Is a foreclosure on a Noodles & Company Restaurant considered a 'Transfer' of the franchise?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
"Transfer" or "Transfer the Franchise" – Or similar words - The voluntary, involuntary, direct or indirect sale, assignment, transfer, license, sublicense, sublease, collateral assignment, grant of a security, collateral or conditional interest, inter-vivos transfer, testamentary disposition or other disposition of this Agreement, any interest in or right under this Agreement, or any form of ownership interest in you or the assets, revenues or income of your Noodles & Company Restaurants including: (1) any transfer, redemption or issuance of a legal or beneficial ownership interest in the capital stock of, or other ownership interest in, you or of any interest convertible to or exchangeable for capital stock of, or other ownership interest in, Area Operator; (2) any merger or consolidation between you and another entity, whether or not you are the surviving corporation; (3) any transfer in, or as a result of, a divorce, insolvency, corporate or partnership dissolution proceeding or otherwise by operation of law; (4) any transfer upon your death or the death of any of your Principal Owners by will, declaration of or transfer in trust or under the laws of interstate succession; or (5) any foreclosure upon your Noodles & Company Restaurants or the transfer, surrender or loss by you of possession, control or management of your Noodles & Company Restaurants.
Source: Item 23 — RECEIPT (FDD pages 99–350)
What This Means (2025 FDD)
According to the 2025 Noodles & Company Franchise Disclosure Document, a foreclosure on a Noodles & Company restaurant is indeed considered a 'Transfer' of the franchise. The FDD defines 'Transfer' broadly to include various scenarios where the franchise agreement or ownership changes hands.
Specifically, the definition encompasses both voluntary and involuntary actions, direct and indirect sales, assignments, and other forms of disposition of the franchise agreement or ownership interests. This includes events like sales, licenses, subleases, and grants of security interests. Critically, it explicitly lists 'any foreclosure upon your Noodles & Company Restaurants' as a type of transfer.
This means that if a franchisee's Noodles & Company restaurant faces foreclosure, it is treated as a transfer of the franchise. As such, the franchisor, Noodles & Company, would likely have specific rights and procedures that would apply, as outlined in the franchise agreement, such as the right of first refusal or the need to approve the new owner/transferee. This is a significant consideration for prospective franchisees, as it clarifies the process and potential consequences in the event of financial distress leading to foreclosure.