[10-K] NOODLES & Co Files Annual Report
Filing Impact
Filing Sentiment
Form Type
10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 30 , 2025
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-35987
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
Registrant’s telephone number, including area code: (720 ) 214-1900
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||||||||
| ☒ | Smaller reporting company | |||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common stock held by non-affiliates as of July 1, 2025, the last business day of the registrant’s most recently completed second fiscal quarter, was $26.1 million. This amount was calculated based on the closing price of the common stock on July 1, 2025
on the Nasdaq Global Select Market. All executive officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.
As of March 20, 2026, there were 5,888,223 shares of the registrant’s Class A common stock, par value of $0.01 per share outstanding (reflecting the 1-for-8 reverse stock split described herein), and no shares of the registrant’s Class B common stock, par value $0.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
TABLE OF CONTENTS
| Page | ||||||||
| PART I | ||||||||
| ITEM 1. | Business | 1 | ||||||
| ITEM 1A. | Risk Factors | 7 | ||||||
| ITEM 1B. | Unresolved Staff Comments | 22 | ||||||
ITEM 1C. | Cybersecurity | 22 | ||||||
| ITEM 2. | Properties | 24 | ||||||
| ITEM 3. | Legal Proceedings | 25 | ||||||
| ITEM 4. | Mine Safety Disclosures | 25 | ||||||
| PART II | ||||||||
| ITEM 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 26 | ||||||
| ITEM 6. | [Reserved] | 26 | ||||||
| ITEM 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 27 | ||||||
| ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk | 40 | ||||||
| ITEM 8. | Financial Statements and Supplementary Data | 41 | ||||||
| ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 68 | ||||||
| ITEM 9A. | Controls and Procedures | 68 | ||||||
| ITEM 9B. | Other Information | 69 | ||||||
| ITEM 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 69 | ||||||
| PART III | ||||||||
| ITEM 10. | Directors, Executive Officers and Corporate Governance | 69 | ||||||
| ITEM 11. | Executive Compensation | 69 | ||||||
| ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 69 | ||||||
| ITEM 13. | Certain Relationships and Related Transactions, and Director Independence | 69 | ||||||
| ITEM 14. | Principal Accountant Fees and Services | 69 | ||||||
| PART IV | ||||||||
| ITEM 15. | Exhibits, Financial Statement Schedules | 70 | ||||||
| ITEM 16. | Form 10-K Summary | 75 | ||||||
| SIGNATURES | ||||||||
| EXHIBITS | ||||||||
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Special Note Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including but not limited to the risks and uncertainties discussed under Item 1A. “Risk Factors,” Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 1. “Business.” In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms and similar expressions intended to identify forward-looking statements. Examples of forward-looking statements include all matters that are not historical facts, such as statements regarding expectations with respect to our results, traffic, unit volume and growth, planned restaurant closures and openings, strategic plan and other initiatives, projected capital expenditures and our financial condition and liquidity needs. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report on Form 10-K, including the risks discussed in Part I, Item 1A “Risk Factors” and the trends discussed in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and those discussed in other documents we file with the SEC. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. These statements reflect our current views with respect to future events and are based on currently available operating, financial and competitive information. Unless required by United States federal securities laws, we do not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made.
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PART I
ITEM 1. Business
General
Noodles & Company is a restaurant concept offering lunch and dinner within the fast-casual segment of the restaurant industry. Our core offerings include noodle and pasta dishes, staples of many different cuisines, with the goal of delivering fresh ingredients and flavors from around the world under one roof. Today, our globally-inspired menu includes a wide variety of high quality, cooked-to-order dishes, including noodles and pasta, salads, soups and appetizers. As of December 30, 2025, we operated 423 restaurants in 31 states, which included 340 company locations and 83 franchise locations.
Noodles & Company is a Delaware corporation that was organized in 2002. Noodles & Company and its subsidiaries are sometimes referred to as “Noodles,” “we,” “us,” “our,” and the “Company” in this report. We refer to our Class A Common Stock, par value $0.01 per share, as our “common stock.”
On February 18, 2026, we implemented a 1-for-8 reverse stock split of our Class A common stock, par value $0.01 per share (the “Reverse Stock Split”). All share, per share and share price amounts, whether from prior to, on, or after such date have been adjusted to reflect the Reverse Stock Split.
Our Concept and Business Strategy
We believe Noodles is a broadly appealing concept in the national fast-casual dining space. We are focused on offering customers flavorful, cooked-to-order dishes in a warm and welcoming environment at an attractive value. We offer approximately 20 globally-inspired and highly customizable dishes that can be enjoyed inside our restaurants, taken to-go, or delivered to our customers.
Our customers experience the Noodles brand through our company-owned and franchise operated locations, and digitally through our mobile app, website www.noodles.com and third-party delivery services. In 2025, approximately 59% of our sales were derived from digital ordering, where guests have the opportunity to select in restaurant quick pick-up or delivery to their home or office. We believe that the breadth of ways that consumers can access our brand, the variety inherent in our menu, and how well our food travels is a business strength in relation to consumer trends towards convenience.
We are one of the only national restaurant chains to offer a menu devoted to noodles across a variety of cuisines. We offer a wide variety of flavor profiles, combining classic noodle dishes with more contemporary options. We hand-chop fresh vegetables and prepare nine noodle varieties in-house every day. All of our dishes are cooked-to-order. Choice and customization have always been a great strength of the brand. This focus on culinary innovation allows us to prepare and serve high quality food and meet changing consumer expectations. In 2025, we completed one of the most comprehensive menu upgrades in our 30-year history with the launch of eight new and four upgraded entrées followed by the third quarter launch of the value-priced Delicious Duos option. This included reimagined favorites including more sauce, more vegetables, and more premium ingredients. Additionally, the new menu includes thoughtfully curated new dishes with bold flavors that addressed gaps in our existing menu offering. The recent introduction of the Delicious Duos platform is designed to drive more frequency as a value option.
Consistent with our culture of enhanced customer service, we seek to hire, develop and retain individuals who will deliver prompt, attentive service by engaging customers the moment they enter our restaurants. Our training philosophy empowers both our restaurant managers and team members, also referred to as employees, to add a personal touch when engaging with our customers. Our restaurant managers are critical to our success, as we believe that their entrepreneurial spirit and outreach efforts build our brand in our communities.
Restaurant Portfolio and Franchising
Restaurant Portfolio. As of December 30, 2025, we had 340 company-owned restaurants and 83 franchise restaurants in 31 states. Our restaurants are typically between 2,000 and 2,600 square feet and are located in end-cap, in-line or free-standing locations across a variety of suburban, collegiate and urban markets. We continue to analyze our restaurant prototype design to better facilitate future expansion and better meet the needs of the changing consumer experience.
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Restaurant Development. In 2025, we opened two new company-owned restaurants.
Certain Restaurant Closures. We closed 33 company-owned restaurants in 2025, most of which were either generating low or negative cash flows, at or approaching the expiration of their leases, or in trade areas that are not as well positioned for current consumer trends or a potential for a significant amount of sales transfer given strong off premise sales . We continue to analyze our restaurant portfolio and expect to close approximately 30 to 35 company-owned restaurants in 2026.
Franchising. As of December 30, 2025, we had 83 franchise units in 20 states operated by 14 franchisees. In 2025, our franchisees did not open any restaurants and closed nine restaurants. In 2024, we sold six company-owned restaurants to a franchisee (“DND” and such sale, the “DND Sale”). As part of the DND Sale, DND entered into a six-year development plan commitment that includes development of ten new locations throughout Oregon and Washington. We have 10 area developers who have signed development agreements providing for the opening of 114 restaurants in their respective territories. We expect franchising to be a part of our growth strategy in future years, which could include refranchising existing markets. We look for experienced, well-capitalized franchise partners who are able to leverage their existing infrastructure and local knowledge in a manner that benefits both our franchisees and us. We expect to continue to offer development rights in markets where we do not intend to build company-owned restaurants. We may offer such rights to larger developers who commit to open 10 or more units, or to smaller developers who may commit to open fewer restaurants. We do not currently intend to offer single-unit franchises. We believe the strength and attractiveness of our brand will attract experienced and well-capitalized area developers.
Site Development and Expansion
We consider our site selection and development process critical to our long-term success. We have used a combination of our own internal team and outside real estate consultants to locate, evaluate and negotiate new sites using various criteria. In making site selection decisions, we use several analytical tools designed to uncover the key site, demographic, business, retail, competitive and traffic characteristics that drive successful locations. We utilize third-party resources to assist with evaluating potential new sites. Once a location has been approved by our executive-level selection committee, we begin a design process to match the characteristics and feel of the location to the trade area. Due to increased construction and development costs and lower than expected returns on investment on recent new restaurant openings, we are currently not planning to open any new company operated restaurants in 2026.
Restaurant Management and Operations
Friendly Team Members. We believe our genuine, friendly team members separate us from our competitors. We value the individuality of our team members, which we believe results in a management, operations and training philosophy distinct from that of our competitors. We strive to hire team members who share our values, a passion for food, have a competitive spirit and will operate our restaurants in a way that is consistent with our high standards. We seek to hire individuals who will deliver prompt, attentive service by engaging customers at all points during the Noodles brand experience. We empower our team members to enrich the experience of our customers and directly address any concerns that may arise in a manner that contributes to the success of our business. We seek to create an environment that attracts, retains, and develops people that have passion and pride in the organization.
Restaurant Management and Employees. Each restaurant typically has a general manager, an assistant general manager, multiple shift managers and team members. We cross-train our employees in an effort to create a depth of competency in our critical restaurant functions. To lead our restaurant management teams, we have area managers (each of whom is responsible for approximately five to 10 restaurants), as well as regional directors (each of whom is responsible for approximately 50 to 60 restaurants).
Training and Career Development. We believe that our training efforts create a culture of continuous learning and professional growth that allows our team members to continue their career development with us. Within each restaurant, two to four team members are designated to lead the training efforts and maintain a consistent approach to team member development. We produce training materials that encourage individual contributions and participation from our team members while also requiring adherence to certain guidelines and procedures.
Food Preparation and Quality. Our teams use classic professional cooking methods, including sautéing many of our vegetables, in full kitchens resembling those of full-service restaurants. All team members, including our restaurant managers, spend their
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first several days working solely with food and learning these techniques, and we spend a significant amount of time training team members to prepare and cook our food properly.
The majority of our restaurants have exhibition-style kitchens. This design demonstrates our commitment to cooking fresh food in an accessible manner. We provide each customer with individual attention and make every effort to respond to customer suggestions and concerns in a personal and hospitable way.
We require all of our dishes to be cooked to order at food safe temperatures or, in the case of salads, subject to our produce washing protocols, as food safety is a top priority for us. We have designed our food safety and quality assurance programs to maintain high standards for our food and food preparation procedures. Our director of quality assurance oversees robust restaurant and supplier audits based upon the potential food safety risk of each food. We also consider food safety and quality assurance when selecting our distributors and suppliers. Our suppliers are inspected by federal, state and local regulators or other reputable, qualified inspection services, which promotes compliance with all federal food safety and quality guidelines. We regularly inspect our suppliers to confirm that the ingredients we buy conform to our quality standards and that the prices we pay are competitive. We train our employees to pay detailed attention to food quality at every stage of the food preparation cycle, and we have developed a daily checklist that our employees are required to use to assess the freshness and quality of food supplies. Finally, we encourage our customers to provide feedback regarding our food quality so that we can identify and resolve problems or concerns as quickly as possible.
Restaurant Marketing
Our strategic marketing efforts seek to drive sales and increase brand loyalty by highlighting our competitive strengths through a variety of channels including digital marketing, social media, public relations, guest engagement and local marketing. We focus on attributes that set us apart including the breadth and customization of our menu and our best-in-class convenience offerings, and ultimately use a data-driven approach to guide our strategy.
•Our Contemporary Menu Offerings. At the heart of our marketing is our food and the desire to craft harmonious dishes that reflect the modern, borderless flavors and celebrate fresh, cooked to order, real food. We focus some of our marketing efforts on new menu offerings to broaden our appeal to our customers and we continue to invest in high quality ingredients and portions that improve the taste and appearance of our dishes. A disciplined pipeline of menu innovation and limited-time offers serves as a catalyst for incremental traffic, increased frequency, and improved comparable restaurant performance, while reinforcing brand relevance in a competitive category. At the same time, we showcase the dishes that continue to be loved by many.
•Brand Platform. From time to time, we launch new brand platforms to enhance our brand awareness, introduce Noodles to new guests and remind existing guests what sets Noodles apart.
•Loyalty Program. Our Noodles Rewards program has over 7 million members. The Rewards program provides us with guest data that can be used to target and personalize offers and communications. The program allows guests to accumulate reward points associated with each purchase that can be redeemed for offers such as free bowls, free side dishes, discounts, and free delivery. Rewards members are typically the first to learn about new offerings, and in some cases are provided exclusive access to certain menu items for a limited time.
•Digital Business. We continue to make strategic investments in our digital capabilities to improve the overall guest experience and increase our digital sales. Our digital platforms, inclusive of our website and our app, offer guests a differentiated and seamless ordering experience and make it convenient for guests to purchase their favorites. We use our digital platforms to increase brand engagement and usage of the Rewards program. Additionally, we have expanded our third-party partnerships to increase our brand’s reach among guests who primarily place orders through these delivery providers. We invest in digital advertising to advertise specific product categories, highlight convenient off-premise channel offerings, communicate rewards and encourage guest action and long-term guest loyalty. We leverage zero-party, first-party and third-party data to drive effective and efficient advertising spend, helping us to improve the return on our investment. We have installed digital menu boards across all company-owned locations that allow us to showcase key menu features, target guest communication, enhance our pricing capabilities and increase flexibility for culinary testing. In addition, all franchise locations are committed to have digital menu boards by September 2026.
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Human Capital Management
We believe the strength of our workforce is one of the significant contributors to our success as a brand. This is largely attributed to our team members who strive every day to create an environment for our guests where they feel welcomed and cared for. Therefore, one of our strategic priorities is to develop people as a differentiator, including investing in the following areas of focus:
Oversight and Management. We value the diversity of our team members, as well as the diversity of our guests and communities, and believe in creating an inclusive environment that promotes employment opportunities across a broad spectrum of backgrounds and cultures. Our Human Resources department is tasked with managing employment-related matters, including recruiting and hiring, onboarding and training, compensation and benefit planning, organizational design, performance management, succession planning and talent development. Our management and cross-functional teams also work closely to evaluate human capital management matters such as team member retention, workplace safety, harassment and bullying, as well as to implement measures to mitigate these risks.
Our Board of Directors and Board committees provide oversight on certain human capital matters. Our Compensation Committee, with input from members of our management team and a third-party compensation consultant, who provides benchmarked data, has responsibility for approving annually certain elements of compensation, including our incentive compensation plans and equity-based plans. Management provides input into the design of our incentive compensation programs to confirm that these programs support the Company’s business objectives and strategic priorities. The annual business plan initially established by our management, and approved by our Board, is an important element of our Compensation Committee’s decision-making process for performance measures and goals.
At Noodles & Company, we prioritize investing in our workforce by offering industry competitive base wages and salaries, performance-based cash and equity incentives, and competitive benefits that enhance the well-being, career growth, and financial security of our team members. Our quarterly and annual performance-based bonus plans are designed to align compensation with company success by rewarding team members for achieving key financial and operational performance metrics. Additionally, eligible team members receive long-term incentives—such as restricted stock units (RSUs) and performance stock units (PSUs)—that align their interests with long-term shareholder value creation.
