In this FDD Talk 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 2019 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 2019 FDD
- Section IV – Number of franchised and company-owned Noodles & Company outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
- Section V – Presentation and analysis of Noodles & Company’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
- 2018 average, median, high, and low net sales for the 392 company-owned, 65 franchise-owned, and 457 company-owned and franchise-owned Noodles & Company Restaurants open during the entire 52-week period ended January 1, 2019
- 2018 average and median net sales, cost of sales, gross profit, labor, controllable expenses, occupancy cost, non-controllable expenses, and restaurant EBITDA for the 392 company-owned Noodles & Company Restaurants open during the entire 52-week period ended January 1, 2019
Section I – Background Information
19 Things You Need to Know About the Noodles & Company Franchise
Zoodles Driving Company’s Growth
1. Since Noodles & Company launched its Zoodles, zucchini noodles, in May 2018, the alternative noodle option has consistently boosted the company’s results. That continued in the fourth quarter of fiscal 2018 and was reflected in the company’s full-year results. In Q4, same-store sales grew 4 percent systemwide, with company-owned restaurants seeing a 3.7 percent increase and franchise locations rising 5.3 percent. For the year, comps lifted 3.7 percent.
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2. Paul J. B. Murphy, executive chairman of Noodles & Company, said, “I am extremely proud of the work and results that our teams throughout the country accomplished in 2018, and even more excited of what 2019 will bring.”
3. The introduction of Zoodles kicked off Noodles & Company’s strategy to restructure its menu and improve value options. Noodles & Company introduced a make-it-a-meal offer – which drives up the average check – while highlighting new signature flavors.
4. The company wants to make ordering easier and to do so needs a simplified menu categorization. Continued testing of the new design and pricing model is ongoing, with an expected completion in May 2019. Dave Boennighausen, chief executive officer of Noodles & Company, said, “Our menu testing has been comprehensive. We’ve been very pleased with the results of this menu test.”
5. Despite the initial success with its Zoodles, Noodles & Company plans to keep working on increasing customer awareness for the brand’s healthier noodle alternative. Murphy said, “The company took an important first step in redefining how the brand resonates from a health perspective. We still have significant opportunity to build awareness for the Zoodles and expand our better-for-you platform in its entirety through continuing innovation, a significant focus of 2019.”
6. Restaurant analyst Andrew Strelzik said he was surprised the awareness of the Zoodle wasn’t where the company thought it would be almost a year after its launch. Boennighausen noted there was disconnect between the marketing of the product and customers, and they will focus on communicating the Zoodle’s capabilities moving forward.
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7. Boenninghausen added, “I think especially when it came to the substitution capability of the zucchini noodle, it was a bit too challenging. As you look at the menu that’s in most of our restaurants today to really understand how versatile that noodle was and how you could incorporate it into any dish. That’s where we saw opportunities.”
8. Noodles & Company recently added a new Zucchini Shrimp Scampi dish for a limited time, as part of its strategy to build more awareness for its Zoodles. By highlighting these healthier options, customers will hopefully be more aware of the brand’s overall healthiness. Later in 2019, Noodles & Company hopes to introduce a new vegetable-infused noodle to the menu.
Unveils New Maternity Leave Program
9. In September 2018, Noodles & Company bolstered its Life@Noodles platform with a unique benefit that makes the maternity leave transition easier for employees. Effective January 1, 2019, qualifying expecting and postpartum mothers will be able to phase-out and phase-in to their maternity leave, allowing them to work an 80 percent schedule the four weeks before and four weeks after maternity leave, while receiving 100 percent pay.
10. Dave Boennighausen, chief executive officer of Noodles & Company, said, “Transitioning to and from maternity leave can be a difficult time for mothers. Through our Life@Noodles initiative, we strive to make that adjustment easier for our team members. This phase-out, phase-in program, which is unavailable elsewhere in the fast-casual industry, added to our already robust maternity, paternity and adoption benefits and reflects our commitment to nourishing and inspiring our Noodles & Company team. Our team members work hard for us, and we want to express our gratitude by offering top-of-the-line benefits that support them in and out of the workplace.”
