Business Overview From Modest Beginnings to Nationwide Expansion
Noodles & Company was founded in 1995, with the goal of bringing the unique flavors of noodle dishes from around the world under one roof. Starting with a single location, the company faced initial challenges in establishing its brand identity and building out its restaurant network. However, Noodles & Company successfully developed a loyal customer base by offering a unique menu of high-quality, cooked-to-order noodle dishes at an attractive price point.
As the company grew, it invested in improving its operations, training programs, and technology systems to enhance the customer experience. By the late 2000s, Noodles & Company had expanded to over 300 locations nationwide. The company's initial public offering in 2013 provided capital to accelerate its growth, leading to further expansion that brought its total to over 470 locations by the end of 2022.
Throughout its history, Noodles & Company has continuously evolved to meet changing consumer preferences. The company has invested in enhancing its digital capabilities, including online ordering and delivery services. However, in recent years, Noodles & Company has faced challenges such as declining sales and profitability, leading to initiatives focused on menu innovation, operational improvements, and adjustments to its restaurant portfolio.
In 2024, the company impaired 16 underperforming restaurants and closed 13 company-owned and 7 franchise restaurants, primarily locations generating low or negative cash flow, at or approaching lease expiration, or in trade areas not well-positioned for current consumer trends. The company plans to continue evaluating its portfolio and may close additional underperforming restaurants.
The company has also experienced several executive transitions in recent years as it navigates a difficult operating environment. In 2024, the company's Chief Financial Officer and Chief Executive Officer positions turned over, with Mike Hynes hired as the new CFO and Drew Madsen appointed as the permanent CEO after serving as interim. The company also appointed a new Chief Concept Officer and Executive Vice President of Marketing in 2024.
Financial Overview Navigating Challenges and Charting a Path to Growth
Financials
Noodles & Company has faced its share of challenges in recent years, including declining comparable restaurant sales and profitability. In fiscal year 2024, the company reported total revenue of $493.27 million, a 2.0% decrease from the previous year. Net loss for the year stood at $36.21 million, or $0.80 per diluted share. The company's annual operating cash flow was $7.56 million, while annual free cash flow was negative $21.21 million.
In the most recent quarter (Q4 2024), revenue was $121.77 million with a net loss of $9.69 million. System-wide comparable restaurant sales increased 0.8% in Q4 2024, including a 0.5% increase at company-owned restaurants and a 1.9% increase at franchise restaurants. The improved comp sales were driven by the rollout of new menu items, increased media support, renewed momentum in third-party delivery, and promotional offers.
However, the company has taken proactive steps to address these headwinds, including the implementation of strategic initiatives aimed at driving operational efficiency, enhancing the guest experience, and reinvigorating its menu. These efforts have begun to bear fruit, as Noodles & Company reported positive traffic and over 3% comparable restaurant sales growth in the first eight weeks of fiscal year 2025.
Liquidity
The company's balance sheet remains a focus area, with $1.15 million in cash and cash equivalents and $103 million in total debt as of December 31, 2024. Noodles & Company's capital expenditures for 2024 totaled $29 million, down from $52 million in the prior year, as the company has shifted its focus to optimizing its existing restaurant portfolio rather than rapid expansion.
As of December 31, 2024, the company had $19 million available under its revolving credit facility. The company's AR Credit Agreement has a variable interest rate equal to SOFR plus a margin of 1.75% to 3.75% per annum, based on the consolidated total lease-adjusted leverage ratio. The company's debt-to-equity ratio stands at -52.25, while its current ratio is 0.31 and quick ratio is 0.15.
Revitalizing the Menu A Bold Culinary Transformation
The centerpiece of Noodles & Company's turnaround strategy is its comprehensive menu overhaul, which the company has been meticulously planning and testing over the past 18 months. This transformative initiative is set to introduce nine new dishes, including five completely new offerings and four reimagined versions of traditional favorites. This represents the largest menu update in the company's 30-year history, with two-thirds of the menu being new or improved.
