What was the total rent expense for Noodles & Company's operating leases in 2024?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
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The Company leases restaurant facilities, office space and certain equipment that expire on various dates through September 2043. Lease terms for restaurants in traditional shopping centers generally include a base term of 10 years, with options to extend these leases for additional periods of five to 15 years.
The Company's leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term. Total rent expense for operating leases for 2024, 2023 and 2022 was approximately $39.4 million, $39.2 million and $38.5 million, respectively.
Some of the Company's leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant's sales in excess of stipulated amounts. Lease expense associated with rent escalation and contingent rental provisions is not material and is included within operating lease cost. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company elected the practical expedient to account for lease and non-lease components as a single component for substantially all lease types.
As most of the Company's leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
Changes in the market trend of the trade area affected certain of our restaurant oper
Source: Item 22 — CONTRACTS (FDD pages 98–99)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, the total rent expense for operating leases in 2024 was approximately $39.4 million. The FDD also provides the total rent expense for operating leases in 2023 and 2022, which were approximately $39.2 million and $38.5 million, respectively.
For a prospective franchisee, this indicates the scale of Noodles & Company's lease obligations and how these costs have trended over the past three years. It's important to note that these figures represent the total rent expense for all of Noodles & Company's operating leases, including restaurant facilities, office space, and certain equipment. Individual franchisees will need to evaluate the specific lease terms for their own locations.
The FDD also mentions that Noodles & Company's leases typically contain rent escalations over the lease term and that the company recognizes expense for these leases on a straight-line basis. Some leases include rent escalations based on inflation indexes and fair market value adjustments. This means that a franchisee's rent expense may increase over time, and they should factor this into their financial projections. Additionally, the company recorded right-of-use asset impairment charges, which reduced the carrying value of operating lease assets to their respective estimated fair value by $1.7 million in 2024, $1.6 million in 2023 and $0.2 million in 2022.