Beyond compensation, Noodles & Company provides a competitive and targeted benefits package designed to support the financial, physical, and mental well-being of our team members. Our offerings include medical, dental, and vision insurance, along with mental health support and wellness programs to promote overall well-being. To enhance financial security, we offer a 401(k) program with a company match, an Employee Stock Purchase Plan (the “ESPP” plan), early access to earned wages, a deferred compensation plan for eligible positions, and short-term and long-term disability coverage for eligible positions.
Additionally, we support team member engagement and work-life balance with paid time off, family-planning benefits, immigration support, education assistance, and meal discounts. Our Employee Assistance Program (EAP) provides valuable resources, including financial planning support and legal assistance, providing our team members access to the tools they need for personal and professional success. We are committed to fostering career growth by offering leadership development programs, skills training, and succession planning to prepare team members for higher-level roles. Our goal of being a best-in-class workplace has earned us continued recognition, including being named one of Forbes’ Best Employers for Diversity for the fifth consecutive year in 2025.
To further demonstrate our commitment to supporting our team members, we established the Noodles & Company Foundation to provide assistance in times of need and invest in their futures. Since its inception, the Foundation has granted over $700,000 in emergency assistance and more than $600,000 in scholarships to help team members and their families achieve their educational goals. Created by and for our team members, the Foundation reinforces our dedication to fostering a resilient, empowered workforce and giving back to the communities we serve. Looking ahead, we are planning to continue to elevate the team member experience by enhancing our talent development, workplace culture, and innovative total rewards programs that differentiate Noodles & Company as an employer of choice in our industry.
As of December 30, 2025, we had approximately 6,500 employees, including approximately 500 salaried employees and approximately 6,000 hourly employees. None of our employees are unionized or covered by a collective bargaining agreement, and we consider our current employee relations to be good.
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Suppliers
Maintaining a high degree of quality in our restaurants depends in part on our ability to acquire fresh ingredients and other necessary supplies that meet our specifications from reliable suppliers. We carefully select suppliers based on quality and their understanding of our brand, and we seek to develop mutually beneficial long-term relationships with them. We work closely with our suppliers and use a mix of forward, fixed and formula pricing protocols. In some cases, we have made efforts to increase the number of suppliers for our ingredients, which we believe can help mitigate pricing volatility. We monitor industry news, trade issues, weather, crises and other world events that may affect supply prices.
Seasonality/Quarterly Financial Information
Seasonal factors and the timing of holidays cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters, due to reduced winter and holiday traffic, and higher in the second and third quarters. Other factors also have a seasonal effect on our results. For example, restaurants located near colleges and universities generally do more business during the academic year. Seasonal factors, however, might be moderated or outweighed by other factors that may influence our quarterly results, such as worldwide health pandemics, fluctuations in food or packaging costs, or the timing of menu price increases or promotional activities and other marketing initiatives.
Our quarterly results are also affected by other factors such as the amount and timing of incentive-based compensation expense and related tax rate impacts, impairment charges and non-operating costs, timing of marketing or promotional expenses, the number and timing of new restaurants opened in a quarter, and the closure of restaurants. Accordingly, results for a particular quarter are not necessarily indicative of results to be expected for any other quarter or for any year.
Competition
We face competition from the casual dining, quick-service and fast-casual segments of the restaurant industry. These segments are highly competitive with respect to taste, price, food quality and presentation, service, location and the ambiance and condition of each restaurant, among other things. Our competition includes a variety of locally owned restaurants and national and regional chains who offer dine-in, carry-out and delivery services. Many of our competitors have existed longer and have a more established market presence with substantially greater financial, marketing, personnel and other resources than we have. Among our competitors are a number of multi-unit, multi-market fast-casual restaurant concepts, some of which are expanding nationally. We will continue to face competition from these concepts and new competitors that strive to compete within our market segments.
We also face competition from firms outside the restaurant industry, such as grocery stores and home meal replacement services, who sell prepared meals for takeout and delivery service.
Intellectual Property and Trademarks
We own a number of trademarks and service marks registered or pending with the U.S. Patent and Trademark Office. We also have certain trademarks registered in certain foreign countries. In addition, we own the internet domain name www.noodles.com. The information on, or that can be accessed through, our website is not part of this report. We believe that our trademarks, service marks and other intellectual property rights have significant value and are important to the marketing of our brand, and it is our policy to protect and defend vigorously our rights to such intellectual property.
Governmental Regulation and Environmental Matters
We are subject to extensive and varied federal, state and local government regulation, including regulations relating to public and occupational health and safety, sanitation and fire prevention. We operate each of our restaurants in accordance with standards and procedures designed to comply with applicable codes and regulations. However, an inability to obtain or retain health department or other licenses could adversely affect our operations. Although we have not experienced, and do not anticipate, any significant difficulties, delays or failures in obtaining required licenses, permits or approvals, any such problem could delay or prevent the opening of, or adversely impact the viability of, a particular restaurant or group of restaurants.
We are subject to federal, state and local environmental laws and regulations concerning waste disposal, pollution, protection of the environment and the presence, discharge, storage, handling, release and disposal of, or exposure to, hazardous or toxic substances (“environmental laws”). These environmental laws can provide for significant fines and penalties for non-compliance
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and liabilities for remediation, sometimes without regard to whether the owner or operator of the property knew of, or was responsible for, the release or presence of the hazardous or toxic substances. Third parties may also make claims against owners or operators of properties for personal injuries and property damage associated with releases of, or actual or alleged exposure to, such substances. We are not aware of any environmental laws that will materially affect our earnings or competitive position, or result in material capital expenditures relating to our restaurants. However, we cannot predict what environmental laws will be enacted in the future, how existing or future environmental laws will be administered, interpreted or enforced, or the amount of future expenditures that we may need to make to comply with, or to satisfy claims relating to, environmental laws. It is possible that we will become subject to environmental liabilities at our properties, and any such liabilities could materially affect our business, financial condition or results of operations.
Management Information Systems
We use a variety of applications and systems to securely manage the flow of information within each restaurant, and within our restaurant support center infrastructure. All of our restaurants use computerized management information systems, which we believe are scalable to support any future growth plans. We use point-of-sale (“POS”) computers designed specifically for the restaurant industry. Our POS system provides a touch screen interface, a graphical order confirmation display and integrated, high-speed credit card and gift card processing. Our online ordering system allows customers to place orders online or through our mobile app. Orders taken remotely are routed to the point-of-sale system based on the time of customer order pickup. The POS system is used to collect daily transaction data, which generates information about daily sales, product mix and average check that we actively analyze. All products sold and prices at our company-owned restaurants are programmed into the system from our restaurant support center. We also continue to modernize and make investments in our information technology networks and infrastructure, specifically in our physical and technological security measures, to anticipate cyber-attacks and defend against breaches and to provide improved control, security and scalability. Enhancing the security of our financial data, customer information and other personal information is a high priority for us.
Our in-restaurant back office computer system is designed to assist in the management of our restaurants and provide labor and food cost management tools. These tools provide restaurant operations management and our restaurant support center quick access to detailed business data and reduces restaurant managers’ administrative time. The system provides our restaurant managers the ability to submit orders electronically with our distribution network. The system also supplies sales, bank deposit and variance data to our finance department on a daily basis. We use this data to generate daily sales information and weekly consolidated reports regarding sales and other key measures.
Franchisees use similar point of sale systems and are required to report sales on a daily basis through an online reporting network and submit their restaurant-level financial statements on a quarterly and annual basis. We also offer certain restaurant technology support services to our franchisees.
Financial Information About Segments
We operate as a single accounting segment. Financial information related to our business is included in Item 8 of this Annual Report on Form 10-K.
Available Information
We maintain a website at www.noodles.com, including an investor relations section at investor.noodles.com, on which we routinely post important information, such as webcasts of quarterly earnings calls, and any related materials. You may access our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, amendments to those reports and other reports relating to us that are filed with or furnished to the SEC, free of charge in the investor relations section of our website as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
The contents of the websites mentioned herein are not incorporated into and should not be considered a part of this report. The references to the URLs for these websites are intended to be inactive textual references only.
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ITEM 1A. Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our other filings with the Securities and Exchange Commission, when considering an investment in our common stock. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.
Risks Related to Our Business and Industry
We may not achieve our operational, strategic or financial goals.
We continue to pursue a number of financial, operational and strategic goals, including through our Strategic Review (as defined below). Our strategies are designed to, among other objectives, improve restaurant operations and increase our restaurant revenue, comparable restaurant sales, net income and adjusted EBITDA, as defined in management’s discussion and analysis. However, we may not be successful in achieving these goals in part or at all.
Our strategies and initiatives include innovating our menu offerings, enhancing our menu structure and layout, improving operational effectiveness and strengthening our financial foundation, optimizing our catering offerings, refining our pricing strategies, better understanding and tailoring communications to customers through our customer data platform and digital ecosystem, introducing new technology and equipment, and continuing to focus on manager selection, training and the development of our teams. These strategies and initiatives are in various stages of testing, evaluation and implementation, and we expect them to improve our results of operations and financial condition. Our continued menu innovation and limited time offerings, may not achieve the results we desire. Further, customers may not favor new menu offerings and pricing or may not find off-premise initiatives appealing, and our efforts to increase our sales growth and improve our offerings may be unsuccessful. Additionally, our operational initiatives may be ineffective at reducing costs or may reduce the quality of the customer experience. Any failure of our new initiatives could materially adversely affect our business, financial condition, results of operations or cash flows.
Our strategic and operational goals are designed to improve our results of operations, including restaurant revenue and profitability. The level of comparable restaurant sales, which represent the change in year-over-year sales for restaurants open for at least 18 full periods, affects our restaurant revenue growth and will continue to be a critical factor affecting profitability. Our ability to increase comparable restaurant sales depends in part on our ability to successfully implement our initiatives, including increasing guest traffic. It is possible that such initiatives will not be successful, that we will not achieve our desired comparable restaurant sales growth or that the change in comparable restaurant sales could be negative, which may cause a decrease in restaurant revenue and profitability that could materially adversely affect our business, financial condition, results of operations or cash flows. For example, in 2023 and 2024 we experienced a decline in same store sales, as well as an increased loss from operations and, during 2025, while we experienced higher comparable sales, we experienced lower operating income.
There can be no assurance that our review of strategic alternatives or any initiatives or transactions that we pursue will result in additional stockholder value or that the process or any actions that we take will not have an adverse impact on our business.
On September 3, 2025, we announced that our Board of Directors had initiated a review of strategic alternatives in order to explore ways to maximize stockholder value (“Strategic Review”). The scope of the review was set to include a range of potential strategic alternatives, including a refinancing of existing indebtedness or sale of all or part of the business, and/or other strategic or financial transactions. The process of reviewing strategic alternatives has been and may continue to be time consuming and may be disruptive to our business operations and, if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We may incur substantial expenses associated with a potential strategic alternative. This process could also increase our exposure to potential litigation. There can be no assurance that any suitable transaction will be identified or that any transaction that we may pursue will provide greater value to our stockholders than that reflected in the current price of our common stock or otherwise be successfully implemented.
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For example, if we are able to access additional liquidity, agreements governing any borrowing arrangement could contain covenants restricting our operations. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing we secure in the future could involve higher interest rates, especially given the current inflationary environment, and restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and to pursue business opportunities. Moreover, if we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets.
Until the review process is concluded, perceived uncertainties related to our future may result in volatility in the market price of our common stock and may make it more difficult for us to attract and retain qualified personnel and business partners.
Changes in political and economic conditions, including higher inflationary pressures and continued elevated interest rates, may reduce customer demand and increase our costs.
Our business and the restaurant industry in general depend on consumer discretionary spending. Changes in market conditions, including negative economic conditions resulting from inflation, increased interest rates, recessionary economic cycles, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, stock market volatility, war, terrorist activities, global economic occurrences or trends or other geo-political events, may result in decreased consumer confidence, increased cost of consumer credit and ultimately reduced consumer disposable income. In turn, consumers may make changes to their discretionary spending behavior in a way that negatively affects our business, including dining out less frequently, reducing the amount they spend while dining out, or choosing to eat at other lower priced restaurants. Additionally, these changes in market conditions may impact our development pipeline, including the availability of new sites, increased construction costs and availability of contract labor.
Changes in economic conditions, particularly with respect to inflationary pressures, may result in increased interest rates persisting for longer than expected and/or further increases in interest rates, labor shortages, and supply chain disruptions. These inflationary pressures may also increase our costs, including our labor and raw material costs, utilities, and our cost of borrowing, and we may not be able to fully offset such higher costs through price increases. For example, in 2023 and 2024, we executed amendments to our credit agreement, which resulted in increased borrowing rates.
If customer demand were to decrease or our costs were to increase without a corresponding increase in our prices, our profitability would decline. Moreover, as a result of such economic conditions, we may record additional asset impairment charges, implement additional restaurant closures, or slow our planned growth. Any of these economic factors may materially adversely affect our business, financial condition, results of operations or cash flows.
Competition from other restaurant companies could adversely affect us.
We face competition from the casual dining, fast-casual and quick-service segments of the restaurant industry. These segments are highly competitive with respect to taste, price, food quality and presentation, service, location and the ambiance and condition of each restaurant, among other things. Our competition includes a variety of locally owned restaurants and national and regional chains who offer dine-in, carry-out and delivery services. Many of our competitors have existed longer and have a more established market presence with substantially greater financial, marketing, personnel and other resources than we have. Among our competitors are a number of multi-unit, multi-market fast-casual restaurant concepts, some of which are expanding nationally. We continually face competition from these concepts and new competitors that strive to compete with our market segments. For example, additional competitive pressures come from the deli sections and in-store cafés of grocery store chains, as well as from convenience stores and online meal preparation sites. These competitors may have, among other things, lower operating costs, food offerings more responsive to consumer preferences, better locations and facilities, more experienced management, more effective marketing and more efficient operations.
Several of our competitors compete by offering menu items that are specifically identified as low in carbohydrates, gluten-free, or rich in protein. Many of our competitors emphasize lower-cost value options or meal packages and as such, the competitive environment has resulted in more value oriented offerings, promotions or discounts, including from casual restaurant chains, which we have responded to by the introduction of our Delicious Duos offering in 2025. Any of these competitive factors may materially adversely affect our business, financial condition, results of operations or cash flows.
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Our marketing programs may not be successful.
We incur costs and expend other resources in our marketing efforts on new menu offerings, advertising campaigns, raising brand awareness and to attract and retain customers. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenues. Further, if our marketing and advertising strategies are not successful, we may be forced to engage in additional promotional activities to attract and retain customers, including offers for discounted food, and any such additional promotional activities could adversely impact our profitability. Additionally, many of our competitors have more marketing resources and we may not be able to successfully compete. If our competitors increase spending on marketing, or if our marketing funds decrease for any reason, or if our advertising and promotions are less effective than those of our competitors, our financial performance could be materially affected.
Many of our competitors are devoting increased resources to their social media marketing programs. Social media can be challenging because it reaches a broad audience with an ability to respond or react, in near real time. In addition, social media can facilitate the improper disclosure of proprietary information, personally identifiable information, or inaccurate information. As a result, if we do not appropriately manage our social media strategies, our marketing efforts in this area may not be successful and could damage our reputation, negatively impacting our restaurant sales and financial performance.
