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 2021 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 2021 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 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD
- Section V – Presentation and analysis of Noodles & Company’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:
- 2020 average, median, high, and low net sales for the 374 company-owned, 67 franchise-owned, and 411 company-owned and franchise-owned Noodles & Company Restaurants open during the entire 52-week period ended December 29, 2020
- 2020 average and median net sales, cost of sales, gross profit, labor, controllable expenses, occupancy cost, non-controllable expenses, and restaurant EBITDA for the 374 company-owned Noodles & Company Restaurants open during the entire 52-week period ended December 29, 2020
Section I – Background Information
22 Things You Need to Know About the Noodles & Company Franchise
Announces Leadership Changes
1. At the beginning of November 2020, Noodles & Company announced that Carl Lukach had been named the company’s chief financial officer. “The strength of our leadership team is one of our greatest assets at Noodles, and the addition of Carl to our executive team will undoubtedly further strengthen Noodles & Company,” said Dave Boennighausen, chief executive officer of Noodles & Company. “Carl comes to Noodles with extensive leadership experience and expertise in a multitude of financial functions from some of the nation’s leading lifestyle organizations. Carl will be instrumental in advancing our financial roadmap and leading Noodles to realize its vast potential.”
2. Lukach brings more than 17 years of diverse financial leadership to Noodles. Most recently, he spent four years as vice president of finance at Equinox, the namesake brand within Equinox Group, a high-growth collective of the world’s most influential lifestyle and digital brands. In this role, he oversaw finance, treasury, tax, strategic planning, and financial operations, in addition to investor management and capital fund raising.
3. Prior to Equinox, he held several roles in finance and corporate development for Abercrombie & Fitch (“A&F”), where he led the successful expansion of the A&F and Hollister brands through outlet growth and new venture initiatives, including franchising, licensing, wholesale, and acquisitions. Prior to A&F, Lukach spent over a decade in investment banking at Credit Suisse with an industry focus in food and retail businesses. As a director, he was responsible for advising clients in capital fund raising and M&A transactions. He holds a bachelor’s degree in finance and psychology from Georgetown University.
4. Lukach said, “I am thrilled to join Dave, the executives, and Noodles’ more than 8,000 dedicated team members across the country at this exciting time in the organization’s history. This is a brand that puts guests and community first, and with a strong strategy and omnichannel consumer approach, the potential for growth and value creation is tremendous.”
5. Noodles & Company also announced that Kathy Lockhart, the company’s vice president and controller, was promoted to the title of chief accounting officer in September 2020. She remains the company’s principal accounting officer. Lockhart has been a leader at Noodles for the past 14 years. She has led continuous change in reducing costs, enhancing quality, and providing valuable insight for operational improvements.
6. Lockhart joined Noodles in 2006 as controller and vice president of accounting. She leads a team of accountants and analysts responsible for financial reporting, risk management, loss prevention and compliance, tax, and treasury. She also leads the company’s crisis management team and has been instrumental in the company’s COVID-19 response.
7. Prior to joining Noodles, Lockhart served as the vice president and controller of several public and private restaurant and retail companies. She is a CPA and a CGMA and is a member of the American Institute of Certified Public Accountants and the Colorado Society of CPAs. She is a member of the Colorado Society’s Financial Literacy Committee and is also a current member of the AICPA’s Benevolent Fund, AMRAP group. In addition, Lockhart was selected as an inaugural member of the Colorado Governor’s Fellowship program. She holds a bachelor’s degree in business administration and political science from Western Colorado University.
8. Boennighausen added, “Noodles & Company is uniquely positioned to win in the current consumer environment, and now with Carl and Kathy’s leadership on our finance team, I am more confident than ever that Noodles will be able to accelerate growth and build shareholder value.”
Announces Additions to Support New Restaurant Development
9. At the beginning of November 2020, Noodles & Company announced that it had hired John Ramsay as vice president of franchise sales to support the company as they prepare for growth. Dave Boennighausen, CEO of Noodles & Company, said, “We are aggressively building a robust development pipeline, and we plan to advance both our company and franchise strategies. We continue to target at least 10-15 new restaurant openings systemwide in 2021, with a target of at least 7% annual unit growth beginning 2022. John brings a breadth of experience that will enable us to take advantage of growth and partnership opportunities as they arise.”
10. Ramsay comes to Noodles with more than 28 years of experience in franchise and sales development. He will be critical in supporting Noodles’ restaurant growth initiatives by recruiting and selecting franchise partners, while also working with existing franchise partners to build out their Noodles & Company businesses through multiple restaurant locations. Ramsay will also partner closely with Carly Habein, vice president of franchise operations, to cultivate strong relationships early in the partnership process with potential franchise prospects. Currently, 76 of Noodles’ 454 locations are franchise owned and operated with two more slated to open in early 2021.
11. “As a proven concept, Noodles is uniquely positioned to grow at this time,” said Ramsay. “Noodles has innovated and adapted quickly to the off-premise experience and offers attractive unit-level economics for franchisees.” Most recently, Ramsay led franchising and development efforts for Bruxie International, Marco’s Franchising, and Rubio’s Baja Grill. In addition to his franchise roles, Ramsay has also worked in construction and real estate for brands like Sbarro’s, T.G.I. Friday’s, and Jack in the Box.
12. Boennighausen said, “Franchise growth is a tremendous opportunity for Noodles, and with John and Carly’s leadership, we will be able to accelerate unit growth while partnering with franchise operators who value our people culture and dedication to making Noodles the best place to work in the industry.”
13. Noodles has also hired two experienced real estate directors, Eric Briggs and Greg Burnthorn, who bring nearly two decades of combined real estate experience to the team. They will report to Dawn Rheinlander, vice president of real estate, and join her in leading restaurant development.
