How does Noodles & Company account for lease and non-lease components?

According to Noodles & Company's 2025 Franchise Disclosure Document, the company has elected a practical approach to account for lease and non-lease components as a single component for almost all lease types. This means that instead of separating the costs associated with the lease of a property from other services or components included in the lease agreement, Noodles & Company combines these into one single accounting component. This simplifies the accounting process for leases.

For franchisees, this consolidated approach means that the financial reporting related to leases is streamlined. Rather than tracking and reporting on different elements of a lease separately, franchisees will deal with a single, combined figure. This can reduce the complexity of financial management and reporting related to their Noodles & Company restaurant location.

It is important to note that while this approach simplifies accounting, Noodles & Company also uses its incremental borrowing rate to determine the present value of lease payments, as most of their leases do not provide an implicit rate. Additionally, rent expenses, which generally have escalating rentals over the term of the lease, are recorded on a straight-line basis over the lease term. Tenant incentives are amortized to reduce expenses over the lease term. These factors can influence the overall cost and financial management of the lease for a Noodles & Company franchise.