Negative publicity relating to one or more of our restaurants, including our franchised restaurants, could reduce sales at some or all of our other restaurants.
Our success is dependent in part upon our ability to maintain and enhance the value of our brand, consumers’ connection to our brand and positive relationships with our franchisees. We may be faced with negative publicity relating to food quality, restaurant facilities, customer complaints or litigation alleging illness or injury, health inspection scores, integrity of our or our suppliers’ food processing, employee relationships or other matters, regardless of whether the allegations are valid or whether we are held to be responsible. The negative impact of adverse publicity relating to one restaurant may extend far beyond the restaurant or franchise involved to affect some or all of our other restaurants. The risk of negative publicity is particularly great with respect to our franchised restaurants because we are limited in the manner in which we can regulate them, especially on a real-time basis. Adverse information posted on social media platforms can quickly reach a wide audience and resulting harm to our reputation may be immediate, without affording us an opportunity to correct or otherwise respond to the information. It is challenging to monitor and anticipate developments on social media in order to respond in an effective and timely manner. As a result, negative publicity generated by such incidents may be amplified by the use of social media. A similar risk exists with respect to unrelated food service businesses, if consumers associate those businesses with our own operations or are concerned with the food safety of the broader restaurant industry.
Additionally, employee claims against us based on, among other things, wage and hour violations, discrimination, harassment or wrongful termination may also create negative publicity that could materially adversely affect us and divert our financial and management resources that would otherwise be used to benefit the future performance of our operations. A significant increase in the number of these claims or an increase in the number or scope of successful claims could materially adversely affect our business, financial condition, results of operations or cash flows. Consumer demand for our products and our brand’s value could diminish significantly if any such incidents or other matters create negative publicity or otherwise erode consumer confidence in us or our products, or in the restaurant industry as a whole, which would likely result in lower sales and could materially adversely affect our business, financial condition, results of operations or cash flows.
Food safety and foodborne illness concerns could have an adverse effect on our business.
We cannot guarantee that our internal controls and training will be fully effective in preventing all food safety issues at our restaurants, including any occurrences of foodborne illnesses such as E. coli, Hepatitis A, listeria, norovirus and salmonella. The risk of illnesses associated with our food might also increase in connection with the expansion of our catering and delivery businesses or other situations in which our food is served or delivered in conditions that we cannot control. Furthermore, we and our franchisees rely on third-party vendors throughout our supply chain, making it difficult to monitor food safety compliance and increasing the risk that foodborne illness would affect multiple locations rather than a single restaurant. Some foodborne illness incidents could be caused by third-party vendors and transporters outside of our control. New illnesses resistant to our current precautions may develop in the future, or diseases with long incubation periods could arise, that could give rise to claims or allegations on a retroactive basis. One or more instances of foodborne illness in any of our restaurants or markets or related to food products we sell could negatively affect our restaurant sales nationwide if highly publicized on national media outlets or through social media. This risk exists even if it were later determined that the illness was wrongly attributed to us or one of our restaurants.
A number of other fast-casual restaurant chains have experienced incidents related to foodborne illnesses, including E. coli,
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listeria and norovirus outbreaks that have had a material adverse effect on their operations. These incidents at other restaurants could cause some customers to have a negative perception of fast-casual concepts generally, which can negatively affect our restaurants. The occurrence of a similar incident at one or more of our restaurants, or negative publicity or public speculation about an incident, could materially adversely affect our business, financial condition, results of operations or cash flows.
We may raise menu prices or revise our pricing structure, which may not be sufficient to offset rising costs or which could
decrease customer demand.
We have historically utilized, and expect to continue utilizing, menu price increases to help offset cost increases, including increased cost for food ingredients and supplies, wages, employee benefits, insurance costs, construction, utilities and other key operating costs. If our selection and amount of menu price increases are not accepted by consumers and reduce guest traffic, or are insufficient to counter increased costs, our financial results could be negatively affected. For example in 2023, primarily in response to inflationary food, labor and operating costs, we made certain menu price increases, which we believe negatively affected our traffic. In 2025, we made certain menu price increases that did not negatively impact our traffic. We cannot provide assurance that menu price increases will not deter guests from visiting our restaurants, reduce the frequency of their visits or affect their purchasing decisions.
Unexpected events have impacted and may in the future impact our business, financial condition and results of operations.
The occurrence of one or more unexpected events, including war, acts of terrorism, cybersecurity incidents, pandemics, civil unrest, natural disasters and other forms of severe weather in the United States or in other locations in which our suppliers are located, have affected and could in the future affect our operations and financial performance. It is possible that weather conditions may impact our business more than other businesses in our industry because of the significant concentration of our restaurants in the Upper Midwest, Rocky Mountain and Mid-Atlantic states. Such events could affect our guest traffic, sales and operating costs and/or cause complete or partial closure of one or more distribution centers, cause temporary or long-term disruption or inoperability of our information technology systems (including our digital platform), temporary or long-term disruptions in our delivery channel or the supply of products from suppliers, and disruption and delay in the transport of products, any of which may have a material adverse effect on our business, financial condition, and results of operations. Existing insurance coverage may not provide protection from all the costs that may arise from such events.
We are subject to risks associated with long-term non-cancellable leases and the costs of exiting leases at restaurants we have closed or may close in the future may be greater than we estimate or could be greater than the funds we raise to address closure costs.
We do not own any real property. Payments under our operating leases account for a significant portion of our operating expenses and we expect any new restaurants we open in the future will similarly be leased. Our leases generally have an initial term of ten years and generally can be extended only in five-year increments (at increased rates). All of our leases require a fixed annual rent, although some require the payment of additional rent if restaurant sales exceed a negotiated amount. Generally, our leases are “net” leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases. Additional sites that we may lease are likely to be subject to similar long-term non-cancelable leases. In connection with closing restaurants, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In 2025, we performed a detailed portfolio review that identified approximately 33 restaurants that we evaluated for potential closure before the end of their lease terms. In addition, as each of our leases expires, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to pay increased occupancy costs or to close restaurants in desirable locations.
Opening and operating new restaurants entails numerous risks and uncertainties.
One element of our long-term operational strategy is the opening of new restaurants and operating those restaurants on a profitable basis with an acceptable return on investment. In 2025, we opened two company-owned restaurants and closed 33 company-owned restaurants and our franchisees did not open any new restaurants and closed nine restaurants.
Opening new restaurants presents numerous risks and uncertainties. We may not successfully identify an appropriate location or be able to open new restaurants as quickly as planned. In the past, we have experienced delays in opening some restaurants due to adverse weather and permitting delays. Delays or failures in opening new restaurants could occur in the future and could materially adversely affect our business strategy and our expected results.
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Our ability to successfully open new restaurants also depends on other factors, including: site selection; local economic trends and demographics; anticipated development near our new restaurants; negotiating leases with acceptable terms; identifying, hiring and training qualified employees; the state of the labor market in each local market; managing construction and development costs; avoiding the impact of inclement weather, natural disasters and other calamities; obtaining construction materials and labor at acceptable costs; securing required governmental approvals, permits and licenses; generating sufficient returns on our new restaurant investments; and accessing capital. The selection of target markets for expansion is challenging. We also must locate and secure appropriate sites for new restaurants, which is one of our biggest challenges. There are numerous factors involved in identifying and securing an appropriate site, including, among others: identification and availability of locations; competition; financial conditions affecting developers and potential landlords; managing construction and development costs; developers and potential landlords obtaining licenses or permits for development projects on a timely basis; proximity of potential development sites to an existing location; availability of acceptable lease arrangements; and obtaining construction materials and labor at acceptable costs.
Moreover, our existing restaurants could also make it more difficult to build our consumer base for a new restaurant in the same market. Our core business strategy does not entail opening new restaurants that we believe will materially affect sales at our existing restaurants, but in the future we may selectively open new restaurants in and around areas of existing restaurants that are operating at or near capacity to effectively serve our customers. Sales cannibalization between our restaurants may become significant in the future as we continue to expand our operations and could affect our sales growth, which could, in turn, materially adversely affect our business, financial condition, results of operations or cash flows.
We paused new company-owned restaurant growth in 2026 due to lower than expected rates of return on investment for our recently opened restaurants as well as increased construction and development costs. We continue to enhance our operating model and are researching a new prototype that would address costs, as well as changing consumer behaviors.
New restaurants, once opened, may not be profitable.
New restaurants may not be profitable, their sales performance may not follow historical patterns, and/or our average restaurant sales and comparable restaurant sales may underperform our expectations. In addition, the construction costs supporting the new restaurant openings may be higher than historical averages, placing a higher profitability threshold to generate an attractive cash-on-cash return. Our ability to operate new restaurants profitably, maintain an attractive cash-on-cash return, and increase average restaurant sales and comparable restaurant sales will depend on many factors, some of which are beyond our control, including: consumer awareness, understanding and support of our brand; general economic conditions, construction cost inflation, local labor costs and availability and prices we pay for the food products and other supplies we use; changes in consumer preferences; competition; temporary and permanent site characteristics of new restaurants; and changes in government regulation.
If our new restaurants do not perform as planned, our business and future prospects could be harmed. In addition, if we are unable to achieve our expected average restaurant sales, our business, financial condition, results of operations or cash flows could be materially adversely affected. The return on investment on our recent new restaurant openings have not been as expected. As a result, we have paused our new restaurant development pipeline for 2026.
Risks Related to Our Employees, Executives and Franchisees
Our business could be adversely affected by difficulties in hiring and retaining qualified employees.
Our success depends on the efforts of our employees and our ability to hire, motivate and retain qualified employees. We have taken strategic steps to improve the retention of our labor force, which has improved sequentially since peak levels in mid-2022 and turnover levels are now at lower levels and wage inflation is also moderating. There may be a small supply of qualified individuals in some of the communities in which we operate, and competition in these communities for qualified individuals could require us to pay higher wages and provide greater benefits. We devote significant resources to training our employees and strive to reduce turnover in order to keep qualified employees and better realize our investment in training new employees. However, turnover among our restaurant employees may increase. Failure to hire and retain qualified employees could impact our financial performance by increasing our training and labor costs and reducing the quality of our customers’ experiences.
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A failure to recruit, develop and retain effective leaders or the loss or shortage of personnel with key capacities and skills could impact our strategic growth plans and jeopardize our ability to meet our business performance expectations and growth targets.
Our ability to continue to grow our business depends substantially on the contributions and abilities of our executive leadership team and other key management personnel. Changes in senior management could expose us to significant changes in strategic direction and initiatives. In August 2025, we promoted our President and Chief Operating Officer to serve as our new President and Chief Executive Officer and the former CEO remains on our board. We have experienced turnover in certain other senior management positions which have been replaced by permanent or fractional management. A failure to maintain appropriate organizational capacity and capability to support our strategic initiatives or to build adequate bench strength with key skill sets required for seamless succession of leadership, could jeopardize our ability to meet our business performance expectations and growth targets. If we are unable to attract, develop, retain and incentivize sufficiently experienced and capable management personnel, our business and financial results may suffer.
If we or our franchisees face labor shortages or increased labor costs, our operating results could be adversely affected.
Labor is a primary component in the cost of operating our restaurants and our success depends in part upon our and our franchisees’ ability to control labor costs and attract, motivate and retain a sufficient number of well-qualified restaurant operators and management personnel, as well as a sufficient number of other qualified employees. Qualified individuals needed to fill these positions has been and may continue to be in short supply in some geographic areas. In addition, restaurants have traditionally experienced relatively high employee turnover rates relative to other industries. If we encounter labor shortages, we have and may continue to be forced to temporarily close restaurants or reduce store hours, which could result in reduced revenue. In addition, failure to recruit and retain qualified individuals has and may continue to delay the planned openings of new restaurants. If labor costs increase, whether because of increased competition for employees, higher employee turnover rates, increases in the federal, state or local minimum wage or other employee benefits costs (including costs associated with workers’ compensation and health insurance coverage), our operating expenses could increase.
We have taken strategic steps to attempt to make our restaurant operations more labor-efficient, including reconfigured restaurant operations, increased off-premise offerings, and new technology and equipment, but in certain instances these strategies may require initial investment costs and there can be no assurances that these strategies will succeed.
We may not be successful in executing our franchise strategy.
We rely in part on our franchisees and the manner in which they operate their locations to develop and promote our business. Although we have developed criteria to evaluate and screen prospective franchisees, we cannot be certain that our franchisees will have the business acumen or financial resources necessary to operate successful franchises in their franchise areas, and state franchise laws may limit our ability to terminate or modify these franchise arrangements. Moreover, despite our training, support and monitoring, franchisees may not successfully operate restaurants in a manner consistent with our standards and requirements or may not hire and train qualified managers and other restaurant personnel. The failure of our franchisees to operate their franchises successfully could have a material adverse effect on us, our reputation, our brand and our ability to attract prospective franchisees and could materially adversely affect our business, financial condition, results of operations or cash flows. Failure to provide our franchisees with adequate support and resources could also materially adversely affect these franchisees, as well as cause disputes between us and them and potentially lead to material liabilities.
Franchisees may not have access to the financial or management resources that they need to open the restaurants contemplated by their agreements with us or be able to find suitable sites on which to develop them, or they may elect to cease development for other reasons, including as a consequence of elevated interest rates and construction cost inflation. Franchisees may not be able to negotiate an acceptable lease or purchase terms for the sites, obtain the necessary permits and government approvals or meet construction schedules. Any of these problems could reduce our franchise revenues. When we sell restaurants to franchisees, we frequently remain liable on the related restaurant facility leases. If franchise owners default on leases that the Company remains liable on, it could result in material liabilities and negatively impact our results from operations and cash flows.
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Risks Related to Our Supply Chain and Technology
We rely heavily on information technology, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.
We rely heavily on information systems, including point-of-sale processing in our restaurants, for management of our supply chain, payment of obligations, collection of cash, credit and debit card transactions and other processes and procedures. We also rely on third-party vendors to provide information technology systems and to securely process and store related information, especially as it relates to credit and debit card transactions and online ordering. Our franchisees also rely on information systems and third-party vendors. Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of these systems. Our operations depend upon our and our franchisees’, and our vendors’, ability to protect computer equipment and systems against damage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses and other disruptive problems. Avoiding such incidents in the future will require us and our franchisees and vendors to continue to enhance information systems, procedures and controls and to hire, train and retain employees. The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems could result in delays in customer service and reduce efficiency in our operations. Remediation of such problems could result in significant, unplanned capital investments and harm our business, financial condition, results of operations or cash flows.
We may be harmed by breaches of security of information technology systems and/or of our confidential consumer, employee, financial, or other proprietary data.
We are part of an industry that is vulnerable to cyber attacks and other cybersecurity incidents. In response, we have implemented cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage cybersecurity risks. Our enterprise risk management framework considers cybersecurity risk alongside other company risks as part of our overall risk assessment process. Our enterprise risk management team includes information technology and digital security functions to gather insights for assessing, identifying and managing cybersecurity threat risks, their severity, and potential mitigations. The rapid evolution and increased adoption of artificial intelligence technologies may intensify our risks.
We assess the Company’s cybersecurity program using several frameworks including the cybersecurity framework from the National Institute of Standards and Technology (NIST-CSF). This program includes policies, processes and procedures that help assess and identify our cybersecurity risks and inform how security measures and controls are developed, implemented and maintained. The risk assessment along with risk-based analysis and judgment are used to prioritize our cybersecurity initiatives. During this process, the following factors, among others, are considered: likelihood and severity of risk, impact on the Company and others if a risk materializes, feasibility and cost of controls and impact of controls on operations.
