Under what conditions can Noodles & Company require a franchisee's annual financial statements to be audited?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
11.03 Periodic Reports. You must furnish us: (a) no later than the first (1st) business day immediately following the end of the applicable Reporting Period, a report of Net Royalty Sales for the preceding Reporting Period; (b) within 90 days after the end of each fiscal year, a year-end balance sheet and income statement and statement of cash flow of your Noodles & Company Restaurant for such year, reflecting all year-end adjustments and accruals; (c) on the 25th day of each month or other fiscal period, Income Statement and Balance Sheet for the prior month or other fiscal period; and (d) within 30 days of our request, such other information as we may require from time to time, including sales mix data, food and labor cost reports and sales and income tax statements. All such reports shall use our then-current standard chart of accounts. You must verify that the information in each such report and financial statement is complete and accurate and sign it. We reserve the right to require that your annual financial statements be audited, at your expense, by an independent certified public accountant approved by us. We reserve the right to publish or disclose information that we obtain under this Section in any data compilations, collections, or aggregations that we deem appropriate, in our sole discretion, so long as we do not disclose information relating to performance of your individual Noodles & Company Restaurant, unless such disclosure is required by law or order of a court. We require you to use the reporting periods and fiscal year used by us.
Source: Item 23 — RECEIPT (FDD pages 99–350)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, Noodles & Company reserves the right to require that a franchisee's annual financial statements be audited. The audit would be at the franchisee's expense and must be performed by an independent certified public accountant approved by Noodles & Company.
This provision allows Noodles & Company to ensure the accuracy and integrity of the financial information it receives from its franchisees. This is a fairly standard practice in franchising, as franchisors rely on franchisee financial data for various purposes, including calculating royalties and assessing the overall health of the franchise system.
For a prospective Noodles & Company franchisee, this means they should be prepared to potentially incur the cost of an annual audit if required by Noodles & Company. The franchisee does have some control over this expense by ensuring their financial reporting is accurate and timely, possibly reducing the likelihood of Noodles & Company requiring an audit. It is also important to note that the accountant performing the audit must be approved by Noodles & Company, so the franchisee may not be able to use their existing accountant without prior approval.