14. “We believe that Noodles & Company’s strengths are perfectly suited for today’s consumer environment, and with these additions to our company and franchise development teams, we are even more equipped to take advantage of the opportunity to expand our footprint throughout the country,” said Boennighausen. “Strength in our most recent class of new restaurants, complemented by the development of an off-premise oriented, more efficient prototype, gives us great confidence in the opportunity to be one of the premier growth stories in the restaurant space in coming years.”
Unveils Multi-Unit Franchise Growth Initiative
15. At the end of February 2021, Noodles & Company announced a multi-unit franchise growth initiative to increase its presence in Southern and Southwestern markets. With plans to expand an off-premise oriented footprint perfectly suited for today’s consumer environment, this expansion will be fueled by company locations, existing franchisees, as well as potential new partnerships with experienced multi-unit franchise owners. The planned expansion will target select DMAs in the Southern and Southwestern markets, including Alabama, Florida, Georgia, New Mexico, South Carolina, and Texas.
16. Noodles & Company’s off-premise capabilities and digital strength uniquely position the brand to meet the needs of today’s fast casual environment and take advantage of long-term consumer trends. With attractive unit economics, evidenced by the company’s recent openings marking the company’s most successful new restaurant class in history, Noodles & Company plans to accelerate new unit growth in the years to come. To support the planned growth, Noodles & Company recently hired a vice president of franchise development, John Ramsay, who has tremendous franchise experience and is bolstering the brand’s franchise partnership efforts.
17. According to Ramsay, “Noodles is well positioned and primed for an aggressive franchise growth strategy. As a leader in the fast-casual space, Noodles & Company stands out to franchise partners because we offer an innovative menu, a competitive investment, and a brand that’s really unlike any other. Further differentiating the Noodles franchise opportunity is our successful model for off-premise dining, distinctive store designs featuring smaller footprint units, pickup windows for digital orders where feasible, more efficient value-engineered equipment packages and streamlined operational procedures. The brand has successfully demonstrated its ability to adapt and is perfectly suited for today’s consumer environment.”
18. Ramsay continued, “Further strengthening the value of Noodles and opportunity for new franchise partners, the restaurants that we have opened over the past two years have been our best performing vintage of restaurants in the company’s history. We’re confident that Noodles & Company is poised for success in our key markets and excited to grow our presence in these new communities.”
19. Noodles & Company was founded in 1995 by Aaron Kennedy in Denver, Colorado. Kennedy, who was a Pepsi marketing executive at the time, realized, while he was eating at an Asian noodles shop in New York, that there weren’t enough restaurants that focused on selling noodle dishes. A year before opening the first restaurant, Kennedy started developing recipes out of his mother-in-law’s kitchen with the future COO, Joe Serafin, and head chef, Ross Kamens.
20. Despite what Kennedy thought was a good idea, Noodles & Company struggled in its first year. Things were so bad that Noodles & Company almost went out of business after a scathing review published in the Wisconsin State Journal. Kennedy and his team re-grouped in mid-1996 and implemented several changes, including overhauling the menu, décor, prices, and the way the noodles were cooked. Things turned around and over the next few years, Kennedy opened additional locations.
21. In 2003, Noodles & Company started franchising and growth continued with both company-owned and franchised locations. In 2010, an investment group led by Catterton Partners acquired a majority interest in Noodles & Company. Today, there are Noodles & Company locations across 29 states and Washington, D.C. A majority of these locations are company-owned, but Noodles & Company has recently invested in additional franchise expansion.
Entrepreneur’s Franchise 500
22. Noodles & Company did not rank on Entrepreneur’s 2021 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 2021 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 2021 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- 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: 65
- Outlets at the End of the Year: 68
- Net Change: +3
- Outlets at the Start of the Year: 68
- Outlets at the End of the Year: 76
- Net Change: +8
- Outlets at the Start of the Year: 412
- Outlets at the End of the Year: 394
- Net Change: -18
- Outlets at the Start of the Year: 394
- Outlets at the End of the Year: 389
- Net Change: -5
- Outlets at the Start of the Year: 389
- Outlets at the End of the Year: 378
- Net Change: -11
Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis
- Noodles & Company is providing statements of and information regarding average and median net sales of company and franchise Restaurants for its 2020 year. Noodles & Company is also providing statements of and information regarding restaurant contribution to gross profit and restaurant EBITDA of company Restaurants in its 2020 fiscal year.
- The COVID-19 pandemic and related governmental actions and changes in consumer behavior significantly disrupted restaurant operations in 2020; these factors contributed to significant periods of time in which in-restaurant dining was closed or significantly limited. Additionally, there were many temporary restaurant closures in 2020 as a result of positive COVID-19 cases.
Part 1 – Statement of and Information Regarding Average and Median Net Sales of Noodles & Company Restaurants for the 52-Week Period Ended December 29, 2020
- As of December 29, 2020, Noodles & Company operated 378 domestic company-owned Restaurants and there were 76 franchise-owned Restaurants, for a total of 454 Restaurants.
- However, 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.
- 374 company-owned Restaurants were open and operating for the entire 52-week period. The remaining company-owned Restaurants were not open for the full preceding 52-week period.
- There were also 76 franchise-owned Restaurants open and operating for the entire 52-week period. Nine of such Restaurants were operated by the company for a portion of the year and then sold to a franchisee.
- In 2020, Noodles & Company closed 6 company-owned Restaurants (none of which had been open less than 12 months) and its franchisees closed 1 franchise-owned Restaurant.
Company and Franchise Net Sales