We maintain internal resources to perform penetration testing designed to simulate evolving tactics and techniques of real-world threat actors, engage with industry partners and law enforcement and intelligence communities and conduct tabletop exercises and periodic risk interviews across our business. We also engage several independent third parties to perform internal and external penetration testing of our technology environment periodically and engage other third parties to periodically conduct assessments of our cybersecurity processes and capabilities. In addition, we continue to expand training and awareness practices to mitigate risk from human error, including mandatory computer-based training and internal communications for employees. Our employees undergo cybersecurity awareness training and regular phishing awareness campaigns that are based upon and designed to emulate real-world contemporary threats. We provide prompt feedback (and, if necessary, additional training or remedial action) based on the results of such exercises.
We use many information technology systems throughout our operations, including systems that record and process customer sales, manage human resources and generate accounting and financial reports. For example, our restaurants use computerized management information systems, including point-of-sale computers that process customer credit card, debit card and gift card payments, and in-restaurant back office computer systems designed to assist in the management of our restaurants and provide labor and food cost management tools. Our franchisees use similar point of sale systems and are required to report business and operational data through an online reporting network. Through these systems, we have access to and store a variety of consumer, employee, financial and other types of information related to our business. We also rely on third-party vendors to provide information technology systems and to securely process and store related information. Our franchisees also use information technology systems and rely on third-party vendors. If our or our franchisees’ technology systems, or those of third-party vendors we or our franchisees rely upon, are compromised as a result of a cyber-attack (including from circumvention of security systems,
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denial-of-service attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, or social engineering) or other external or internal methods, it could materially adversely affect our reputation, business, financial condition, results of operations or cash flows.
The cyber risks we face range from cyber-attacks common to most industries to attacks that target us due to the confidential consumer information we obtain through our electronic processing of credit and debit card transactions. Like others in our industry, we have experienced many attempts to compromise our information technology and data, including a successful attempt in 2016 that we have discussed in previous filings, and we may experience more attempts in the future. These events could result in the misappropriation of our or our customers’ personal information or other proprietary or confidential information, breach of our legal, regulatory or contractual obligations, delays in our operations, or inability to access or rely upon critical business records or systems. In addition to property and casualty insurance, which may cover restoration of data, certain physical damage or third-party injuries, we have cybersecurity insurance related to a breach event. However, damage and claims arising from such incidents may not be covered or may exceed the amount of any available insurance.
Because cyber-attacks take many forms, change frequently, are becoming increasingly sophisticated, and may be difficult to detect for significant periods of time, we may not be able to respond adequately or timely to future cyber-attacks. If we or our franchisees, or third-party vendors, were to experience a material breach resulting in the unauthorized access, use, or destruction of our information technology systems or confidential consumer, employee, financial, or other proprietary data, it could negatively impact our reputation, reduce our ability to attract and retain customers and employees and disrupt the implementation and execution of our strategic goals. Moreover, such breaches could result in a violation of various privacy-related laws, including the various state specific privacy laws, which are subject to differing interpretations and criteria for enforcement, continue to undergo frequent change, and there are likely to be other jurisdictions that propose or enact new or emerging data privacy requirements in the future. The complexity of these privacy and data protection laws may result in significant costs arising from compliance and from any non-compliance, whether or not due to our negligence, and could affect our brand reputation and our results of operations. As a result, we may be subject us to investigations or private litigation, which, in turn, could expose us to civil or criminal liability, fines and penalties imposed by state and federal regulators, claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, compromised security and information systems, failure of our employees to comply with applicable laws, the unauthorized acquisition or use of such information by third parties, or other similar claims, and various costs associated with such matters.
We rely heavily on certain vendors, suppliers and distributors, which could adversely affect our business.
Our ability to maintain consistent pricing, quality and safety throughout our restaurants depends in part upon our ability to acquire specified food products and supplies in sufficient quantities from third-party vendors, suppliers and distributors at a reasonable cost. We do not control the businesses of our vendors, suppliers and distributors and our efforts to specify and monitor the standards under which they perform may not be successful. Furthermore, certain food items are perishable, and we have limited control over whether these items will be delivered to us in appropriate condition for use in our restaurants. If any of our distributors or suppliers perform inadequately, or our distribution or supply relationships are disrupted for any reason, our business, financial condition, results of operations or cash flows could be materially adversely affected. If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, including any suppliers who are a sole source of supply of a particular ingredient, that could increase our expenses and cause shortages of food and other items at our restaurants, which could cause a restaurant to remove items from its menu. If that were to happen, affected restaurants could experience significant reductions in sales during the shortage or thereafter, especially if customers change their dining habits as a result. Our focus on a limited menu would make the consequences of a shortage of a key ingredient more severe. In addition, because we provide moderately priced food, we may choose not to, or may be unable to, pass along commodity price increases to consumers. These potential changes in food and supply costs could materially adversely affect our business, financial condition, results of operations or cash flows.
In addition, we use various third-party vendors to provide, support and maintain most of our management information systems. We also outsource certain accounting, payroll and human resource functions to business process service providers. The failure of such vendors to fulfill their obligations could disrupt our operations. Any changes we may make to the services we obtain from our vendors, or new vendors we employ, may disrupt our operations. These disruptions could materially adversely affect our business, financial condition, results of operations or cash flows. For example, during 2023 our point of sale provider and food ordering vendors experienced temporary system outages. Future outages could lead to greater disruption to our operations.
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We also partner with various third-party vendors to deliver our food. If any of our delivery vendors perform inadequately, or our delivery relationships are disrupted for any reason, our business, financial condition, results of operations or cash flows could be materially adversely affected.
Our ability to continue to expand our digital business, delivery orders, and catering is uncertain, and these business lines are subject to risks.
We rely on third-party providers to fulfill delivery orders, and the ordering and payment platforms used by these third parties, or our mobile app or online ordering system, could be damaged or interrupted by technological failures, user errors, cyber-attacks or other factors, which may materially adversely impact our sales through these channels and could negatively impact our brand. Additionally, our delivery partners are responsible for order fulfillment and may make errors or fail to make timely deliveries, leading to customer disappointment that may negatively impact our brand. We also incur additional costs associated with using third-party service providers to fulfill these digital orders and the costs of delivery may have a material adverse impact on restaurant level margins. Additionally, several jurisdictions have implemented minimum wages for delivery drivers, and other jurisdictions are considering similar wage regulations, which could increase delivery fees and decrease our digital sales. Our competitive position within the third-party platforms can impact our sales. Moreover, the third-party restaurant delivery business is intensely competitive, with a number of players competing for market share, online traffic, capital, and delivery drivers and other people resources. The third-party delivery services with which we work may struggle to compete effectively, and if they were to cease or curtail operations, or fail to provide timely delivery services in a cost-effective manner, or if they give greater priority on their platforms to our competitors, our delivery business may be negatively impacted. Delivery and catering offerings also increase the risk of illnesses associated with our food because the food is transported and/or served by third parties in conditions we cannot control.
Changes in food and supply costs could adversely affect our results of operations.
Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs. Shortages or interruptions in the availability of certain supplies caused by seasonal fluctuations, unanticipated demand, problems in production or distribution, food contamination, product recalls, government regulations (including changes in trade policies), inclement weather or other conditions could materially adversely affect the availability, quality and cost of our ingredients, which could harm our operations. Weather related issues, such as freezes, heavy rains or drought, may also lead to temporary spikes in the prices of some ingredients such as produce or meats. Increasing weather volatility or other long-term changes in global weather patterns, including any changes associated with global climate change, could have a significant impact on the price, availability and timing of delivery of some of our ingredients. In addition, at certain times of the year a substantial volume of our shrimp and produce items are imported from India, Mexico and other countries. The United States has recently implemented or threatened certain changes in trade policies, including tariffs. Any new or increased import duties, tariffs or taxes, or other changes in U.S. trade or tax policy, could result in higher food and supply costs. Any increase in the prices of the food products most critical to our menu, such as pasta, beef, chicken, wheat flour, cheese and other dairy products, tofu and vegetables, could materially adversely affect our operating results, especially if we are unable to increase our menu prices in order to pass these increased costs on to consumers.
In the past the cost of several of our food ingredients increased as a result of inflation in many commodities, particularly chicken and in 2025 we saw an increase in beef inflation. For our chicken purchases, we entered into temporary formula pricing contracts with our vendors and were susceptible to fluctuations in the commodities markets. While we saw material market improvement in food ingredients, if food inflation were to persist, our financial condition and business operations could be severely impacted. We have, and expect to continue to, enter into fixed-based pricing agreements for certain food ingredients to reduce our exposure to cost increases, but there can be no guarantee that we will be able to do so on favorable terms or at all.
Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could have an adverse effect on our business.
There has been a widespread and dramatic increase in the use of social media platforms that allow users to access a broad audience of consumers and other interested persons. The availability of information on social media can be virtually immediate, as can its impact, and users of many social media platforms can post information without filters or checks on the accuracy of the content posted. Adverse information concerning our restaurants or brand, including user reviews, whether accurate or inaccurate, may be posted on such platforms at any time and can quickly reach a wide audience. The resulting harm to our reputation may be
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immediate, without affording us an opportunity to correct or otherwise respond to the information, and it is challenging to monitor and anticipate developments on social media in order to respond in an effective and timely manner.
In addition, although search engine marketing, social media and other new technological platforms offer great opportunities to increase awareness of and engagement with our restaurants and brand, our failure to use social media effectively in our marketing efforts may further expose us to the risks associated with the accelerated impact of social media. Many of our competitors are expanding their use of social media and the social media landscape is rapidly evolving, potentially making more traditional social media platforms obsolete. As a result, we need to continuously innovate and develop our social media strategies in order to maintain broad appeal with guests and brand relevance, and we may not do so effectively. A variety of additional risks associated with our use of social media include the possibility of improper disclosure of proprietary information, exposure of personally identifiable information of our employees or guests, fraud, or the publication of out-of-date information, any of which may result in material liabilities or reputational damage. Furthermore, any inappropriate use of social media platforms by our employees could also result in negative publicity that could materially damage our reputation or lead to litigation that materially increases our costs.
New or improved technologies, including artificial intelligence, and risks or changes in consumer behavior facilitated by these technologies could negatively affect our business.
Consumer behavior continues to evolve regarding restaurant technology expectations, and we may not be able to meet changing demands. For example, the rapid evolution and increased use of artificial intelligence and related technologies may affect our customers’ expectations, requirements or tastes in ways we cannot adequately anticipate or adapt to, adversely affect our business financial condition and results of operations, and may require us to develop artificial intelligence-specific systems. Use of artificial intelligence in our systems may create further risks, such as unauthorized access to or the misappropriation of information including consumer, employee, financial and other types of information related to our business as well as disruptions to operations, which could materially adversely affect our reputation, business, financial condition, results of operations or cash flows.
Legal, Accounting, and Regulatory Risks
Changes to estimates related to our property, fixtures and equipment or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges on certain long-lived assets, which may materially adversely affect our results of operations.
In accordance with accounting guidance as it relates to the impairment of long-lived assets, we make certain estimates and projections with regard to individual restaurant operations, as well as our overall performance, in connection with our impairment analyses for long-lived assets. When impairment triggers are deemed to exist for any location, the estimated undiscounted future cash flows are compared to its carrying value. If the carrying value exceeds the undiscounted cash flows, an impairment charge equal to the difference between the carrying value and the fair value is recorded. The projections of future cash flows used in these analyses require the use of judgment and a number of estimates and projections of future operating results. If actual results differ from our estimates, additional charges for asset impairments may be required in the future. Over the past several years we have recognized significant impairment charges and, if future impairment charges continue to be significant, this could have a material adverse effect on our business or results of operations.
Failure of our internal control over financial reporting could adversely affect our business and financial results.
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a material misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. The identification of a material weakness could indicate a lack of controls adequate to generate accurate financial statements that, in turn, could cause a loss of investor confidence and decline in the market price of our common stock. We may not be able to timely remediate any material weaknesses that may be identified in future periods or maintain all of the controls necessary for continued compliance. Likewise, we cannot assure you that we will be able to retain sufficient skilled
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finance and accounting personnel, especially in light of the increased demand for such personnel among publicly traded companies.
Governmental regulation may adversely affect our business, financial condition, results of operations or cash flows.
We are subject to various federal, state and local regulations, including those relating to building and zoning requirements and those relating to the preparation and sale of food. Our restaurants are also subject to state and local licensing and regulation by health, sanitation, food and occupational safety and other agencies. We may experience material difficulties or failures in obtaining the necessary licenses, approvals or permits for our restaurants, which could delay planned restaurant openings or affect the operations at our existing restaurants. In addition, stringent and varied requirements of local regulators with respect to zoning, land use and environmental factors could delay or prevent development of new restaurants in particular locations. Moreover, the current uncertainty surrounding government regulations and policies, how they are interpreted and enforced and the potential for rapid change could lead to disruptions in our business.
We are subject to the Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas, including our restaurants. We may in the future have to modify restaurants, for example, by adding access ramps or redesigning certain architectural fixtures, to provide service to or make reasonable accommodations for disabled persons. The expenses associated with these modifications could be material.
Our operations are also subject to the U.S. Occupational Safety and Health Act, which governs worker health and safety, the U.S. Fair Labor Standards Act, which governs such matters as minimum wages and overtime and a variety of similar federal, state and local laws that govern these and other employment law matters. Changes in these laws or implementation of new proposals for similar matters could materially adversely affect our business, financial condition, results of operations or cash flows.
Our franchising activities are subject to federal rules and regulations administered by the U.S. Federal Trade Commission and laws enacted by a number of states. In particular, we are subject to federal and state laws regulating the offer and sale of franchises, as well as judicial and administrative interpretations of such laws. Such laws impose registration and disclosure requirements on franchisors in the offer and sale of franchises and may also apply substantive standards to the relationship between franchisor and franchisee, including limitations on the ability of franchisors to terminate franchises and alter franchise arrangements. Failure to comply with new or existing franchise laws, rules, and regulations in any jurisdiction or to obtain required government approvals could negatively affect our ability to grow or expand our franchise business and sell franchises.
Our business involves the collection, transmission and retention of large volumes of customer and employee data (among others), including credit and debit card numbers and other personally identifiable information. The collection and use of such information is regulated at the federal and state levels, as well as internationally. Regulatory requirements, both domestic and abroad, have been changing with increasing regulation relating to the privacy, security and protection of data. Such regulatory requirements may become more prevalent in other states and jurisdictions as well. Monitoring and complying with these laws requires substantial resources and there is no assurance that our compliance efforts will be successful in preventing breaches or data loss. Failure to comply with these laws, whether through fault of our own information systems or those of third parties, could not only cause us to fail to comply with these laws and regulations, but also could cause us to face litigation and penalties that could adversely affect our business, financial condition and results of operations.
Changes in employment laws may adversely affect our business.
