much of the impact that inflation has had on consumer behavior.

Indeed, the company’s digital growth suggests that it has been able to grow off-premise sales even amid inflation, with 11% year-over-year digital sales growth in the quarter and a 54% digital mix, which has only grown slightly in the first couple months of 2023 to 55%.