What are the Noodles & Company franchisee's obligations upon termination of the Franchise Agreement?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
| q. Non-competition covenants during the term of the franchise | Section 7.02 | Except for a 5.0% or less ownership interest in a publicly traded company, you may not directly or indirectly own or have any legal or beneficial interest in or render services or give advice to any competitive business located in the United States. A competitive business is any business that operates or franchises one or more restaurants: (1) whose sales of Specified Dishes (as defined below) collectively constitute more than 10.0% of restaurant 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. As used in this Agreement, "Specified Dishes" means 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 ("Noodles & Company Dishes") as it may evolve or change over time. |
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| r. Non-competition covenants after the franchise is terminated or expires | Section 7.03 | For 2 years after termination or expiration and except for a 5.0% or less ownership interest in a publicly traded company, you may not own, or have any legal or beneficial interest in, or render services or give advice to, any competitive business, as described above in q. in any Designated Market Area (as defined by Nielsen Media Research) where any Noodles & Company restaurant is located. Noodles & Company may, in its discretion, exclude from this clause certain competitive businesses approved by Noodles & Company at the time of execution of your Area Development Agreement and Franchise Agreements or approved subsequent to the execution of those agreements. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 63–83)
What This Means (2025 FDD)
According to the 2025 Noodles & Company Franchise Disclosure Document, a significant obligation upon termination or expiration of the franchise agreement is a non-compete covenant. For two years after the termination or expiration of the franchise, the franchisee is restricted from owning, having any legal or beneficial interest in, or providing services or advice to any competitive business. This restriction applies within any Designated Market Area (as defined by Nielsen Media Research) where a Noodles & Company restaurant is located. However, this restriction does not apply to ownership of 5.0% or less in a publicly traded company.
A competitive business is defined as one that operates or franchises restaurants with more than 10.0% of their operating revenues coming from the sale of 'Specified Dishes'. 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. The definition also includes businesses that are the same as, or substantially similar to, the Noodles & Company concept, or that operate in a fast casual or quick casual format.
Noodles & Company retains the discretion to exclude certain competitive businesses from this non-compete clause, either at the time of the agreement's execution or at a later date. This means that a former franchisee might be able to engage with a business that would otherwise be considered competitive if Noodles & Company approves it. This non-compete agreement is designed to protect Noodles & Company's market position and brand identity by preventing former franchisees from directly competing using similar concepts or menus in the same geographic areas.