Various federal and state labor laws govern the relationship with our employees and affect labor and operating costs. These laws include employee classification as exempt/non-exempt for overtime and other purposes, minimum wage requirements, unemployment tax rates, workers’ compensation rates, mandatory health benefits, immigration status and other wage and benefit requirements. Some jurisdictions, including some of those in which we operate, have recently increased their minimum wage by a significant amount, and other jurisdictions are considering similar actions, which has and may continue increase our labor costs. Several jurisdictions have implemented fair workweek or “secure scheduling” legislation, which impose complex requirements related to scheduling for certain restaurant and retail employees, and additional jurisdictions are considering similar legislation. Several jurisdictions have also implemented sick pay and paid time off legislation, which requires employers to provide paid time off to employees, and “just cause” termination legislation, which restricts companies’ ability to terminate employees or reduce employees’ hours unless they can prove “just cause” or a “bona fide economic reason” for the termination or reduction in hours. All of these regulations impose additional obligations on us and our failure to comply with any of these regulations could subject us to penalties and other legal liabilities. Significant additional government-imposed increases in the following areas could
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materially affect our business, financial condition, operating results or cash flow: overtime rules; mandatory health benefits; vacation accruals; paid leaves of absence, including paid sick leave; and tax reporting.
Immigration laws have recently been an area of considerable focus by the Department of Homeland Security, with enforcement operations taking place across the country, resulting in arrests, detentions and deportation of unauthorized workers. Some of these changes and enforcement programs may increase our obligations for compliance and oversight, which could subject us to additional costs and make our hiring process more cumbersome or reduce the availability of potential employees. Although we require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. Unauthorized workers are subject to deportation and may subject us to fines or penalties, and if any of our workers are found to be unauthorized we could experience adverse publicity that negatively impacts our brand and may make it more difficult to hire and keep qualified employees. Termination of a significant number of employees who were unauthorized employees may disrupt our operations, cause temporary increases in our labor costs as we train new employees and result in additional adverse publicity. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws. These factors could materially adversely affect our business, financial condition, results of operations or cash flows.
New information or attitudes regarding diet and health could result in changes in regulations and consumer consumption habits that could adversely affect our results of operations.
Regulations and consumer eating habits may change as a result of new information or attitudes regarding diet, health and safety. Such changes may include federal, state and local regulations and recommendations from medical and diet professionals pertaining to the ingredients and nutritional content of the food and beverages we offer. The significant rise in weight loss medications, and recent reductions in their costs, could lead to a limitation of the consumption of higher calorie items or portion sizes. The success of our restaurant operations is dependent, in part, upon our ability to effectively respond to changes in any consumer health regulations and our ability to adapt our menu offerings to trends in food consumption. If consumer health regulations or consumer eating habits change significantly, we may choose or be required to modify or remove certain menu items, which may cause us to incur costs to implement those changes and may materially adversely affect the appeal of our menu to new or returning customers. To the extent we are unwilling or unable to respond with appropriate changes to our menu offerings, it could materially affect consumer demand and could have a material adverse impact on our business, financial condition, results of operations or cash flows.
Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet, medications and health or new information regarding the adverse health effects of consuming certain menu offerings. As discussed in Part I, “Business-Governmental Regulation and Environmental Matters” of this Form 10-K, these changes have resulted in, and may continue to result in, laws and regulations requiring us to disclose the nutritional content of our food offerings, and they have resulted, and may continue to result in, laws and regulations affecting permissible ingredients and menu offerings. Inconsistencies among state laws with respect to presentation of nutritional content could be challenging for us to comply with in an efficient manner. The Patient Protection and Affordable Care Act also requires covered restaurants to provide to consumers, upon request, a written summary of detailed nutritional information for each standard menu item, and to provide a statement on menus and menu boards about the availability of this information upon request. An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our offerings.
Compliance with current and future laws and regulations regarding the ingredients and nutritional content of our menu items may be costly and time-consuming. The risks and costs associated with nutritional disclosures on our menus could also impact our operations, particularly given differences among applicable legal requirements and practices within the restaurant industry with respect to testing and disclosure, ordinary variations in food preparation among our own restaurants and the need to rely on the accuracy and completeness of nutritional information obtained from third-party suppliers.
We may not be able to effectively respond to changes in consumer health and safety perceptions or to successfully implement the nutrient content disclosure requirements and adapt our menu offerings to trends in eating habits. The imposition of additional menu labeling laws could materially adversely affect our business, financial condition, results of operations or cash flows, as well as our position within the restaurant industry in general.
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We may not be able to adequately protect our intellectual property, which could harm the value of our brand and could adversely affect our business.
Our intellectual property is material to the conduct of our business and our marketing efforts. Our ability to implement our business plan successfully depends in part on our ability to further build brand recognition using our trademarks, service marks, trade dress and other proprietary intellectual property, including our name and logos and the unique ambiance of our restaurants. While it is our policy to protect and defend vigorously our rights to our intellectual property, we cannot predict whether steps taken by us to protect our intellectual property rights will be adequate to prevent misappropriation of these rights or the use by others of restaurant features based upon, or otherwise similar to, our concept. It may be difficult for us to prevent others from copying elements of our concept and any litigation to enforce our rights will likely be costly and may not be successful. Although we believe that we have sufficient rights to all of our trademarks and service marks, we may face claims of infringement that could interfere with our ability to market our restaurants and promote our brand. Any such litigation may be costly and divert resources from our business. Moreover, if we are unable to successfully defend against such claims, we may be prevented from using our trademarks or service marks in the future, may be liable for damages and may have to change our marketing efforts, which in turn could materially adversely affect our business, financial condition, results of operations or cash flows.
We could be party to litigation that could adversely affect us by distracting management, impairing our reputation, increasing our expenses or subjecting us to material money damages and other remedies.
Our customers occasionally file complaints or lawsuits against us alleging we caused an illness or injury they suffered at or after a visit to our restaurants, or that we have problems with food quality or operations. These kinds of complaints or lawsuits may be more common in a period in which the public is focused on health safety issues, or may attract more attention due to publication on various social media outlets. We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state law regarding workplace and employment matters, equal opportunity, discrimination and similar matters and we could become subject to class action or other lawsuits related to these or different matters in the future. In addition, the restaurant industry has from time to time been subject to claims based on the nutritional content of food products sold and disclosure and advertising practices. We may also become subject to various employee and workplace litigation, including claims related to discrimination, harassment, workplace safety, medical and family leave, and wage-and-hour issues.
Regardless of whether any claims against us are valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time and money away from our operations and hurt our performance. A judgment in excess of our insurance coverage for any claims could materially adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegations, even if proven to be false, may also materially adversely affect our reputation or prospects, which in turn could materially adversely affect our business, financial condition, results of operations or cash flows.
Increasing attention to and evolving expectations for corporate responsibility matters may increase our costs, harm our reputation, or otherwise adversely affect our business.
Our reputation could be harmed if we fail, or are perceived to fail, to comply with various regulatory requirements or if we are unable to meet stakeholder expectations in a number of areas such as health, safety and security; sustainability; environmental stewardship; climate change; human rights; and corporate governance. We manage a broad range of corporate responsibility matters, taking into consideration their expected effect on the sustainability of our business over time, and the potential effect of our business on society and the environment. Such efforts can be costly and complex, and we may not ultimately accomplish our desired objectives, either as intended or at all. In addition, both guest and shareholder and other stakeholder expectations regarding such matters are evolving, and navigating these issues will require us to successfully manage differing views on these matters. Adverse incidents or failure to comply or meet expectations with respect to our corporate responsibility efforts could negatively affect our reputation, the cost of our operations, and relationships with guests and shareholder and other stakeholders, all of which could adversely affect our business, results of operations, and the price of our stock.
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Risks Related to Our Debt Financing and Common Stock
Our indebtedness and credit facility contain financial covenants and other restrictions on our actions that may limit our financial and operational flexibility or otherwise adversely affect our liquidity and results of operations. Further, we may be unable to negotiate favorable borrowing terms, and any additional capital we may require could be senior to existing equity holders, dilute existing equity holders or include unfavorable restrictions.
As a general matter, operating and developing our business requires significant capital. Our A&R Credit Agreement (as defined in Item 7 below) matures in 2027 and securing access to credit on reasonable terms thereafter will require us to extend or refinance such agreement. In addition, in order to pursue our business and operational strategies, we may need additional sources of liquidity in the future and it may be difficult or not practical at such time to increase our liquidity. Our lenders may not agree to amend our credit agreement at such time to increase our borrowing capacity.
Our A&R Credit Agreement has a variable interest rate equal to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.75% to 3.75% per annum, based upon the consolidated total lease adjusted leverage ratio. Interest rates may rise in the future due to future amendments to the A&R Credit Agreement, inflation or other causes. As a result, the costs of servicing our variable interest rate debt have and could again increase even if the amount borrowed under such credit facility remains the same. Increased servicing costs could adversely affect our business, financial condition, results of operations or cash flows.
Further, our requirements for additional liquidity may coincide with periods during which we may not be in compliance with covenants under our credit agreement and our lenders may not agree to further amend our credit agreement to accommodate such non-compliance. We amended our credit agreement in 2023 and 2024, which resulted in an increase in our borrowing rates and modifications to both the Fixed Charge and Consolidated Total Lease Adjusted Leverage ratios and restrictions related to new restaurant growth and new leases, and these restrictions became more stringent beginning in the fourth quarter of 2025.
We were in compliance with our covenants as of December 30, 2025, and expect to continue to be in compliance through the next twelve months; however there is no assurance that we will be able to do so. The required Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) stepped down from 5.50 to 1.00 to 5.25 to 1.00 for the fourth quarter of fiscal year 2025, then further steps down to 5:00 to 1.00 for the first two quarters of fiscal 2026, and further steps down to 4.75 to 1.00 for the third and fourth quarters of 2026. The required Minimum Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) stepped up from 1.05 to 1.00 to 1.15 to 1.00 for the fourth quarter of fiscal year 2025 and the first quarter of fiscal 2026, and then further steps up to 1.25 to 1.00 for the second quarter of fiscal 2026. Our ability to comply with these covenants or, if we are not in compliance, our ability to obtain covenant waivers or modifications depends on many factors, some of which are beyond our control, including without limitation macroeconomic conditions, operating performance and the effectiveness of our strategic initiatives. The A&R Credit Agreement contains various events of default that include, among others, non-payment of principal or interest, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, material judgments, and events constituting a change of control, in each case subject to thresholds and cure periods as set forth in the A&R Credit Agreement. Upon the occurrence and during the continuance of such an event of default, our lenders would have the right to terminate their commitments and accelerate our obligations under the A&R Credit Agreement as well as exercise other rights and remedies provided for under the A&R Credit Agreement, the other loan documents and applicable law. If outstanding borrowings under the A&R Credit Agreement were to be accelerated, we may not have sufficient cash on hand or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately adversely affect our business, cash flows, results of operations, and financial condition.
Even if we are able to access additional liquidity, agreements governing any borrowing arrangement could contain covenants restricting our operations. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing we secure in the future could involve higher interest rates, especially given the current inflationary environment, and restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and to pursue business opportunities. Moreover, if we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets.
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We may fail to qualify for continued listing on the Nasdaq Global Select Market, which could make it more difficult for our stockholders to sell their shares and reduce our ability to raise additional capital.
We are required to satisfy the continued listing requirements of the Nasdaq Global Select Market (“Nasdaq”) to maintain such listing, including, among other things, the maintenance of a minimum closing bid price of $1.00 per share. On June 24, 2025, we received a notice from Nasdaq indicating that we were not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5450(a)(1) for continued listing on Nasdaq. Nasdaq Listing Rule 5450(a)(1) requires listed securities maintain a minimum closing bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notification of noncompliance had no immediate effect on the listing or trading of our common stock on Nasdaq and we had 180 calendar days from the date of notice to achieve compliance with the minimum bid price requirement, or until December 22, 2025. To regain compliance, the closing bid price of our common stock must have been at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to the expiration of the 180-calendar day grace period, unless Nasdaq exercised its discretion to extend this ten-day period. As the Company did not regain compliance by December 22, 2025, the Company requested a hearing before a Nasdaq Hearing Panel (“Panel”) to extend its compliance period, which request stayed any further suspension or delisting action by Nasdaq, pending the ultimate conclusion of the hearing process. On January 27, 2026, the Panel notified the Company that it had granted the Company’s request for additional time to complete the steps intended to cause it to regain compliance with the minimum bid price requirement. The Company executed the Reverse Stock Split on February 18, 2026, and as a result, the Company’s common stock traded above $1.00 for the required time period. On March 5, 2026, Nasdaq notified us that we had regained compliance with Nasdaq Listing Rule 5450(a)(1) and that the matter is now closed.
Though we recently regained compliance, we could be notified in the future of non-compliance, including if our stock price again falls below $1.00 for the compliance time period, and we may fail to regain compliance and qualify for continued listing on the Nasdaq Global Select Market.
If our common stock is delisted by Nasdaq, we could face significant material adverse consequences, including: a limited availability of market quotations for our common stock; reduced liquidity with respect to our common stock; a determination that our shares are “penny stock,” which will require brokers trading in our shares to adhere to more stringent shares, and which may limit demand for our common stock; a limited amount of analyst coverage for our company; and a decreased ability to obtain additional financing in the future.
Future sales of our common stock, or the perception that such sales may occur, could depress our common stock price.
Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could depress the market price of our common stock. Our amended and restated certificate of incorporation authorizes us to issue up to 180,000,000 shares of Class A common stock and Class B common stock , and such amount was not reduced in connection with the Reverse Stock Split, in which the number of outstanding shares of Class A common stock was reduced by a factor of eight. As a result, this increased the number of shares available for future issuance. As of December 30, 2025, we have 5,852,349 outstanding shares of Class A common stock and no outstanding shares of Class B common stock. In addition, as of such date, approximately 365,007 shares of Class A common stock are issuable upon the exercise of outstanding stock options and the vesting of restricted stock units. Moreover, as of that date, approximately 0.5 million shares of our common stock are available for future grants under our stock incentive plan and for future purchase under our employee stock purchase plan.
Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
Our quarterly operating results may fluctuate significantly because of several factors, including but not limited to: increases and decreases in average unit volumes and comparable restaurant sales; profitability of our restaurants; labor availability and costs for hourly and management personnel; changes in interest rates; macroeconomic conditions, both nationally and locally; negative publicity relating to the consumption of products we serve; changes in consumer preferences and competitive conditions; impairment of long-lived assets and any loss on and exit costs associated with restaurant closures; expansion to new markets; the timing of any new restaurant openings and related expense; restaurant operating costs for our newly-opened restaurants; increases in infrastructure costs; and fluctuations in commodity prices.
Seasonal factors, particularly weather disruptions, and the timing of holidays also cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced winter and holiday traffic and
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higher in the second and third quarters. As a result of these factors, our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable restaurant sales for any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors. In that event, the price of our common stock would likely decrease.
Provisions in our organizational documents and Delaware law may delay or prevent our acquisition by a third party.
Our amended and restated certificate of incorporation, our second amended and restated bylaws and Delaware law each contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our Board of Directors. For example, we have a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding equity interests. These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock.
ITEM 1B. Unresolved Staff Comments
None.
