Noodles & Company Logo

Noodles & Company

Noodles & Company
https://www.noodles.com
1-720-214-1900
520 Zang Street, Suite D, Broomfield, CO 80021

Initial Investment Range

$669,000 to $1,412,000

Franchise Fee

$35,000 to $35,000

The franchise offered is for a Noodles & Company restaurant, which will specialize in the retail sale of noodle dishes, salads, soups, desserts, breads, beverages and other menu items and merchandise related to the Noodles & Company concept.

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Noodles & Company April 24, 2025 FDD Risk Analysis

Free FDD Library AI Analysis Date: July 16, 2025

DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.

1

Franchisor Stability Risks

Start Here
Total: 10
3
1
6

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The financial statements for Noodles & Company (N&C) show significant risks. For fiscal year 2024, N&C reported a net loss of $36.2 million, a substantial increase from prior years, and has negative stockholders' equity of -$5.6 million. An auditor's note highlights impairment charges on underperforming restaurants. These factors suggest potential financial instability, which could affect N&C's ability to support you and grow the brand, posing a risk to your investment.

Potential Mitigations

  • A franchise accountant must conduct a thorough review of the audited financial statements, including all footnotes and cash flow statements, to assess the franchisor's viability.
  • Discuss the franchisor's financial health and their strategy for returning to profitability with your business advisor.
  • Your attorney should investigate if any financial performance bonds or fee deferrals are required by state regulators due to these financial results.
Citations: Item 21, Exhibit F

High Franchisee Turnover

High Risk

Explanation

Item 20 data for 2024 shows a concerning level of franchisee turnover. During the year, 7 franchised restaurants ceased operations and 6 were reacquired by the franchisor. This represents 13 total exits from a starting base of 90 franchised units, a turnover rate of approximately 14.4%. This high rate of outlets leaving the system may indicate potential issues with franchisee profitability, satisfaction, or the overall business model, presenting a significant risk to your potential success.

Potential Mitigations

  • It is critical to contact a significant number of the former franchisees listed in Item 20 to understand their reasons for leaving the system.
  • Your accountant should analyze the turnover data over the past three years to identify if this is a persistent or worsening trend.
  • A business advisor can help you compare this turnover rate to industry benchmarks for similar fast-casual restaurant systems.
Citations: Item 20

Rapid System Growth

Low Risk

Explanation

This risk was not identified in the FDD package. The data in Item 20 does not indicate overly rapid or unsustainable system growth; in fact, the total number of outlets slightly decreased in the most recent year. Rapid growth can strain a franchisor's ability to provide adequate support, so its absence here is a neutral factor. You should still evaluate the quality of support provided to the existing system.

Potential Mitigations

  • Your business advisor should still help you evaluate the franchisor's infrastructure to ensure it can adequately support its current and projected number of units.
  • Engaging with a range of current franchisees can provide insight into the quality and consistency of the support they receive.
Citations: Not applicable

New/Unproven Franchise System

Low Risk

Explanation

This risk was not identified. Item 1 indicates that N&C has been operating restaurants since 1995 and has been franchising since 2003. This represents a long-established system with significant operational and franchising history. A new or unproven system would present higher risks related to the viability of the business model and the adequacy of its support systems.

Potential Mitigations

  • A business advisor can still help you research the brand's history and its evolution to understand its long-term market position.
  • In discussions with long-term franchisees, ask about how the system and franchisor support have changed over time.
Citations: Not applicable

Possible Fad Business

Low Risk

Explanation

This risk was not identified. The FDD describes a fast-casual restaurant concept centered on noodle dishes, salads, and soups. This is a well-established segment of the restaurant industry with sustained consumer demand. A business based on a fad carries the risk that its popularity could decline quickly, leaving you with a long-term contractual obligation for a business with a short-term appeal.

