Considering the restrictions on suppliers in Item 8, how might this affect the 'Build-out Costs' and 'Leasehold Improvements' listed in the Noodles & Company initial investment in Item 7?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 7: ESTIMATED INITIAL INVESTMENT]
| Type of Expenditure | Amount (2) | Method of Payment | When Due | To Whom Payment is to be Made | |
|---|---|---|---|---|---|
| Low | High | ||||
| Build-out Costs (3) | |||||
| Leasehold Improvements (4) | $381,000 | $822,000 | As Arranged | As Incurred, Subject to Negotiated Terms | Contractors & Government Agencies |
| Architectural & Other Design Fees (4) | $47,000 | $116,000 | As Arranged | As Incurred, Subject to Negotiated Terms | Architects & Engineers |
| Landlord Credits (5) | $(78,000) | $(183,000) | As Arranged | Post - Construction | Landlord |
| Kitchen Equipment (5) | $150,000 | $241,000 | As Arranged | As Incurred, Subject to Negotiated Terms | Approved Suppliers |
| Millwork & Furniture (5) | $15,000 | $48,000 | As Arranged | As Incurred, Subject to Negotiated Terms | Approved Suppliers |
| Computer Equipment (5) | $58,000 | $60,000 | As Arranged | As Incurred, Subject to Negotiated Terms | Approved Suppliers |
| Signage (5) | $20,000 | $66,000 | As Arranged | As Incurred, Subject to Negotiated Terms | Approved Suppliers |
[Item 8: RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES]
The reputation and goodwill of Noodles & Company restaurants are based on, and must be maintained by, the sale of distinctive high-quality products, merchandise and services. Therefore, your Noodles & Company restaurant must use and offer for sale only food products, beverages, ingredients, uniforms, packaging materials, menus, forms, labels and other supplies and other products and services that conform to our specifications and quality standards and/or are purchased from suppliers we have approved. Where we have Proprietary Products, you must use the ingredients and products without exception. The list of brands and suppliers are contained in our Noodles & Company Operations Manual, and we may modify that list when we deem necessary in our sole discretion. After notice of a modification, you may not reorder any brand or reorder from any supplier that is no longer approved.
You will be required to purchase IT support services from us. These services, and the related fees, are described in Item 11.
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, Item 8 outlines restrictions on sources of products and services, which can directly influence the 'Build-out Costs' and 'Leasehold Improvements' detailed in Item 7. Noodles & Company mandates that franchisees must purchase food products, beverages, ingredients, uniforms, packaging materials, menus, forms, labels, and other supplies from approved suppliers who meet the franchisor's specifications and quality standards. For proprietary products, there are no exceptions, meaning franchisees must use the specified ingredients and products. This requirement extends to IT support services, which franchisees must purchase directly from Noodles & Company.
The FDD specifies that for the recently opened company-owned restaurants, 'Build-out Costs' and 'Leasehold Improvements' ranged from $381,000 to $822,000. The obligation to use only Noodles & Company-approved suppliers for items such as kitchen equipment ($150,000 to $241,000), millwork and furniture ($15,000 to $48,000), computer equipment ($58,000 to $60,000), and signage ($20,000 to $66,000) means franchisees cannot seek potentially lower-cost alternatives from non-approved vendors. While Noodles & Company attempts to negotiate favorable purchase arrangements with suppliers, franchisees are still bound to these approved sources, which could impact their overall build-out expenses.
The franchisor retains the right to modify the list of approved brands and suppliers, potentially requiring franchisees to switch suppliers even after initial construction. If a franchisee wishes to use a non-approved supplier, they must seek approval from Noodles & Company, which may involve providing detailed information, specifications, and samples, as well as covering reasonable fees for the review process. This approval process adds another layer of complexity and potential cost. The franchisor may also impose limits on the number of suppliers and brands for any items, further restricting the franchisee's options and potentially affecting the costs associated with build-out and leasehold improvements. Therefore, franchisees should carefully consider these restrictions and their potential impact on the initial investment when evaluating a Noodles & Company franchise.