ITEM 1C. Cybersecurity
The Board of Directors, as a whole and at the committee level, has oversight for the most significant risks facing us and for our processes to identify, prioritize, assess, manage, and mitigate those risks. The Audit Committee, which is comprised solely of independent directors, has been designated by our Board to oversee cybersecurity risks. The Audit Committee receives regular updates on cybersecurity, including immediate notification of any material cybersecurity events, and information technology
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ITEM 2. Properties
As of December 30, 2025, we and our franchisees operated 423 restaurants in 31 states. Our restaurants are typically between 2,000 and 2,600 square feet and are located in a variety of suburban, collegiate and urban markets. We lease the property for our restaurant support center and all of the properties on which we operate restaurants. The chart below shows the locations of our company-owned and franchised restaurants as of December 30, 2025.
| State | Company-owned | Franchised | Total | |||||||||||||||||
| Arizona | 9 | — | 9 | |||||||||||||||||
| California | — | 7 | 7 | |||||||||||||||||
| Colorado | 50 | — | 50 | |||||||||||||||||
| Connecticut | — | 4 | 4 | |||||||||||||||||
| Florida | — | 4 | 4 | |||||||||||||||||
| Idaho | 6 | — | 6 | |||||||||||||||||
| Illinois | 44 | 5 | 49 | |||||||||||||||||
| Indiana | 20 | 1 | 21 | |||||||||||||||||
| Iowa | 9 | 2 | 11 | |||||||||||||||||
| Kansas | 9 | — | 9 | |||||||||||||||||
| Kentucky | 1 | 3 | 4 | |||||||||||||||||
| Maryland | 19 | — | 19 | |||||||||||||||||
| Michigan | — | 19 | 19 | |||||||||||||||||
| Minnesota | 43 | 1 | 44 | |||||||||||||||||
| Missouri | 2 | 5 | 7 | |||||||||||||||||
| Montana | — | 2 | 2 | |||||||||||||||||
| Nebraska | — | 5 | 5 | |||||||||||||||||
| Nevada | 1 | — | 1 | |||||||||||||||||
| New York | 1 | — | 1 | |||||||||||||||||
| North Carolina | 8 | 2 | 10 | |||||||||||||||||
| North Dakota | — | 6 | 6 | |||||||||||||||||
| Ohio | 16 | — | 16 | |||||||||||||||||
| Oregon | — | 5 | 5 | |||||||||||||||||
| Pennsylvania | 9 | — | 9 | |||||||||||||||||
| South Carolina | — | 2 | 2 | |||||||||||||||||
| South Dakota | — | 2 | 2 | |||||||||||||||||
| Tennessee | — | 4 | 4 | |||||||||||||||||
| Utah | 15 | — | 15 | |||||||||||||||||
| Virginia | 23 | — | 23 | |||||||||||||||||
| Washington | — | 1 | 1 | |||||||||||||||||
| Wisconsin | 55 | 3 | 58 | |||||||||||||||||
| 340 | 83 | 423 | ||||||||||||||||||
We are obligated under non-cancelable leases for our restaurants and our restaurant support center. Our restaurant leases generally have initial terms of 10 years with two or more five-year renewal options. Our restaurant leases may require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges and other operating costs.
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ITEM 3. Legal Proceedings
In the normal course of business, the Company is subject to proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes that are not predictable with assurance. Consequently, the Company is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of December 30, 2025. These matters could affect the operating results of any one financial reporting period when resolved in future periods. The Company believes that an unfavorable outcome with respect to these matters is remote or a potential range of loss is not material to its consolidated financial statements. Significant increases in the number of these claims, or one or more successful claims that result in greater liabilities than the Company currently anticipates, could materially and adversely affect its business, financial condition, results of operations or cash flows.
ITEM 4. Mine Safety Disclosures
Not applicable.
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PART II
ITEM 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our Class A common stock trades on the Nasdaq Global Select Market under the symbol NDLS. As of March 20, 2026, there were approximately 29 holders of record of our common stock. The number of holders of record is based upon the actual numbers of holders registered at such date and does not include holders of shares in “street name” or persons, partnerships, associates, corporations or other entities in security position listings maintained by depositories. On February 18, 2026, we effectuated the 1-for-8 Reverse Stock Split of our shares of Class A common stock. Refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion.
Purchases of Equity Securities by the Issuer
We had no share repurchases during the fourth quarter of 2025.
Sales of Unregistered Securities by the Issuer
We sold no unregistered securities that have not been previously included in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.
Dividends
No dividends have been declared or paid on our shares of common stock. We do not anticipate paying any cash dividends on any of our shares of common stock in the foreseeable future. We currently intend to retain any earnings to reduce outstanding debt and finance the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon then-existing conditions, including our earnings, capital requirements, results of operations, financial condition, business prospects and other factors that our Board of Directors considers relevant. Further, our credit facility contains provisions that limit our ability to pay dividends on our common stock. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Certain Relationships and Related Transactions, and Director Independence” for additional information regarding our financial condition.
ITEM 6. [Reserved]
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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in Item 8. “Financial Statements and Supplementary Data.” This section of the Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons of 2025 to 2024. Discussions of 2023 items and year-to-year comparisons of 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 31, 2024. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed in Item 1A. “Risk Factors” and elsewhere in this report.
We operate on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Fiscal years 2025 and 2024, which ended on December 30, 2025 and December 31, 2024, respectively, contained 52 weeks. We refer to our fiscal years as 2025 and 2024. Our fiscal quarters each contained 13 operating weeks.
Overview
Noodles & Company is a restaurant concept offering lunch and dinner within the fast-casual segment of the restaurant industry. We opened our first location in 1995, offering noodle and pasta dishes, staples of many different cuisines, with the goal of delivering fresh ingredients and flavors from around the world under one roof. Today, our globally-inspired menu includes a wide variety of high quality, cooked-to-order dishes, including noodles and pasta, soups, salads and appetizers. We believe we offer our customers value with a per-person spend of $13.86 in 2025.
Recent Trends, Risks and Uncertainties
Reverse Stock Split. On February 18, 2026, the amendment to our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) took effect to implement the Reverse Stock Split of our issued and outstanding shares of Class A common stock, par value $0.01 per share, at a ratio of 1-for-8.
No fractional shares were issued as a result of the Reverse Stock Split and it did not impact the par value of our common stock. Neither the Reverse Stock Split nor the related amendment to the Certificate of Incorporation had any impact on the number of shares of common stock or preferred stock we are authorized to issue under the Certificate of Incorporation or the number of issued and outstanding shares of our preferred stock (of which there are currently none).
All shares of common stock, stock-based compensation awards and per share amounts included in the Consolidated Financial Statements and applicable notes thereto in Part II, Item 8 of this Report and elsewhere in this Report have been retrospectively restated to reflect the effect of the Reverse Stock Split and related amendment to the Certificate of Incorporation.
Strategic Review. On September 3, 2025, we announced that our Board of Directors had initiated a review of strategic alternatives in order to explore ways to maximize stockholder value. The review was set to include a range of potential strategic alternatives, including a refinancing of existing indebtedness or sale of all or part of the business, and/or other strategic or financial transactions. Such review remains in process.
Revenue. In fiscal 2025, we saw an increase in revenue as a result of an increase in comparable restaurant sales, partially offset by restaurant closures. System-wide comparable restaurant sales increased 4.1%, comprised of a 4.3% increase for company-owned restaurants and a 3.2% increase for franchise restaurants. Starting in the third quarter of 2025 and continuing into the early part of 2026 we have seen our sales outpace the overall fast casual industry as measured by Blackbox. Our comparable restaurant sales have been positive since the introduction of our new menu aided by the introduction of Delicious Duos in late July, the introduction of Chili Garlic Ramen in October, and the benefit of sales transferring from restaurants that we closed to our nearby restaurants.
Cost of Sales. In recent years, we incurred incremental costs of sales driven by volatility in the commodity and food ingredients markets, particularly with our chicken products, in addition to an increase in packaging costs and distribution. The commodity markets underlying our cost of food have improved since the historically high costs in 2022. Our commodity inflation in 2025
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was less than 2%. Throughout these periods of volatility, we have continued to work with our suppliers for ongoing supply chain efficiencies, including managing food waste and adding additional suppliers as necessary.
We have evaluated and will continue to evaluate the impact of import laws and tariffs on our operations as some of our food items are imported from India, Mexico and other countries. As of December 30, 2025, there was no material impact on our business, financial condition, results of operations or cash flows. However, the tariffs continue to change and we expect tariffs may impact our operations in certain areas, such as food and beverage costs, construction and equipment costs and other restaurant operating costs into 2026. We will continue to utilize fixed price contracts for certain key items to mitigate risk.
Labor Costs. Similar to much of the restaurant industry, our base labor costs have risen in recent years. We have been able to partially mitigate the impact of wage inflation through a continued focus on maximizing efficiencies of labor hour usage per restaurant and wage inflation has stabilized to less than 3%.
Other Restaurant Operating Costs. We have incurred, and expect to continue to incur, increased third-party delivery fees due to significant increased usage of third-party delivery services resulting in a higher mix of third party delivery sales.
Restaurant Development. In 2025, we opened two company-owned restaurants. As of December 30, 2025, we had 340 company-owned restaurants and 83 franchise restaurants in 31 states. We do not plan to open any new company-owned restaurants in 2026.
Certain Restaurant Closures. We closed 33 and 13 company-owned restaurants in 2025 and 2024, respectively, most of which were either generating low or negative cash flows, at or approaching the expiration of their leases or in trade areas that are not as well positioned for current consumer trends or a potential for a significant amount of sales transfer given strong off premise sales. We continue to analyze our restaurant portfolio and expect to close approximately 30 to 35 restaurants in 2026, of which 19 have already been closed in the first two months of 2026, that are either generating low or negative cash flows, at or approaching the expiration of their leases or in trade areas that are not as well positioned for current consumer trends or a potential for a significant amount of sales transfer given strong off premise sales.
Impairment of Long-lived Assets. We impaired fixed assets related to 25 restaurants in 2025 and 16 restaurants in 2024 primarily related to closure decisions on underperforming restaurants. Impairment is based on our current assessment of the expected future cash flows of various restaurants based on recent results and other specific market factors.
Key Measures We Use to Evaluate Our Performance
To evaluate the performance of our business, we utilize a variety of financial and performance measures. These key measures include revenue, comparable restaurant sales, average unit volumes (“AUVs”), EBITDA and adjusted EBITDA. EBITDA and adjusted EBITDA are non-GAAP financial measures.
Revenue
Revenue includes both restaurant revenue and franchise royalties and fees. Restaurant revenue represents sales of food and beverages in company-owned restaurants. Several factors affect our restaurant revenue in any period, including the number of restaurants in operation and per-restaurant sales.
Franchise royalties and fees represent royalty income and initial franchise fees. While we expect that the majority of our revenue and net income growth will be driven by company-owned restaurants, our franchise restaurants remain an important factor impacting our revenue and financial performance.
Seasonal factors cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced winter and holiday traffic and is typically higher in the second and third quarters. As a result of these factors, our quarterly and annual operating results and comparable restaurant sales may fluctuate.
Comparable Restaurant Sales
Comparable restaurant sales refer to year-over-year sales comparisons for the comparable restaurant base. We define the comparable restaurant base to include restaurants open for at least 18 full periods. As of the end of 2025, 2024 and 2023, there were 335, 350 and 355 restaurants, respectively, in our comparable restaurant base for company-owned locations. This measure
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highlights performance of existing restaurants, as the impact of new restaurant openings is excluded. Changes in comparable restaurant sales are generated by changes in traffic, which we calculate as the number of entrées sold, and changes in per-person spend, calculated as sales divided by traffic. Per-person spend can be influenced by changes in menu prices and the mix and number of items sold per person.
Measuring our comparable restaurant sales allows us to evaluate the performance of our existing restaurant base. Various factors impact comparable restaurant sales, including, but not limited to:
•introduction of new and seasonal menu items and limited time offerings;
•consumer recognition of our brand and our ability to respond to changing consumer preferences;
•overall economic trends, particularly those related to consumer spending;
•our ability to operate restaurants effectively and efficiently to meet consumer expectations;
•pricing and perceived value;
•the number of restaurant transactions, per-person spend and average check amount;
•marketing and promotional efforts;
•abnormal weather patterns;
•food safety and foodborne illness concerns;
•the impact of health pandemics;
•local and national competition;
•trade area dynamics;
•tariffs or trade restrictions; and
•opening and closing restaurants in the vicinity of other restaurant locations.
Consistent with common industry practice, we present comparable restaurant sales on a calendar-adjusted basis that aligns current year sales weeks with comparable periods in the prior year, regardless of whether they belong to the same fiscal period or not. Comparable restaurant sales is only one measure of how we evaluate our performance.
Average Unit Volumes
AUVs consist of the average annualized sales of all company-owned restaurants for a given time period. AUVs are calculated by dividing restaurant revenue by the number of operating days within each time period and multiplying by the number of operating days we have in a typical year. This measurement allows management to assess changes in consumer traffic and per-person spending patterns at our restaurants. In addition to the factors that impact comparable restaurant sales, AUVs can be further impacted by effective real estate site selection and maturity and trends within new markets.
EBITDA and Adjusted EBITDA
We define EBITDA as net income (loss) before net interest expense, provision (benefit) for income taxes and depreciation and amortization. We define adjusted EBITDA as net income (loss) before net interest expense, provision (benefit) for income taxes, depreciation and amortization, restaurant impairments, loss on disposal of assets, net lease exit costs (benefits), gain (loss) on sale of restaurants, severance, executive transition costs, corporate transaction costs and stock-based compensation.
We believe that EBITDA and adjusted EBITDA provide clear pictures of our operating results by eliminating certain non-recurring and non-cash expenses that may vary widely from period to period and are not reflective of the underlying business performance.
The presentation of EBITDA and adjusted EBITDA, which may not be comparable to similarly titled financial measures used by other companies, is not intended to be considered in isolation or as a substitute for, or to be superior to, the financial information
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prepared and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information to management and investors about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.
The following table presents a reconciliation of net loss to EBITDA and adjusted EBITDA:
| Fiscal Year | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (in thousands) | ||||||||||||||
| Net loss | $ | (42,568) | $ | (36,213) | ||||||||||
| Depreciation and amortization | 27,047 | 29,066 | ||||||||||||
| Interest expense, net | 10,915 | 8,381 | ||||||||||||
| Provision for income taxes | 64 | 54 | ||||||||||||
| EBITDA | $ | (4,542) | $ | 1,288 | ||||||||||
Restaurant impairments(1) | 22,040 | 13,441 | ||||||||||||
| Loss on disposal of assets | 3,209 | 3,079 | ||||||||||||
Lease exit costs, net | (2,520) | 924 | ||||||||||||
Gain on sale of restaurants | — | (490) | ||||||||||||
| Severance, executive transition costs and corporate transaction costs | 1,260 | 1,677 | ||||||||||||
| Stock-based compensation expense | 3,037 | 3,680 | ||||||||||||
| Adjusted EBITDA | $ | 22,484 | $ | 23,599 | ||||||||||
_____________
(1) Restaurant impairments in all periods presented above include amounts related to restaurants previously impaired. See Note 6, Restaurant Impairments, Closure Costs and Asset Disposals.
Key Financial Definitions
Cost of Sales
Cost of sales includes the direct costs associated with the food, beverage and packaging of our menu items. Cost of sales also includes any costs related to discounted menu items. Cost of sales is a substantial expense and can be expected to change proportionally as our restaurant revenue changes. Fluctuations in cost of sales are caused primarily by volatility in the cost of commodity food items and related contracts for such items. Other important factors causing fluctuations in cost of sales include seasonality, discounting activity, distribution costs and restaurant level management of food waste.
Labor Costs
Labor costs include wages, payroll taxes, workers’ compensation expense, benefits and incentives paid to our restaurant teams. Similar to certain other expense items, we expect hourly labor costs to change proportionally as our restaurant revenue changes. Factors that influence fluctuations in our labor costs include minimum wage and payroll tax legislation, wage inflation, the frequency and severity of workers’ compensation claims, health care costs and the performance of our restaurants.
