What constitutes 'long-lived assets' for Noodles & Company, as presented in the Consolidated Balance Sheets?

According to Noodles & Company's 2025 Franchise Disclosure Document, long-lived assets include the company's property, equipment, and operating lease assets as presented in the Consolidated Balance Sheets. This definition is important for prospective franchisees to understand because these assets are subject to impairment reviews, which can affect the company's financial performance.

The FDD also describes the process Noodles & Company uses to evaluate long-lived assets for impairment. The company reviews these assets regularly and whenever events or changes in circumstances suggest that the carrying amount of an asset may not be recoverable. This review involves comparing the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the restaurant level, which is the lowest level at which they can be independently assessed.

If Noodles & Company determines that an asset is impaired, the impairment is measured by the amount by which the carrying amount of the assets exceeds their fair value. The estimates of future cash flows are based on the company's experience and knowledge of local operations. During 2024, 2023, and 2022, Noodles & Company recorded impairment charges for certain long-lived assets, which were included in restaurant impairments, closure costs, and asset disposals in the Consolidated Statements of Operations. The fair value of the restaurant assets was determined using Level 3 inputs, as described in Note 5, Fair Value Measurements.

During the year ended December 31, 2024, Noodles & Company recorded impairment charges of $13.4 million related to its restaurants. Auditing the company's long-lived asset impairment analyses involves subjective auditor judgment in evaluating the expected restaurant revenues included in the future undiscounted cash flows. This assumption is subjective and is affected by expectations about future market conditions for a given store. Understanding how Noodles & Company assesses and manages its long-lived assets can provide potential franchisees with insights into the company's financial management practices and potential risks associated with asset values.