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FDD Talk 2017: What You Need to Know About the Noodles & Company Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

by Franchise Chatter on July 24, 2017

in Fast Casual Restaurant Franchise, FDD Talk 2017: Food Franchises, Franchise Earnings

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Noodles & Company Photo by fensterj

In this FDD Talk 2017 post, you’ll learn the following:

  • Section I – Background information on the Noodles & Company franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Noodles & Company franchise, based on Item 7 of the company’s 2017 FDD
  • Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Noodles & Company franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of Noodles & Company’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • 2016 average, high, and low net sales for the 372 company-owned and 69 franchised Noodles & Company Restaurants open during the entire 53-week period ended January 3, 2017
  • 2016 average net sales, cost of sales, gross profit, labor, controllable expenses, occupancy cost, non-controllable expenses, and restaurant EBITDA for the 372 company-owned Noodles & Company Restaurants open during the entire 53-week period ended January 3, 2017

Section I – Background Information

15 Things You Need to Know About the Noodles & Company Franchise

Senior Management and Board of Directors Changes

1.  In early June, Noodles & Company announced that Dave Boennighausen had been appointed to the permanent role of Chief Executive Officer of the company. Also in the press release, Noodles & Company announced that Paul Murphy had been named Executive Chairman of the Board and that Robert Hartnett was stepping down as Chairman, but staying on as a director.

2.  Boennighausen previously served as Noodles & Company’s interim CEO since July 2016 and its Chief Financial Officer since July 2012.

Expanded Animal Welfare Initiatives

3.  In early February, Noodles & Company announced a new commitment to expand and strengthen farm animal welfare within its supply chain. Noodles & Company is already using 100 percent cage-free eggs and 100 percent gestation crate-free pork.

4.  Noodles & Company is partnering with Compassion in World Farming, a respected international animal welfare organization, to make a long-term commitment to improved conditions for the animals in the company’s supply chain by 2024.

5.  Noodles & Company’s animal welfare commitments include:

(a) Broiler chicken welfare: By 2024, the company will align its supply chain with the Global Animal Partnership’s (GAP) Broiler Chicken Standards to achieve the following:

  • Moving to breeds of birds approved by GAP that drive significantly higher welfare outcomes;
  • Reducing stocking density to GAP-approved levels;
  • Providing birds with improved environments, which include litter, lighting, and enrichment that meet GAP’s new requirements;
  • Moving to a more humane practice of slaughter by implementing a multi-step controlled atmosphere processing system; and
  • Demonstrating compliance with these standards through a vigorous third-party audit system.

(b) Dairy cow welfare: Cows used in the production of milk to make its cheddar, jack, feta, Parmesan, and Montamore cheeses, as well as its butter and cream, currently comply with the National Milk Producers Federation’s FARM program, which mandates:

  • No tail docking. In instances when disbudding is performed, effective pain management is administered by a veterinary professional.
  • Detailed written procedures, overseen by a veterinary professional, for management of injured and non-ambulatory animals, as well as euthanasia.

(c) Pig welfare: The company will continue to work with its pork suppliers to eliminate the use of routine tail docking and teeth clipping.

New Menu Items and the Return of a Fan Favorite

6.  In an effort to keep its menu fresh, Noodles & Company has added two new items to its permanent menu and also brought back an old fan favorite. In early February, Thai Green Curry with Shrimp, and Pork or Chicken Adobo were added to the chain’s permanent menu.

7.  The Thai Green Curry is a South-Asian inspired dish with a sweet and spicy coconut green curry sauce, rice noodles, pineapple, broccoli, red onion, snap peas, lime, black sesame seeds, and cilantro with sautéed shrimp; while the Pork or Chicken Adobo has a cavatappi noodle base with a smoky adobo sauce, red onions, roasted mushrooms, olives, sour cream, lime, and cilantro topped with slow-braised pork or grilled chicken.

8.  At the start of May, Noodles & Company brought back a fan favorite, Pasta Fresca, as another addition to its permanent menu. The Pasta Fresca, which features balsamic vinegar, olive oil, and roasted garlic over penne pasta, tossed with fresh tomato, spinach, and Parmesan cheese, was offered over four years ago and has returned to Noodles & Company after thousands of requests from customers.

Celebrating Holidays with Special Offers

9.  Noodles & Company typically offers special deals during holidays and other special events. Most recently, Noodles & Company celebrated National Mac and Cheese Day on July 14, by offering customers a free small size of its mac and cheese with every regular entree purchase.

10.  The company also helped Americans de-stress during tax season with the return of its “File Online, Order Online” promotion, which offered $4 off any $10 purchase placed through Noodles & Company’s website from April 12 to April 18 using a special code.

Company History

11.  Noodles & Company was founded in 1995 by Aaron Kennedy in the Cherry Creek neighborhood of Denver, Colorado. Kennedy was inspired to start Noodles & Company after realizing that there weren’t enough restaurants that focused on serving noodle dishes.

12.  A year before opening the first Noodles & Company restaurant, Kennedy and future COO Joe Serafin and head chef Ross Kamens, developed recipes out of the kitchen of Kennedy’s mother-in-law.

13.  Noodles & Company got off to a rocky start and almost went out of business in 1996 after a reporter with the Wisconsin State Journal and several other newspapers published negative reviews of the restaurant’s food. In response, Kennedy and his team completely reworked the Noodles & Company concept by overhauling the menu, prices, décor, and other aspects of the restaurant that weren’t working out.

14.  The reboot was successful and Noodles & Company began opening new locations in the U.S. The company began franchising in 2003 and, today, there are over 500 locations across the U.S.

Entrepreneur’s Franchise 500

15. Despite having over 500 locations in the U.S., Noodles & Company has yet to appear on Entrepreneur’s annual Franchise 500 list.

Section II – Estimated Costs

  • Please click here for detailed estimates of Noodles & Company franchise costs, based on Item 7 of the company’s 2017 FDD (updated).

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

  • Please click here for detailed information on Noodles & Company’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

Part 1 – Statement of and Information Regarding Average Net Sales of Noodles & Company Restaurants for the 53-Week Period Ended January 3, 2017

  • As of January 3, 2017, Noodles & Company operated 455 domestic company-owned Restaurants and there were 75 franchise-owned Restaurants, for a total of 530 Restaurants.
  • However, the Statement of Average Net Sales consists of mean averages of the reported Net Sales for those Restaurants open for the entire preceding 53-week period.
  • While 418 company-owned Restaurants were open and operating for the entire 53-week period, Noodles & Company has excluded 46 Restaurants that have closed since fiscal year end or will close this fiscal year, resulting in 372 company-owned Restaurants.
  • There were also 69 franchise-owned Restaurants open and operating for the entire 53-week period, for a total of 441.

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