Franchise Costs: Detailed Estimates of Noodles & Company Franchise Costs (2019 FDD)

Updated August 11, 2019.

Detailed Estimates of Noodles & Company Franchise Costs Based on Item 7 (Estimated Initial Investment) of Noodles & Company’s 2019 Franchise Disclosure Document

• The table below includes costs incurred to open recent company restaurants which Noodles & Company believes to be the best indicator of costs to open a franchise restaurant.

• The table includes costs incurred for 10 of the 13 company-owned restaurants opened in the trailing 2-year period ended January 1, 2019 (excluding one restaurant that was not open for the full 2018 fiscal year and two restaurants which Noodles & Company believed had costs that were too high or too low, respectively, to be representative of the cost of opening a typical Noodles & Company restaurant).

• The 10 company-owned restaurants ranged in size from 2,500 to 2,900 square feet with an average of 2,625 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.

• Noodles & Company is exploring the use of a somewhat smaller restaurant footprint; if there are changes to its restaurant prototype, it is possible that such changes will affect the costs shown here.

Build-Out Costs

1.  Leasehold Improvements:  $436,000 to $576,000

• 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 $10,192 per month and ranged from approximately $8,093 to $14,434 per month.

2.  Architectural and Other Design Fees:  $45,000 to $113,000

3.  Landlord Credits:  ($100,000) to ($150,000)

• Often, landlords provide allowances or rent-free periods for tenant improvements. Noodles & Company received an average tenant improvement (“TI”) allowance and free rent totaling $105,500, and such allowances ranged from $100,000 to $130,000.

4.  Kitchen Equipment:  $108,000 to $137,000

5.  Millwork & Furniture:  $47,000 to $83,000

6.  Computer Equipment:  $20,000 to $32,000

7.  Signage:  $20,000 to $52,000

8.  Total Build-Out Costs:  $576,000 to $843,000

• 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:  $0 to $9,000

• 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 $3,354 and ranged from $0 to $9,394.

• Permits and licenses can vary widely between locations. However, while Noodles & Company restaurants historically sold liquor, they generally no longer do so and liquor licenses are no longer required.

2.  Supplies and Smallwares:  $0 to $8,000

3.  Opening Inventory:  $6,000 to $10,000

• 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:  $1,000 to $3,000

5.  Utilities:  $0 to $3,000

6.  Pre-Opening Cash Occupancy Costs:  $0 to $8,000

• 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:  $22,000 to $36,000

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

8.  Grand Opening Marketing Program:  $1,000 to $3,000

• 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:  amount not specified

• 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 $18,000

• 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 estimates 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:  $30,000 to $98,000

Franchise Fee:  $35,000

Grand Total for Franchise-Owned Restaurants:  $641,000 to $976,000