Considering the restrictions on suppliers for Noodles & Company (Item 8), how does this impact the franchisee's ability to offer competitive pricing to customers?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 8: RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES]
The Noodles & Company restaurant franchise could not be offered efficiently or effectively without the inclusion of the ingredients as an essential and integral component of the System. You therefore are required to purchase all ingredients and products in accordance with the terms of Section 9 of the Franchise Agreement. Specifically, you are required to purchase exclusively from Approved and Designated Suppliers. As defined in the Franchise Agreement, a "Designated Supplier" is any supplier whom we authorize to manufacture or distribute Proprietary Products. Additionally, you agree to purchase from Approved Suppliers those ingredients, products and services we authorize now or in the future to be provided and or produced by Approved Suppliers, subject to your right to purchase from Alternative Approved Suppliers. An "Alternative Approved Supplier" is any supplier who has been proposed by you or by another franchisee and who has been approved by us to provide and/or produce ingredients, products and services in accordance with the terms of the Franchise Agreement. We reserve the right to designate any ingredient as a Proprietary Product. Products not designated as Proprietary Products are referred to as "Non-Proprietary Products."Designated and Approved Suppliers have the right to profit from the sale of products and ingredients. We do not act in any fiduciary capacity for you in our relationship with any Designated or Approved Suppliers; however, we do negotiate contracts for use by and binding upon all Franchise-owned and Company-owned Restaurants. None of our officers have an ownership interest in any of our Designated or Approved Suppliers.
Provided you and your affiliates are in compliance with the Franchise Agreement and all other agreements with us, we will cause Designated and Approved Suppliers to sell reasonable quantities of products and ingredients to you in accordance with the terms of Section 9 of the Franchise Agreement. We will use reasonable efforts to cause Designated Suppliers to sell to you reasonable quantities of Proprietary Products. All Proprietary Products, as well as all other ingredients and products, are sold at prices and on shipping terms established and changed by the supplier. Designated and Approved Suppliers may establish credit terms, if any, as deemed appropriate.
Designated and Approved Suppliers will not be liable for any delay in the delivery of products as a result of any cause beyond their reasonable control, except in accordance with our contracts with them. Designated and Approved Suppliers may establish policies and procedures for the allocation and distribution of ingredients and products among Noodles & Company restaurants.
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, franchisees are required to purchase ingredients, goods, supplies, fixtures, equipment, and inventory exclusively from approved suppliers and distributors. This restriction is in place to maintain uniform standards of quality and service across all Noodles & Company restaurants. While franchisees can propose alternative suppliers, Noodles & Company is not obligated to approve them and may consider the potential impact on cost and service for the entire system.
The FDD states that Noodles & Company attempts to negotiate purchase arrangements, including price terms, with third-party suppliers for the benefit of all restaurants, including those owned by franchisees. However, all proprietary and non-proprietary products are sold at prices and on shipping terms established and changed by the supplier. Designated and Approved Suppliers have the right to profit from the sale of products and ingredients. This means that franchisees do not have the freedom to seek out the lowest prices on the open market, potentially affecting their ability to offer lower prices to customers.
The approval process for alternative suppliers involves submitting information, specifications, and samples, and may require the franchisee to cover Noodles & Company's costs for review, inspection, and product testing. Noodles & Company may also impose obligations on suppliers, potentially requiring them to comply with specific agreements. This process can be lengthy, with Noodles & Company aiming to make a decision within 60 to 120 days after receiving the necessary information. The franchisor may consider the effect that the approval may have on the ability of Noodles & Company and other Area Operators to obtain the lowest distribution costs and on the quality and uniformity of products offered system-wide. Ultimately, the restrictions on suppliers could limit a franchisee's flexibility in managing costs and setting competitive prices, as they are largely dependent on the negotiated agreements and approved suppliers determined by Noodles & Company.