According to Noodles & Company's 2025 Franchise Disclosure Document, the company recognizes initial franchise fees as revenue over the term of the franchise agreement. This means that instead of recognizing the entire fee upfront, Noodles & Company spreads the revenue recognition over the life of the agreement, which is typically 20 years.

For a prospective franchisee, this means that Noodles & Company does not recognize the initial franchise fee as immediate income. Instead, they recognize a portion of it each year for the duration of the franchise agreement. The document states that in 2024, 2023 and 2022, Noodles & Company recognized revenue of $0.3 million, $0.2 million and $0.1 million, respectively, related to initial fees from franchisees that were included in the contract liability balance at the beginning of the year.

Noodles & 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. This approach aligns the revenue recognition with the services and rights provided to the franchisee over the long term, which is a common practice in the franchise industry.