During the term of the Noodles & Company franchise, what ownership interest can I have in a publicly traded competitive business?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
| q. Non-competition covenants during the term of the franchise | Section 7.02 | Except for a 5.0% or less ownership interest in a publicly traded company, you may not directly or indirectly own or have any legal or beneficial interest in or render services or give advice to any competitive business located in the United States. A competitive business is any business that operates or franchises one or more restaurants: (1) whose sales of Specified Dishes (as defined below) collectively constitute more than 10.0% of restaurant operating revenues; (2) that are the same as, or substantially similar to, the Noodles & Company concept as it evolves or changes over time; or (3) that operate in a fast casual or quick casual format. As used in this Agreement, "Specified Dishes" means noodle dishes, pasta dishes, Asian dishes, Italian or Mediterranean dishes and any other dishes that are the same or substantially similar to the dishes on the Noodles & Company menu ("Noodles & Company Dishes") as it may evolve or change over time. |
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Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 63–83)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, during the term of the franchise, you are permitted to have a limited ownership interest in a publicly traded company that might be considered competitive. Specifically, you can hold a 5.0% or less ownership interest in such a company.
However, beyond this limited investment in a publicly traded company, you are restricted from directly or indirectly owning, having any legal or beneficial interest in, or providing services or advice to any competitive business within the United States. A competitive business is defined as one that operates or franchises restaurants with significant sales of specific types of dishes (noodle, pasta, Asian, Italian, or Mediterranean) or that closely resembles the Noodles & Company concept in a fast-casual or quick-casual format.
This restriction is designed to protect Noodles & Company's market position and prevent franchisees from diverting resources or knowledge to competing ventures. The definition of "Specified Dishes" is broad, encompassing any dish similar to those on the Noodles & Company menu, which could evolve over time, further limiting a franchisee's ability to engage with other restaurant businesses. This non-compete clause applies throughout the duration of the franchise agreement.
It is important for prospective franchisees to fully understand these restrictions and how they might impact any existing or future business interests. Franchisees should seek clarification from Noodles & Company regarding specific situations or potential conflicts of interest to ensure compliance with the franchise agreement.