Occupancy Costs
Occupancy costs include rent, common area maintenance charges and real estate tax expense related to our restaurants and are expected to grow proportionally as we open new restaurants.
Other Restaurant Operating Costs
Other restaurant operating costs include the costs of repairs and maintenance, utilities, restaurant-level marketing, credit card processing fees, third-party delivery fees, restaurant supplies and other restaurant operating costs. Similar to certain other costs, they are expected to grow proportionally as restaurant revenue grows.
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General and Administrative Expense
General and administrative expense is composed of payroll, other compensation, travel, marketing, accounting and legal fees, insurance and other expenses related to the infrastructure required to support our restaurants. General and administrative expense also includes the non-cash stock compensation expense related to our stock incentive plan.
Depreciation and Amortization
Our principal depreciation and amortization charges relate to depreciation of long-lived assets, such as property, equipment and leasehold improvements, from restaurant construction and ongoing maintenance.
Pre-Opening Costs
Pre-opening costs relate to the costs incurred prior to the opening of a restaurant. These include management labor costs, staff labor costs during training, food and supplies utilized during training, marketing costs and other pre-opening related costs. Pre-opening costs also include rent recorded between the date of possession and the opening date for our restaurants.
Restaurant Impairments, Closure Costs and Asset Disposals
Restaurant impairments, closure costs and asset disposals include the net gain or loss on disposal of long-lived assets related to retirements and replacement of equipment or leasehold improvements, lease expenses that the Company is still obligated for, refranchising gains or losses, gains or losses on lease terminations, other restaurant closure costs and impairment charges. Each quarter we evaluate possible impairment of property and equipment at the restaurant level and record an impairment loss whenever we determine that the fair value of these assets is less than their carrying value. There can be no assurance that such evaluations will not result in additional impairment costs in future periods.
Interest Expense, Net
Interest expense, net consists primarily of interest on our outstanding indebtedness and amortization of debt issuance costs over the life of the related debt reduced by capitalized interest.
Provision for Income Taxes
Provision for income taxes consists of federal, state and local taxes on our income.
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Restaurant Openings, Closures and Relocations
The following table shows restaurants opened or closed in the years indicated:
| Fiscal Year | ||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Company-Owned Restaurants | ||||||||||||||||||||
| Beginning of period | 371 | 380 | ||||||||||||||||||
| Openings | 2 | 10 | ||||||||||||||||||
Divestitures (1) | — | (6) | ||||||||||||||||||
Closures | (33) | (13) | ||||||||||||||||||
| End of period | 340 | 371 | ||||||||||||||||||
| Franchise Restaurants | ||||||||||||||||||||
| Beginning of period | 92 | 90 | ||||||||||||||||||
| Openings | — | 3 | ||||||||||||||||||
Acquisitions (1) | — | 6 | ||||||||||||||||||
| Closures | (9) | (7) | ||||||||||||||||||
| End of period | 83 | 92 | ||||||||||||||||||
| Total restaurants | 423 | 463 | ||||||||||||||||||
_____________________________
(1)During 2024, we sold six company-owned restaurants to a franchisee.
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Results of Operations
The following table summarizes key components of our results of operations for the periods indicated as a percentage of our total revenue, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenue.
| Fiscal Year | ||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Restaurant revenue | 98.0 | % | 97.9 | % | ||||||||||||||||
| Franchising royalties and fees, and other | 2.0 | % | 2.1 | % | ||||||||||||||||
| Total revenue | 100.0 | % | 100.0 | % | ||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||
Restaurant operating costs (exclusive of depreciation and amortization, shown separately below): | ||||||||||||||||||||
| Cost of sales | 26.2 | % | 25.6 | % | ||||||||||||||||
| Labor | 31.6 | % | 31.9 | % | ||||||||||||||||
| Occupancy | 9.2 | % | 9.6 | % | ||||||||||||||||
| Other restaurant operating costs | 20.4 | % | 19.7 | % | ||||||||||||||||
| General and administrative | 9.9 | % | 10.3 | % | ||||||||||||||||
| Depreciation and amortization | 5.5 | % | 5.9 | % | ||||||||||||||||
| Pre-opening | — | % | 0.3 | % | ||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | 5.3 | % | 4.1 | % | ||||||||||||||||
| Total costs and expenses | 106.4 | % | 105.6 | % | ||||||||||||||||
| Loss from operations | (6.4) | % | (5.6) | % | ||||||||||||||||
| Interest expense, net | 2.2 | % | 1.7 | % | ||||||||||||||||
| Loss before income taxes | (8.6) | % | (7.3) | % | ||||||||||||||||
| Provision for income taxes | — | % | — | % | ||||||||||||||||
| Net loss | (8.6) | % | (7.3) | % | ||||||||||||||||
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Fiscal Year 2025 compared to Fiscal Year 2024
The table below presents our operating results for 2025 and 2024, and the related year-over-year changes:
| Fiscal Year | Increase / (Decrease) | |||||||||||||||||||||||||
| 2025 | 2024 | $ | % | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Restaurant revenue | $ | 485,103 | $ | 483,097 | $ | 2,006 | 0.4 | % | ||||||||||||||||||
| Franchising royalties and fees, and other | 9,986 | 10,174 | (188) | (1.8) | % | |||||||||||||||||||||
| Total revenue | 495,089 | 493,271 | 1,818 | 0.4 | % | |||||||||||||||||||||
| Costs and Expenses: | ||||||||||||||||||||||||||
Restaurant operating costs (exclusive of depreciation and amortization, shown separately below): | ||||||||||||||||||||||||||
| Cost of sales | 127,168 | 123,692 | 3,476 | 2.8 | % | |||||||||||||||||||||
| Labor | 153,342 | 154,258 | (916) | (0.6) | % | |||||||||||||||||||||
| Occupancy | 44,621 | 46,366 | (1,745) | (3.8) | % | |||||||||||||||||||||
| Other restaurant operating costs | 98,876 | 95,032 | 3,844 | 4.0 | % | |||||||||||||||||||||
| General and administrative | 49,137 | 50,824 | (1,687) | (3.3) | % | |||||||||||||||||||||
| Depreciation and amortization | 27,047 | 29,066 | (2,019) | (6.9) | % | |||||||||||||||||||||
| Pre-opening | 225 | 1,543 | (1,318) | (85.4) | % | |||||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | 26,262 | 20,268 | 5,994 | 29.6 | % | |||||||||||||||||||||
| Total costs and expenses | 526,678 | 521,049 | 5,629 | 1.1 | % | |||||||||||||||||||||
| Loss from operations | (31,589) | (27,778) | (3,811) | 13.7 | % | |||||||||||||||||||||
| Interest expense, net | 10,915 | 8,381 | 2,534 | 30.2 | % | |||||||||||||||||||||
| Loss before income taxes | (42,504) | (36,159) | (6,345) | (17.5) | % | |||||||||||||||||||||
| Provision for income taxes | 64 | 54 | 10 | 18.5 | % | |||||||||||||||||||||
| Net loss | $ | (42,568) | $ | (36,213) | $ | (6,355) | (17.5) | % | ||||||||||||||||||
| Company-owned: | ||||||||||||||||||||||||||
| Average unit volumes | $ | 1,360 | $ | 1,289 | $ | 71 | 5.5 | % | ||||||||||||||||||
| Comparable restaurant sales | 4.3 | % | (1.8) | % | ||||||||||||||||||||||
Revenue
Total revenue increased by $1.8 million, or 0.4%, in 2025 compared to 2024. The increase was primarily due to an $18.2 million increase in company same store sales, a $4.4 million increase from new restaurant revenue mostly offset by a decrease of $18.3 million from permanent restaurant closures and a decrease of $2.5 million from refranchising.
Average unit volumes increased 5.5% to $1.36 million in 2025 compared to $1.29 million in 2024 primarily due to increases in same store sales and the closure of underperforming restaurants. System-wide comparable restaurant sales increased 4.1% in 2025, comprised of a 4.3% increase at company-owned restaurants and a 3.2% increase at franchise-owned restaurants.
Cost of Sales
Cost of sales increased by $3.5 million, or 2.8%, in 2025 compared to 2024. As a percentage of restaurant revenue, cost of sales increased to 26.2% in 2025 from 25.6% in 2024, primarily due to a 1.4% impact from a combination of new menu investments, menu mix shifts, and inflation partially offset by a 0.8% benefit from menu price and vendor rebates.
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Labor Costs
Labor costs decreased by $0.9 million, or 0.6%, in 2025 compared to 2024. As a percentage of restaurant revenue, labor costs decreased to 31.6% in 2025 compared to 31.9% in 2024, primarily due to a 1.1% benefit from sales leverage and a 0.2% benefit from lower incentive pay and benefits partially offset by 0.7% of wage inflation and 0.4% from a temporary increase in labor hours related to the new menu rollout.
Occupancy Costs
Occupancy costs decreased by $1.7 million, or 3.8%, in 2025 compared to 2024, due primarily to restaurant closures. As a percentage of restaurant revenue, occupancy costs decreased to 9.2% in 2025 from 9.6% in 2024, primarily due to sales leverage.
Other Restaurant Operating Costs
Other restaurant operating costs increased by $3.8 million, or 4.0%, in 2025 compared to 2024. As a percentage of restaurant revenue, other restaurant operating costs increased to 20.4% in 2025 from 19.7% in 2024, primarily due to 0.5% impact from higher delivery fees driven by higher delivery sales and 0.3% from increased marketing spend.
General and Administrative Expense
General and administrative expense decreased by $1.7 million, or 3.3%, in 2025 compared to 2024, primarily due to a decrease in severance costs, lower stock based compensation, and lower labor costs partially offset by higher marketing expenses and software maintenance. As a percentage of revenue, general and administrative expense decreased to 9.9% in 2025 from 10.3% in 2024.
Depreciation and Amortization
Depreciation and amortization decreased by $2.0 million, or 6.9%, in 2025 compared to 2024, due primarily to restaurants impaired or closed during 2025. As a percentage of revenue, depreciation and amortization decreased to 5.5% in 2025 compared to 5.9% in 2024.
Pre-Opening Costs
Pre-opening costs decreased by $1.3 million, or 85.4%, in 2025 compared to 2024 due to less new restaurant openings in 2025 compared to 2024.
Restaurant Impairments, Closure Costs and Asset Disposals
Restaurant impairments, closure costs and asset disposals increased by $6.0 million, or 29.6%, in 2025 compared to 2024. The increase was largely due to an increase in write-downs of lease related assets and fixed asset impairment charges with 25 restaurants impaired in 2025 compared to 16 restaurants impaired in 2024 primarily related to closure decisions on underperforming restaurants. This was partially offset by a decline in closure costs as a result of lease remeasurement gains. We continue to analyze our restaurant portfolio and expect to close certain restaurants that are either generating low or negative cash flows, at or are approaching the expiration of their leases or in trade areas that are not as well positioned for current consumer trends. Both years include ongoing equipment costs for restaurants previously impaired and lease related costs and expenses in connection with the divestiture of company-owned restaurants in previous years.
Interest Expense, Net
Interest expense, net increased by $2.5 million, or 30.2% in 2025 compared to 2024. The increase was primarily due to higher average borrowings in 2025 compared to 2024. Interest rates for all amounts outstanding are variable.
Provision for Income Taxes
The effective tax rate was (0.2)% in 2025 compared to (0.1)% in 2024. We will continue to maintain a valuation allowance against deferred tax assets until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit from income tax.
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Liquidity and Capital Resources
Current Resources
As of December 30, 2025, our available cash and cash equivalents balance was $1.3 million, and $11.9 million was available for future borrowings under our A&R Credit Agreement.
On July 27, 2022, we amended and restated our Credit Agreement by entering into the Amended and Restated Credit Agreement (as further amended, restated, extended, supplemented, modified and otherwise in effect from time to time, the “A&R Credit Agreement” or the “credit agreement”), with each other Loan Party (as defined in the A&R Credit Agreement) party thereto, each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Lender (each as defined in the A&R Credit Agreement). The A&R Credit Agreement matures on July 27, 2027. Among other things, the A&R Credit Agreement: (i) increased the credit facility from $100.0 million to $125.0 million; (ii) eliminated the term loan and principal amortization components of the credit facility; (iii) removed the Company’s capital expenditure covenant; (iv) enhanced flexibility for certain covenants and restrictions; and (v) lowered the spread of the Company’s cost of borrowing and transitioned from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.50% to 2.50% per annum, based upon the consolidated total lease-adjusted leverage ratio. The A&R Credit Agreement is secured by a pledge of stock of substantially all of the Company’s subsidiaries and a lien on substantially all of the personal property assets of the Company and its subsidiaries. The A&R Credit Agreement was subsequently amended on December 21, 2023.
On October 29, 2024, the Company further amended its A&R Credit Agreement, by entering into that certain Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). Among the modifications, the Second Amendment: (i) increased the maximum applicable rate ranges with respect to certain loans, (ii) conditioned the use of the general restricted payment basket on satisfaction of a Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) of less than or equal to 4.00 to 1.00 and a Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) of greater than or equal to 1.25 to 1.00, (iii) restricted entry into new lease agreements so long as the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement is greater than or equal to 4.50 to 1.00, (iv) increased the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement and (v) amended the Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(b) of the A&R Credit Agreement.
As of December 30, 2025, the Company had $110.2 million of indebtedness (excluding $1.4 million of unamortized debt issuance costs) and $3.0 million of letters of credit outstanding under the A&R Credit Agreement.
Availability of borrowings under the A&R Credit Agreement is conditioned upon the Company’s compliance with the terms of the A&R Credit Agreement, including the financial covenants and other customary affirmative and negative covenants, such as limitations on additional borrowings, acquisitions, dividend payments and lease commitments, and customary representations and warranties. As of December 30, 2025, the Company was in compliance with all of its debt covenants.
The Company expects to meet all applicable financial covenants in its A&R Credit Agreement through at least the next four fiscal quarters. However, there can be no assurance that the Company will meet such financial covenants. If such covenants are not met, the Company would be required to seek a waiver or amendment from the banks participating in the credit facility. There can be no assurance that such waiver or amendment would be granted, which could have a material adverse impact on the Company’s liquidity.
The Company also maintains outstanding letters of credit to secure obligations under its workers’ compensation program and certain lease obligations. As of December 30, 2025, the Company was in compliance with all of its debt covenants.
The Company’s revolver, which had a balance of $109.8 million as of December 30, 2025, bore interest at rates between 7.58% to 10.25% during 2025. The Company’s swingline, which had a balance of $0.4 million as of December 30, 2025, bore interest at rates between 9.50% and 10.25% in 2025. The Company recorded interest expense of $10.9 million, $8.4 million and $4.8 million for 2025, 2024 and 2023, respectively, of which $0.9 million, $0.6 million and $0.4 million was amortization of debt issuance costs in each of the respective years.
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Cash Flow Analysis
Cash flows from operating, investing and financing activities are shown in the following table:
| Fiscal Year Ended | ||||||||||||||||||||
| December 30, 2025 | December 31, 2024 | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Net cash provided by operating activities | $ | 7,284 | $ | 7,561 | ||||||||||||||||
| Net cash used in investing activities | (12,395) | (26,714) | ||||||||||||||||||
| Net cash provided by financing activities | 5,227 | 17,289 | ||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 116 | $ | (1,864) | ||||||||||||||||
Operating Activities
Net cash provided by operating activities in 2025 was $7.3 million compared to $7.6 million in 2024. The decrease in operating cash flows resulted primarily from a decrease in net income as adjusted for non-cash items including depreciation and impairments, as well as changes in working capital related to payroll timing and normal changes in accounts payable and other accrued expenses.