11. Noodles & Company cited research from the Centers for Disease Control and Prevention that says after giving birth, one in nine women experience postpartum depression in addition to sleep deprivation and difficulty managing breastfeeding. In a press release, Noodles & Company said, “Reentering the work world too quickly can increase work-related concerns and compound those issues. Phasing out of maternity leave allows mothers time to balance their work and personal lives and creates a work environment where employees can thrive.”
12. The new maternity leave program is the latest addition to Noodles & Company’s robust family-focused benefits program, which already includes:
- Six weeks of fully paid maternity leave and expanded parental leave;
- Adoption assistance of up to $10,000;
- Breast milk shipment during business travel; and
- Flexible time off for corporate team members.
13. Noodles & Company also offers student loan debt assistance to its employees and competitive standard benefits, such as dental and vision coverage, employee assistance programs, and 401(k) retirement plans. Assistant general managers and above are also eligible for Noodles & Company’s medical and life insurance and disability coverage offerings.
14. Noodles & Company was founded in 1995 by Aaron Kennedy in Denver, Colorado. Kennedy, who was a Pepsi marketing executive at the time, was inspired to open a noodle-centric restaurant after he realized that there were not enough restaurants that served noodle dishes.
15. With help from Noodles & Company’s future COO, Joe Serafin, and head chef, Ross Kamens, Kennedy began developing recipes out of his mother-in-law’s kitchen a year before opening the first Noodles & Company restaurant.
16. Initially, Noodles & Company was not well received and almost went out of business within its first year. The restaurant received numerous negative reviews in various newspapers. However, the reviews did praise the concept, which motivated Kennedy to revamp nearly every aspect of the operation. Kennedy ended up overhauling the menu, the prices, the décor, and the other weak parts of Noodles & Company’s concept.
17. The redesign worked and between the end of 1996 to 2000, Noodles & Company’s revenue grew from $330,000 to $13 million. In addition to making more money, Noodles & Company also grew across the United States and by 2007 there were 142 stores, 22 of which were franchises.
18. In 2010, an investment group led by Catterton Partners acquired a majority interest in Noodles & Company. In more recent years, beginning in 2015, Noodles & Company began closing underperforming stores, while opening just a few new locations each year.
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19. Noodles & Company did not rank on Entrepreneur’s 2019 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 2019 FDD.
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 2019 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 70
- Outlets at the End of the Year: 75
- Net Change: +5
- Outlets at the Start of the Year: 75
- Outlets at the End of the Year: 66
- Net Change: +9
- Outlets at the Start of the Year: 66
- Outlets at the End of the Year: 65
- Net Change: +1
- Outlets at the Start of the Year: 421
- Outlets at the End of the Year: 455
- Net Change: +34
- Outlets at the Start of the Year: 455
- Outlets at the End of the Year: 412
- Net Change: +43
- Outlets at the Start of the Year: 412
- Outlets at the End of the Year: 394
- Net Change: +18
Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis
Part 1 – Statement of and Information Regarding Average and Median Net Sales of Noodles & Company Restaurants for the 52-Week Period Ended January 1, 2019
- As of January 1, 2019, Noodles & Company operated 392 domestic company-owned Restaurants and there were 65 franchise-owned Restaurants, for a total of 457 Restaurants.
- The Statement of Average and Median Net Sales consists of averages and medians of the reported Net Sales only for those Restaurants open for the entire preceding 52-week period.
- 392 company-owned Restaurants were open and operating for the entire 52-week period.
- There were also 65 franchise-owned Restaurants open and operating for the entire 52-week period, for a total of 457.
- In 2018, Noodles & Company closed 20 company-owned Restaurants (none of which had been open less than 12 months) and its franchisees closed no franchise-owned restaurants.
Company and Franchise Net Sales