What is the minimum equity contribution required from the Owners in connection with the development of each Noodles & Company restaurant?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
You may incur debt in connection with the development of Noodles & Company Restaurants hereunder, provided that (a) you will, in connection with the development of each such Restaurant, receive equity contributions from your Owners equal to not less than 25% of the total development cost of the Restaurant (which shall consist for this purpose of the cost of all leasehold improvements, furniture, fixtures and equipment) and (b) from and after the first anniversary of the opening of your first Restaurant hereunder, at no time shall your total indebtedness outstanding at any time during any fiscal year exceed 4.0 times your earnings (determined in accordance with generally accepted accounting principles consistently applied) before interest, taxes, depreciation and amortization (EBITDA) minus any distributions to Owners for such fiscal year.
Source: Item 23 — RECEIPT (FDD pages 99–350)
What This Means (2025 FDD)
According to the 2025 Noodles & Company FDD, franchisees must ensure that owners make a minimum equity contribution towards the development of each restaurant. Specifically, the equity contribution must be equal to at least 25% of the restaurant's total development cost.
The total development cost, for the purpose of calculating the minimum equity contribution, includes the cost of all leasehold improvements, furniture, fixtures, and equipment. This means that a franchisee cannot finance the entire development through debt; a significant portion must come from the owners' equity.
This requirement ensures that the franchisee has a vested financial interest in the success of the Noodles & Company restaurant and is aligned with the long-term goals of the franchise system. It also helps to mitigate risk for Noodles & Company, as franchisees with sufficient equity are generally more financially stable and committed to the business. Furthermore, after the first anniversary of the restaurant opening, the franchisee's total outstanding debt at any time during a fiscal year cannot exceed 4.0 times their earnings before interest, taxes, depreciation, and amortization (EBITDA), minus any distributions to owners for that fiscal year.