What are the consequences if a receiver is appointed for a Noodles & Company franchisee's business?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
ess than 51% of your and/or your Affiliates' securities and voting rights.
Any proposed private placement of your or of your Affiliate's securities must be approved by us and our legal counsel prior to the offering of securities. You shall pay the costs of such review and associated legal fees.
15. DEFAULT AND TERMINATION.
15.01 General. Noodles & Company shall have the right to terminate this Agreement for "cause." "Cause" is hereby defined as a material breach or material default of this Agreement. Noodles & Company has the right to terminate this Agreement upon the following circumstances and in the following manners, each of which is deemed a material breach or default:
15.02 Automatic Termination Without Notice. Subject to applicable laws of the jurisdiction in which the franchise is located to the contrary, Area Operator shall be deemed to be in default under this Agreement, and all rights granted herein shall (unless we otherwise elect by notice to Area Operator) automatically terminate without notice to Area Operator if: (i) Area Operator shall be adjudicated bankrupt or judicially determined to be insolvent (subject to any contrary provisions of any applicable state or federal laws), shall admit to its inability to meet its financial obligations as they become due or shall make a disposition for the benefit of its creditors; (ii) Area Operator shall allow a judgment against him in the amount of more than $25,000 to remain unsatisfied for a period of more than 30 days (unless a supersedeas or other appeal bond has been filed); (iii) if the Restaurant at the Premises or the Area Operator's assets are seized, taken over or foreclosed by a government official in the exercise of its duties, or seized, taken over, or foreclosed by a creditor or lien holder provided that a final judgment against the Area Operator remains unsatisfied for 30 days (unless a supersedeas or other appeal bond has been filed); (iv) if a levy of execution of attachment has been made upon the license granted by this Agreement or upon any property used in the Restaurant at the Premises, and is not
Source: Item 23 — RECEIPT (FDD pages 99–350)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, if a franchisee consents to the appointment of a receiver, trustee, or other custodian for all or a substantial part of its property or the property of the franchise business, this constitutes an automatic termination of the Area Operator Agreement without notice. This is subject to applicable laws of the jurisdiction in which the franchise is located. However, Noodles & Company can elect otherwise by providing notice to the Area Operator.
This means that if a Noodles & Company franchisee faces severe financial difficulties and agrees to have a receiver manage their assets, their franchise agreement can be terminated immediately. The franchisee would lose the right to operate the Noodles & Company restaurant unless Noodles & Company decides to provide notice that they will not terminate the agreement.
This provision protects Noodles & Company by allowing them to quickly terminate agreements with franchisees who are in severe financial distress, thereby safeguarding the brand's reputation and ensuring consistent operational standards. Prospective franchisees should be aware of this clause and understand the potential consequences of financial instability leading to receivership.