What is considered a 'Competitive Business' in the context of the Noodles & Company franchise transfer agreement?

According to the 2025 Noodles & Company Franchise Disclosure Document, a 'Competitive Business' is defined within the context of franchise agreements and transfer restrictions. Specifically, it refers to any business that operates or franchises one or more restaurants that meet any of the following criteria: (1) whose sales of specified dishes collectively constitute more than 10% of the restaurant's operating revenues; (2) that are the same as, or substantially similar to, the Noodles & Company concept as it evolves or changes over time; or (3) that operate in a fast casual or quick casual format. Specified dishes include noodle dishes, pasta dishes, Asian dishes, Italian or Mediterranean dishes, and any other dishes that are the same or substantially similar to the dishes on the Noodles & Company menu as it may evolve or change over time.

However, there are exceptions to this definition. The restrictions on competitive activities do not apply to: (a) the ownership or operation of other Noodles & Company restaurants licensed by Noodles & Company or its affiliates; (b) the ownership of shares of a class of securities that are listed on a public stock exchange or traded on the over-the-counter market and that represent less than 5% of that class of securities; or (c) any restaurant concept whose per-person average check during the preceding 12 months was more than 50% higher or lower than Noodles & Company's per-person average check for the same period. Revenue of a restaurant, as used in this definition, means the aggregate amount of all sales of food, beverages, and other products sold in or by such restaurant, whether for cash or credit, but excluding all federal, state, or municipal sales or service taxes collected from customers and paid to the appropriate taxing authorities, all coupons, promotions, discounts, and refunds.

This definition is important because during a franchise transfer, the transferring franchisee and their owners typically must sign a non-competition agreement. This agreement prevents them from engaging with a Competitive Business for a certain period (e.g., two years) after the transfer. The definition ensures that former franchisees do not leverage their knowledge of the Noodles & Company system to benefit a competing business within a specific geographic area. Understanding this definition is crucial for anyone considering selling their Noodles & Company franchise, as it outlines the scope of their non-compete obligations.

For a prospective franchisee, this definition highlights the importance of understanding the competitive landscape and potential restrictions on future business activities. It also emphasizes the need to carefully review the non-competition covenant during the franchise transfer process to fully understand its implications. The exceptions to the definition provide some flexibility, particularly regarding investments in publicly traded companies or restaurants with significantly different price points. However, franchisees should seek legal counsel to fully assess the impact of these restrictions on their specific circumstances.