After termination of the Noodles & Company agreement, what happens to the fees already paid?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
- RIGHTS AND OBLIGATIONS UPON TERMINATION.
16.01 Expiration or Termination of Area Operator's Rights. Upon the expiration or termination of Area Operator's rights granted under this Agreement:
(b) Noodles & Company may retain all fees paid pursuant to this Agreement, and Area Operator shall immediately pay any and all amounts owing to Noodles & Company and its Affiliates.
(c) Any and all obligations of Noodles & Company to Area Operator under this Agreement shall immediately cease and terminate.
Source: Item 23 — RECEIPT (FDD pages 99–350)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, upon the expiration or termination of an Area Operator's rights, Noodles & Company retains all fees paid under the agreement. Additionally, the Area Operator must immediately pay any outstanding amounts owed to Noodles & Company and its affiliates. This policy applies regardless of the reason for termination, whether it's due to the agreement's expiration or a termination for cause.
This means that a franchisee who terminates their agreement with Noodles & Company, or whose agreement is terminated by Noodles & Company, will not receive a refund of any fees already paid. These fees can include the initial franchise fee of $35,000, development fees, royalty fees, and marketing fund contributions. The franchisee is also responsible for settling any outstanding debts, which could include unpaid royalties, marketing contributions, or interest on late payments.
This policy is fairly standard in the franchise industry, as initial fees are generally considered earned upon payment and are used to cover the franchisor's initial costs of setting up the franchise. However, the franchisee should be aware of this policy and factor it into their decision-making process, as it represents a significant financial risk. It is important to note that the obligation to pay the Franchise Fee for restaurants that were required to be open prior to termination of the Agreement survives termination of the Agreement.
Prospective franchisees should carefully consider the implications of this policy and seek legal and financial advice before entering into a franchise agreement with Noodles & Company. Understanding the conditions under which fees are non-refundable is crucial for making an informed investment decision.