What were the franchising royalties and fees, and other revenue for Noodles & Company in 2023 (in thousands)?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
Initial fees received from franchisees are recognized as revenue over the term of each respective franchise agreement, which is typically 20 years. The Company recognized revenue of $0.3 million, $0.2 million and $0.1 million in 2024, 2023 and 2022, respectively related to initial fees from franchisees that were included in the contract liability balance at the beginning of the year. The Company expects to recognize approximately $0.1 million each fiscal year through fiscal 2029 and approximately $0.6 million thereafter related to performance obligations that are unsatisfied as of December 31, 2024.
Royalties from franchise restaurants are based on a percentage of restaurant revenues and are recognized in the period the related franchised restaurants' sales occur. Development fees and franchise fees, portions of which are collected in advance, are nonrefundable. The Company has determined that the initial franchise services are not distinct from the continuing rights or services offered during the term of the franchise agreement and should be treated as a single performance obligation; therefore, such fees are recognized in income ratably over the term of the related franchise agreement or recognized upon the termination of the agreement between the Company and the franchisee.
The Company records sublease income related to leases for which the Company remains obligated. The Company has entered into transactions to sell company-owned restaurants to franchisees. The lease agreements for those restaurants were assigned to the franchisee, but in some instances, the Company was not relieved of its primary obligations under the main lease, therefore these leases are treated as subleases. The lease income on these locations has been recorded in "Franchising royalties and fees, and other" and the offsetting lease expense has been recorded in "Restaurant impairments, closure costs and asset disposals" in the Consolidated Statement of Operations.
Source: Item 22 — CONTRACTS (FDD pages 98–99)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, the company recognizes revenue from several sources, including restaurant operations and franchise royalties and fees. In 2023, Noodles & Company recognized $0.2 million in revenue related to initial fees from franchisees. This revenue recognition pertains to initial fees received from franchisees, which are recognized over the typical 20-year term of each franchise agreement.
Additionally, royalties from franchise restaurants are based on a percentage of restaurant revenues and are recognized in the period the related franchised restaurants' sales occur. Development and franchise fees, which are partially collected in advance and are nonrefundable, are treated as a single performance obligation. These fees are recognized ratably over the term of the related franchise agreement or upon the termination of the agreement between Noodles & Company and the franchisee.
Sublease income related to leases for which Noodles & Company remains obligated is recorded as "Franchising royalties and fees, and other." This situation arises when company-owned restaurants are sold to franchisees, and the lease agreements are assigned to the franchisee. However, if Noodles & Company is not relieved of its primary obligations under the main lease, these leases are treated as subleases. The lease income on these locations is recorded in "Franchising royalties and fees, and other," while the offsetting lease expense is recorded in "Restaurant impairments, closure costs and asset disposals" in the Consolidated Statement of Operations.