The new menu items are the result of a rigorous development process that involved concept testing, central location testing, and real-world market testing to ensure exceptional taste and operational feasibility. The company's research showed that the new and improved dishes achieved significantly higher guest satisfaction scores across key metrics such as overall satisfaction, taste of food, and perceived value.
One standout example is the new Buffalo Chicken Ranch Mac & Cheese, which features elbow noodles in a creamy cheddar and jack cheese sauce, topped with parmesan-crusted chicken, buffalo sauce, green onions, crispy onions, and a drizzle of ranch. This dish outperformed the item it replaced by 11 points on the taste of food score and 15 points on the overall menu average.
Another highlight is the Basil Pesto Cavatappi, a fresh take on one of Noodles & Company's longstanding bestsellers. The revamped dish features fire-roasted tomatoes, aged Parmesan, and a 60% increase in the signature basil pesto sauce, resulting in a 9-point improvement in the taste of food score compared to the previous version.
These menu innovations, coupled with an enhanced training program and the introduction of new plateware, are designed to elevate the Noodles & Company brand experience and appeal to both existing and new customers.
Strengthening the Operational Foundation
Alongside its culinary transformation, Noodles & Company has been laser-focused on enhancing its operational capabilities to deliver a consistently exceptional guest experience. The company has made significant investments in training and development, with two additional weeks of hands-on training for restaurant teams before and after the menu rollout.
These efforts have already begun to pay dividends, as evidenced by the company's impressive improvements in guest satisfaction metrics. In January 2025, Noodles & Company achieved its largest single-month increase in overall guest satisfaction, effectively eliminating 80% of the gap to the fast-casual industry average over the past 12 months.
The company has also strengthened its digital and delivery capabilities, with approximately 56% of sales derived from digital ordering channels in 2024. Noodles & Company's revamped pricing and promotion strategy for third-party delivery has driven double-digit traffic growth in this important channel.
Navigating Macroeconomic Headwinds and Looking Ahead
Like many in the restaurant industry, Noodles & Company has not been immune to the challenges posed by macroeconomic conditions, including elevated inflation and interest rates. In 2024, the company faced increased costs for food, labor, and other operational expenses, which impacted its profitability.
To mitigate these pressures, Noodles & Company has implemented a strategic pricing strategy, passing along a portion of the cost increases to customers while carefully balancing guest affordability and value perception. The company has also focused on improving operational efficiency and labor productivity to enhance its margins.
Looking ahead, Noodles & Company is cautiously optimistic about its prospects for 2025. The company has provided full-year guidance, expecting total revenue in the range of $503 million to $512 million, driven by mid-single-digit comparable restaurant sales growth. Restaurant contribution margin is projected to be between 12.5% and 14.0%, reflecting the investments in menu quality and the anticipated benefits of operational improvements. This guidance includes a 100 basis point investment in food costs.
Additional guidance for 2025 includes: - G&A expenses of $49 to $52 million - Depreciation and amortization of $27 to $29 million - Interest expense of $8 to $10 million - Opening 2 new company-owned restaurants and closing 12-15 company-owned and 4 franchise restaurants - Total capital expenditures of $11 to $13 million
The company anticipates being able to reduce their debt balance in the back half of 2025 due to significantly lower capital expenditures.
Conclusion Noodles Perfected, A Brand Transformed
Noodles & Company's transformative journey underscores the company's relentless pursuit of culinary excellence and its commitment to providing customers with a differentiated dining experience. By reimagining its menu, enhancing its operational foundation, and strengthening its digital capabilities, the company is poised to capitalize on the growing consumer demand for high-quality, globally-inspired cuisine in the fast-casual segment.
As Noodles & Company embarks on this new chapter, it is well-positioned to regain its footing and drive sustainable growth, solidifying its position as a leader in the noodle-centric dining landscape. The company's focus on menu innovation, operational improvements, and strategic initiatives to drive traffic and sales growth while managing its cost structure provides a solid foundation for future success.