Under what circumstances does Noodles & Company record sublease expenses?

According to the 2025 Noodles & Company Franchise Disclosure Document, the company records sublease expenses when it remains obligated under a lease, even after assigning the lease to a franchisee. This situation typically arises when Noodles & Company sells company-owned restaurants to franchisees but is not released from its primary lease obligations. In such cases, the leases are treated as subleases for accounting purposes.

Specifically, Noodles & Company assigns the lease agreements to the franchisee but remains primarily liable under the original lease. As a result, the company records the lease income received from the franchisee under "Franchising royalties and fees, and other." To offset this income, the corresponding lease expense is recorded under "Restaurant impairments, closure costs and asset disposals" in the Consolidated Statement of Operations.

For a prospective franchisee, this accounting practice indicates that Noodles & Company has, in the past, retained some level of lease obligation when transferring company-owned restaurants to franchisees. While the franchisee assumes operational control and makes lease payments, Noodles & Company's financial statements reflect the sublease arrangement due to their continued liability. This arrangement could have implications for Noodles & Company's financial reporting and may reflect potential risks associated with lease obligations even after restaurants are franchised.