Potential Mitigations

  • A business advisor can help you analyze the long-term consumer trends in the fast-casual dining space.
  • Assess the concept's adaptability and menu innovation history to gauge its resilience to changing consumer tastes.
Citations: Not applicable

Inexperienced Management

Medium Risk

Explanation

While the individuals in key management roles have extensive experience in the restaurant industry, Item 2 shows there has been significant recent turnover at the highest levels. The CEO, CFO, and President/COO have all been in their roles for a relatively short time. Such changes in senior leadership can create a period of strategic uncertainty or shifts in operational focus, which may pose a risk to system stability and the consistency of support you receive.

Potential Mitigations

  • Engaging a business advisor to research the professional reputations and track records of the new executives is recommended.
  • When speaking with current franchisees, specifically inquire about any recent changes in strategy, support, or company culture since the new leadership team was installed.
  • Your attorney should help you seek clarity from the franchisor on their long-term strategic vision and commitment to the franchise model.
Citations: Item 2

Private Equity Ownership

High Risk

Explanation

Item 15 discloses that investment firms Mill Road Capital and Hoak & Co. have significant ownership stakes and corresponding representation on the Board of Directors. Private equity or investment firm ownership can introduce a focus on short-term financial returns. This might lead to decisions, such as increasing fees or reducing franchisee support, that could potentially benefit the investors over the long-term health of the individual franchise owners.

Potential Mitigations

  • Your business advisor should help you research the investment firms' history and reputation with other franchise brands in their portfolio.
  • Discuss with current franchisees whether they have observed any changes in franchisor behavior or support quality related to this ownership structure.
  • Your attorney can help clarify the franchisor’s rights to sell the entire system, which is a common exit strategy for investment firms.
Citations: Item 1, Item 15

Non-Disclosure of Parent Company

Low Risk

Explanation

This risk was not identified. Item 1 of the FDD clearly states the franchisor entity and its affiliates, and does not indicate the presence of a parent company whose financials would be material to your decision. In cases where a franchisor is a subsidiary of another company, the financial health of that parent can be a critical, and sometimes hidden, risk factor if not properly disclosed.

Potential Mitigations

  • Your attorney should always verify the corporate structure described in Item 1 to confirm the identity of the party you are contracting with.
  • An accountant should review whether the provided financials are for the correct entity and if any guarantees from other entities are involved.
Citations: Not applicable

Predecessor History Issues

Low Risk

Explanation

This risk was not identified in the FDD. Item 1 states, "We have no parents or predecessors." This indicates the business was developed internally by the current franchisor entity rather than being acquired. A history with a predecessor can sometimes introduce risks if the prior operator had a poor track record, a high rate of franchisee failures, or significant litigation that the new franchisor inherited.

Potential Mitigations

  • Your attorney should always confirm the statements made in Item 1 regarding predecessor history.
  • A business advisor can help you research the brand's public history to ensure no undisclosed predecessor issues exist.
Citations: Not applicable

Pattern of Litigation

Low Risk

Explanation

This risk was not identified. Item 3 discloses a single, settled lawsuit from 2018 related to unclaimed gift card funds and states no other litigation is required to be disclosed. A pattern of litigation, especially franchisee-initiated lawsuits alleging fraud or franchisor-initiated suits against franchisees, can be a major red flag indicating systemic problems. The absence of such a pattern is a positive sign.

Potential Mitigations

  • It is still prudent to have your attorney perform a public records search for any litigation involving the franchisor that may not have met the threshold for FDD disclosure.
  • When speaking with former franchisees, you can inquire if they had any legal disputes with the franchisor.
  • A business advisor can help assess if the disclosed litigation, even if minor, indicates any potential operational issues.
Citations: Not applicable
2

Disclosure & Representation Risks

Total: 15
6
1
8

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

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3

Financial & Fee Risks

Total: 10
7
0
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

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4

Legal & Contract Risks

Total: 16
10
1
5

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

5

Territory & Competition Risks

Total: 5
3
0
2

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

6

Regulatory & Compliance Risks

Total: 10
5
2
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

7

Franchisor Support Risks

Total: 4
2
2
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

8

Operational Control Risks

Total: 12
6
5
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

9

Term & Exit Risks

Total: 18
9
6
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

10

Miscellaneous Risks

Total: 2
2
0
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.