What are the implications of the litigation involving Noodles & Company (Item 3) on the franchisee's ability to secure financing for the initial investment (Item 7)?

According to Noodles & Company's 2025 Franchise Disclosure Document, Item 7 provides an estimate of the initial investment required to open a Noodles & Company restaurant. However, Noodles & Company does not offer direct or indirect financing to franchisees. Item 7 includes costs incurred to open 10 recently opened company-owned restaurants in the trailing 12-month period ended December 31, 2024. These restaurants ranged in size from 2,000 to 3,500 square feet with an average of 2,400 square feet. These costs include all of Noodles & Company's out-of-pocket costs to develop and open a Company-owned Restaurant net of tenant improvement allowances adding in a Franchise Fee for illustrative purposes.

Because Noodles & Company does not provide financing, prospective franchisees will need to explore third-party financing options to cover these initial investment costs. These options may include bank loans, Small Business Administration (SBA) loans, or other financing arrangements. The franchisee's ability to secure financing will depend on their creditworthiness, business plan, and the lending institution's assessment of the risks associated with investing in a Noodles & Company franchise.

The presence of litigation involving Noodles & Company, as disclosed in Item 3 of the FDD, could potentially impact a franchisee's ability to secure financing. Lenders may view ongoing litigation as a risk factor, as it could potentially affect the financial stability or reputation of the Noodles & Company brand. Therefore, prospective franchisees should carefully review Item 3 and discuss any litigation with potential lenders to assess its potential impact on their financing options. Franchisees should be prepared to explain the nature of the litigation, its potential impact on Noodles & Company, and how they plan to mitigate any risks associated with it.

While the FDD does not explicitly state how litigation will affect financing, it is a factor that lenders consider. Franchisees should proactively address this issue by understanding the details of any litigation disclosed in Item 3 and preparing a comprehensive business plan that demonstrates their ability to manage the risks associated with the franchise. Consulting with a financial advisor or franchise consultant can also provide valuable guidance in navigating the financing process and addressing any concerns raised by lenders.