What protections must any debt instrument provide to Noodles & Company, including notice of default?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
Furthermore, any debt instrument must provide to us the following protections, and any others that we from time to time require, (i) Franchisor shall be provided notice of any default of any such debt instrument simultaneous with notice being provided to you and Owners; (ii) Franchisor shall have a right of first refusal to purchase any restaurant to be sold, disposed of, or otherwise transferred by the lender of such debt instrument; (iii) Franchisor shall have the right, but not the obligation, to cure your and Owner's default under such debt instruments; and (iv) Franchisor shall have the right to operate the restaurant(s) that is the subject of the debt instrument upon your or Owner's default of such instrument. In the event you default on your debt and we elect to pursue any of the foregoing protections available to us, your right to cure such default shall expire as of the date we pursue any such protections notwithstanding any longer cure period set forth elsewhere in any agreement between you and us. Additionally you shall be liable for the full amount we pay to cure your default plus interest at 18% per annum, or the highest rate allowable by law, and all costs we incur, including legal fees
and appraisal fees relating to the evaluation of and exercise of any such protections. Breach of this Section 3.04 is a material breach of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 98–99)
What This Means (2025 FDD)
According to the 2025 Noodles & Company Franchise Disclosure Document, any debt instrument used by a franchisee must provide certain protections to Noodles & Company. Specifically, Noodles & Company must receive notice of any default on the debt instrument at the same time the franchisee and owners receive notice.
Additionally, Noodles & Company has the right of first refusal to purchase any restaurant if the lender intends to sell, dispose of, or transfer it. Noodles & Company also has the right, but not the obligation, to cure the franchisee's default under the debt instruments. Furthermore, Noodles & Company has the right to operate the restaurant that is subject to the debt instrument if the franchisee defaults.
If Noodles & Company chooses to exercise any of these protections, the franchisee's right to cure the default expires when Noodles & Company acts, regardless of any longer cure period specified in agreements between the franchisee and Noodles & Company. The franchisee is liable for the full amount Noodles & Company pays to cure the default, plus interest at 18% per annum (or the highest rate allowed by law), and all associated costs, including legal and appraisal fees. A breach of these debt-related provisions is considered a material breach of the Franchise Agreement.