Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Franchise Costs: Detailed Estimates of Noodles & Company Franchise Costs (2016 FDD)

by Franchise Chatter on May 31, 2015

in Fast Casual Restaurant Franchise, Franchise Costs

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Noodles & Company Photo by fensterj

This post was updated on February 18, 2017 to reflect information from Noodles & Company’s 2016 FDD (Item 7).

Detailed Estimates of Noodles & Company Franchise Costs Based on Item 7 (Estimated Initial Investment) of Noodles & Company’s 2016 Franchise Disclosure Document

  • The table below details costs incurred for 48 of the 51 company-owned restaurants opened in the 52-week period ended December 29, 2015. The table excludes 2 locations that are atypical for a Noodles & Company location and 1 restaurant that opened and closed in 2015.
  • The 48 company-owned locations ranged in size from 862 to 3,470 square feet with an average of 2,614 square feet.
  • These costs include all of the company’s out-of-pocket costs to develop and open a company-owned restaurant net of tenant improvement allowances, adding in a Franchise Fee for illustrative purposes.

Build-Out Costs

1.  Leasehold Improvements:  $375,645 to $802,780

  • These estimates assume that the location will be a leased, unimproved, unfinished retail store-type unit. If you purchase a location, lease a freestanding building, or lease a space in a multi-story structure, your initial investment may be much greater.
  • A typical Noodles & Company restaurant will be located in a suburban or urban area on a major thoroughfare or adjacent to or part of a retail shopping center.
  • For the restaurants included in the table, occupancy costs, which are comprised of base rent, percentage rent, CAM, and real estate taxes averaged $9,210 per month and ranged from approximately $5,471 to $13,096 per month.

2.  Architectural and Other Design Fees:  $21,549 to $164,083

3.  Landlord Credits:  $0 to ($220,000)

  • Often, landlords provide allowances or rent-free periods for tenant improvements. Noodles & Company received an average tenant improvement (“TI”) allowance and free rent totaling $99,230, and such allowances ranged from $0 to $220,000.

4.  Kitchen Equipment:  $109,854 to $160,009

5.  Millwork & Furniture:  $35,255 to $70,109

6.  Computer Equipment:  $18,570 to $30,239

7.  Signage:  $15,441 to $63,214

8.  Total Build-Out Costs$576,313 to $1,070,433

  • The construction costs presented include all significant costs incurred in constructing or remodeling a location to conform to Noodles & Company’s standards, except for time incurred internally by staff to design the restaurant and manage the construction process.
  • Costs include general contractor and subcontractor fees along with other costs to construct leasehold improvements to conform to Noodles & Company’s standards.

Pre-Opening Costs and Additional Funds

1.  Permits and Licenses:  $1,482 to $12,167

  • Permits and licenses include, for example, business licenses, tap fees, and liquor licenses. (Building permits are included in the Total Build-Out Costs.)
  • For the restaurants included in the table, total permits and licenses averaged $5,555 and ranged from $1,482 to $12,167.

2.  Supplies and Smallwares:  $1,445 to $6,245

3.  Opening Inventory:  $5,500 to $9,500

  • Proprietary Products must be purchased from Noodles & Company’s Designated Suppliers. Other items must be purchased from an Approved Supplier or an Alternative Approved Supplier.

4.  Safe and Cash on Hand in Registers:  $1,200 to $2,500

5.  Utilities:  $0 to $4,437

6.  Pre-Opening Cash Occupancy Costs:  $0 to $8,769

  • In general, Noodles & Company negotiates the payment of its leases to coincide with the start of operations. However, in some cases it may be necessary to begin lease payments before opening in order to secure a particular location, or to accommodate the optimal timing of a new restaurant opening.

7.  Training:  $14,342 to $36,689

  • Lodging and travel costs for training 3 persons for your first restaurant are included in these estimates. Fully-burdened labor costs for your employees to attend the training are not included as these may vary widely.

8.  Grand Opening Marketing Program:  $1,569 to $9,357

  • You must spend a minimum of $15,000 for the first 2 restaurants in a discrete market and $5,000 per restaurant for each grand opening after the first 2 grand openings in a market.

9.  Legal Expenses:  $0

  • Legal expenses will differ by restaurant, Area Operator, individual real estate, and site requirements. For company-owned restaurants, Noodles & Company handles a significant amount of these activities with its existing management team, including internal legal counsel.

10.  Additional Funds – 3 Months:  $0 to $40,369

  • These additional funds may be used for restaurant-level employee wages and benefits, point of purchase collateral, other marketing costs, insurance, maintenance, linens, cleaning and office supplies, leased equipment, occupancy expenses, and credit card processing fees, among other costs.
  • These amounts do not include training expenses, general and administrative or area manager salaries, or any payment to you.

11.  Total Pre-Opening Costs and Additional Funds:  $24,538 to $130,034

Franchise Fee:  $35,000

Grand Total for Franchise-Owned Restaurants:  $635,851 to $1,235,467

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