Investing Activities
Net cash used in investing activities decreased $14.3 million to $12.4 million in 2025 compared to 2024. This decrease was primarily due to decreased investment in new restaurant openings and restaurant technology in 2025. We opened two and 10 company-owned restaurants in 2025 and 2024, respectively.
Financing Activities
Net cash provided by financing activities was $5.2 million in 2025, compared to $17.3 million in 2024. The decrease from 2024 was primarily due to a reduction in net borrowings in 2025.
Material Cash Requirements
Our short-term obligations consist primarily of certain lease and other contractual commitments related to our operations, normal recurring operating expenses, working capital needs, new store development, capital improvements and maintenance of our restaurants, regular interest payments on our debt obligations and certain non-recurring expenditures.
Our long-term obligations consist primarily of certain lease and other contractual commitments related to our operations and payment of our outstanding debt obligations. In addition, new store development will require capital in each year that we plan to open new restaurants which is expected to be funded by then available cash and cash equivalents, cash flows from operations and our revolving credit facility.
Our capital expenditure requirements are primarily dependent upon the pace of our real estate development program and resulting new restaurant openings, costs for maintenance and remodeling of our existing restaurants, as well as information technology expenses and other general corporate capital expenditures. We currently do not plan to open any company-owned restaurants in 2026.
Our total capital expenditures for 2025 were $12.4 million primarily related to two new company-owned restaurants, reinvestment in existing restaurants and technology improvements. We expect our 2026 capital expenditures to be in the range of $9.5 million to $10.5 million. Our capital expenditures in 2026 are expected to be primarily related to our reinvestment in existing restaurants.
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Our contractual obligations consist of lease obligations, purchase obligations, long-term debt and other liabilities. See Note 4 Long-Term Debt and Note 12 Leases to our consolidated financial statements for further discussion. We are obligated under non-cancelable leases for our restaurants, administrative offices and equipment. In addition to those lease obligations, we have legally binding minimum lease payments for lease renewals signed but not yet commenced amounting to $0.5 million as of December 30, 2025. We enter into various purchase obligations in the ordinary course of business. As of December 30, 2025, our binding purchase obligations are approximately $57.1 million, which includes $40.5 million to be incurred within the next 12 months. These amounts relate to volume commitments for beverage and food products. Our other liabilities of $1.0 million as of December 30, 2025 includes our commitment under our non-qualified deferred compensation plan and severance.
We believe that we have sufficient liquidity to meet our liquidity needs and capital resource requirements for at least the next twelve months primarily through currently available cash and cash equivalents, cash flows from operations, and borrowings under the A&R Credit Agreement. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have up to 30 days to pay our vendors. In addition, we receive trade credit for the purchase of food, beverages and supplies, therefore reducing the need for incremental working capital to support growth.
Critical Accounting Policies and Estimates
Our consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in Note 1 Business and Summary of Significant Accounting Policies, to our consolidated financial statements. Critical accounting estimates are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions. It is possible that materially different amounts would be reported using different assumptions. We believe the critical accounting policies described below affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Impairment of Long-Lived Assets
We review long-lived assets, such as property and equipment, right of use assets and intangibles, subject to amortization, for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level and primarily includes an assessment of historical cash flows and other relevant factors and circumstances. The other factors and circumstances include changes in the economic environment, changes in the manner in which assets are used, unfavorable changes in legal factors or business climate, incurring excess costs in construction of the asset, early lease terminations and closures, overall restaurant operating performance and projections for future performance. These estimates result in a wide range of variability on a year to year basis due to the nature of the criteria. Restaurant-level cash flow less than our internal threshold over the previous 12 periods is considered an indicator of potential impairment. In such situations, we evaluate future undiscounted cash flow projections in conjunction with qualitative factors and future operating plans. Our impairment assessment process requires the use of estimates and assumptions regarding the future undiscounted cash flows and operating outcomes, which are based upon a significant degree of management’s judgment.
In performing our impairment testing, we forecast our future undiscounted cash flows by looking at recent restaurant level performance, restaurant level operating plans, sales trends and cost trends for cost of sales, labor and operating expenses. We believe that this combination of information gives us a fair benchmark to estimate future undiscounted cash flows. We compare this cash flow forecast, excluding occupancy rent expense, to the asset’s carrying value, excluding lease liability, at the restaurant. Based on this analysis, if the carrying amount of the assets is greater than the estimated future undiscounted cash flows, an impairment charge is recognized, measured as the amount by which the carrying amount exceeds the fair value of the asset. If these projections are not achieved, we could realize future impairments.
Leases
We lease all restaurant facilities, office space and certain equipment. Pursuant to FASB Accounting Standards Codification (“ASC”) Topic 842, all operating and finance lease assets and liabilities are recognized on our Consolidated Balance Sheets.
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Right of use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make future lease payments arising from the lease. Operating lease ROU assets and liabilities are recorded at commencement date based on the present value of lease payments over the lease term, which includes options to extend lease terms that are reasonably certain of being exercised. To determine the present value of lease payments not yet paid, we estimate incremental borrowing rates corresponding to the reasonably certain lease term. As most of our leases do not provide an implicit rate, we use the incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. We recognize lease expense for these short-term leases on a straight-line basis over the lease term.
Our leases typically contain rent escalations over the lease term. We recognize 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. Rent expense for the period prior to the restaurant opening is reported as pre-opening expense in the Consolidated Statements of Operations. If our estimates or underlying assumptions, including discount rate and sublease income change in the future, our operating results may be materially impacted.
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ITEM 7A. Quantitative and Qualitative Disclosure about Market Risk
Interest Rate Risk
We are exposed to market risk from changes in interest rates on debt. Our exposure to interest rate fluctuations is limited to our outstanding borrowing under our A&R Credit Agreement, which bears interest at variable rates equal to SOFR plus a margin of 1.75% to 3.75% per annum, based upon the consolidated total lease-adjusted leverage ratio. As of December 30, 2025, $110.2 million in borrowings were outstanding under our A&R Credit Agreement. An increase or decrease of 1.0% in the effective interest rate applied to our borrowings would have resulted in a pre-tax interest expense fluctuation of approximately $1.1 million on an annualized basis.
Commodity Price Risk
We purchase certain products that are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions and other factors that are not considered predictable or within our control. Although these products are subject to changes in commodity prices, certain purchasing contracts or pricing arrangements contain risk management techniques designed to minimize price volatility. We use these types of purchasing techniques to control costs as an alternative to directly managing financial instruments to hedge commodity prices. In many cases, we believe we may be able to address material commodity cost increases by adjusting our menu pricing, but multiple price increases over a short period of time may negatively affect customer behavior, as we observed in 2023. We have evaluated and will continue to evaluate the impact of import laws and tariffs on our operations as some of our food items are imported from India, Mexico and other countries. As of December 30, 2025, there was no material impact on our business, financial condition, results of operations or cash flows. However, tariffs continue to change and we expect tariffs may impact our operations in certain areas, such as food and beverage costs, construction and equipment costs and other restaurant operating costs, into 2026. We will continue to utilize fixed price contracts for certain key items to mitigate risk. However, increases in commodity prices, without adjustments to our menu prices, could increase restaurant operating costs as a percentage of restaurant revenue.
Inflation
The primary inflationary factors affecting our operations are food costs, labor costs, energy costs and materials used in the construction of new restaurants and maintenance of existing restaurants. Increases in federal, state or local minimum wages directly affect our labor costs. Many of our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases. Additionally, the cost of constructing our restaurants is subject to inflationary increases in the costs of labor and material. We expect inflation may continue to affect our results in the near future.
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ITEM 8. Financial Statements and Supplementary Data
Noodles & Company
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Consolidated Financial Statements | |||||
Consolidated Balance Sheets as of December 30, 2025 and December 31, 2024 | 42 | ||||
Consolidated Statements of Operations for the years ended December 30, 2025, December 31, 2024 and January 2, 2024 | 43 | ||||
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 30, 2025, December 31, 2024 and January 2, 2024 | 44 | ||||
Consolidated Statements of Cash Flows for the years ended December 30, 2025, December 31, 2024 and January 2, 2024 | 45 | ||||
Notes to Consolidated Financial Statements | 46 | ||||
Report of Independent Registered Public Accounting Firm (PCAOB ID: | 66 | ||||
Report of Independent Registered Public Accounting Firm (PCAOB ID: | 67 | ||||
See accompanying notes to consolidated financial statements.
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Noodles & Company
Consolidated Balance Sheets
(in thousands, except share data)
| December 30, 2025 | December 31, 2024 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Accounts receivable | ||||||||||||||
| Inventories | ||||||||||||||
| Prepaid expenses and other assets | ||||||||||||||
| Income tax receivable | ||||||||||||||
| Total current assets | ||||||||||||||
| Property and equipment, net | ||||||||||||||
| Operating lease assets, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Intangibles, net | ||||||||||||||
| Other assets, net | ||||||||||||||
| Total long-term assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and Stockholders’ Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued payroll and benefits | ||||||||||||||
| Accrued expenses and other current liabilities | ||||||||||||||
| Current operating lease liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt, net | ||||||||||||||
| Long-term operating lease liabilities, net | ||||||||||||||
| Deferred tax liabilities, net | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies | ||||||||||||||
| Stockholders’ deficit: | ||||||||||||||
Preferred stock—$ | ||||||||||||||
Common stock—$ | ||||||||||||||
Treasury stock, at cost, | ( | ( | ||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Total stockholders’ deficit | ( | ( | ||||||||||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||||||||
____________
(1) Shares have been retroactively adjusted to reflect the decreased number of shares resulting from a 1-for-8 reverse stock split.
See accompanying notes to consolidated financial statements.
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Noodles & Company
Consolidated Statements of Operations
(in thousands, except share and per share data)
| Fiscal Year Ended | ||||||||||||||||||||
| December 30, 2025 | December 31, 2024 | January 2, 2024 | ||||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Restaurant revenue | $ | $ | $ | |||||||||||||||||
| Franchising royalties and fees, and other | ||||||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||
| Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Labor | ||||||||||||||||||||
| Occupancy | ||||||||||||||||||||
| Other restaurant operating costs | ||||||||||||||||||||
| General and administrative | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Pre-opening | ||||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | ||||||||||||||||||||
| Total costs and expenses | ||||||||||||||||||||
| Loss from operations | ( | ( | ( | |||||||||||||||||
| Interest expense, net | ||||||||||||||||||||
| Loss before income taxes | ( | ( | ( | |||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
Loss per Class A and Class B common stock, combined(1) | ||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | ||||||||||||||
Weighted average Class A and Class B common stock outstanding, combined(1) | ||||||||||||||||||||
| Basic | ||||||||||||||||||||
| Diluted | ||||||||||||||||||||
_________________
(1) Shares and per share amounts have been retroactively adjusted to reflect the decreased number of shares resulting from a 1-for-8 reverse stock split.
See accompanying notes to consolidated financial statements.
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Noodles & Company
Consolidated Statements of Stockholders’ Equity (Deficit)
(in thousands, except share data)
Common Stock(1) | Treasury | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||
Shares(2) | Amount | Shares(2) | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance—January 3, 2023 | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| Stock plan transactions and other | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Shares repurchased and retired | ( | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance—January 2, 2024 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Stock plan transactions and other | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance—December 31, 2024 | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Stock plan transactions and other | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance—December 30, 2025 | $ | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
_____________
(1)Unless otherwise noted, activity relates to Class A common stock .
(2)Shares have been retroactively adjusted to reflect the decreased number of shares resulting from a 1-for-8 reverse stock split.
See accompanying notes to consolidated financial statements.
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Noodles & Company
Consolidated Statements of Cash Flows
(in thousands)
| Fiscal Year Ended | ||||||||||||||||||||
| December 30, 2025 | December 31, 2024 | January 2, 2024 | ||||||||||||||||||
| Operating activities | ||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | ||||||||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Deferred income taxes, net | ||||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | ||||||||||||||||||||
| Amortization of debt issuance costs | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Gain on insurance proceeds received for property damage | ( | |||||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||
| Accounts receivable | ( | |||||||||||||||||||
| Inventories | ( | ( | ( | |||||||||||||||||
| Prepaid expenses and other assets | ( | ( | ||||||||||||||||||
| Accounts payable | ( | |||||||||||||||||||
| Operating lease assets and liabilities | ( | ( | ( | |||||||||||||||||
| Income taxes | ( | |||||||||||||||||||
| Accrued expenses and other liabilities | ( | ( | ||||||||||||||||||
| Net cash provided by operating activities | ||||||||||||||||||||
| Investing activities | ||||||||||||||||||||
| Purchases of property and equipment | ( | ( | ( | |||||||||||||||||
| Proceeds from restaurant refranchising | ||||||||||||||||||||
| Insurance proceeds received for property damage | ||||||||||||||||||||
| Net cash used in investing activities | ( | ( | ( | |||||||||||||||||
| Financing activities | ||||||||||||||||||||
| Net (payments) borrowings from swing line loan | ( | ( | ||||||||||||||||||
| Proceeds from borrowings on long-term debt | ||||||||||||||||||||
| Debt issuance costs | ( | ( | ||||||||||||||||||
| Payment of finance leases | ( | ( | ( | |||||||||||||||||
| Repurchase of common stock | ( | |||||||||||||||||||
| Stock plan transactions and tax withholding on share-based compensation awards | ( | ( | ( | |||||||||||||||||
Net cash provided by financing activities | ||||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | |||||||||||||||||||
| Cash and cash equivalents | ||||||||||||||||||||
| Beginning of year | ||||||||||||||||||||
| End of year | $ | $ | $ | |||||||||||||||||
See accompanying notes to consolidated financial statements.
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NOODLES & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Summary of Significant Accounting Policies
Business
Noodles & Company (the “Company” or “Noodles & Company”), a Delaware corporation, develops and operates fast-casual restaurants that serve globally-inspired noodle and pasta dishes, soups, salads and appetizers. As of December 30, 2025, the Company had 340 company-owned restaurants and 83 franchise restaurants in 31 states. The Company operates its business as one
Principles of Consolidation and Basis of Presentation
Fiscal Year
The Company operates on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Fiscal years 2025, 2024 and 2023 which ended on December 30, 2025, December 31, 2024 and January 2, 2024, respectively, each contained 52 weeks.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Reverse Stock Split
On February 4, 2026, the Company's Board of Directors approved a reverse stock split of the Company's issued and outstanding Class A common stock, par value $0.01 per share. The reverse stock split was effectuated on February 18, 2026 at a 1-for-8 ratio (the “Reverse Stock Split”). All issued and outstanding common stock and per share amounts contained in this Report have been adjusted retroactively to reflect the change in capital structure for all periods presented. Refer to Note 18: Subsequent Event for further discussion.
Cash and Cash Equivalents
The Company considers all highly liquid investment instruments with an initial maturity of three months or less when purchased to be cash equivalents. Amounts receivable from credit card processors are converted to cash shortly after the related sales transaction and are considered to be cash equivalents because they are both short-term and highly liquid in nature. Amounts receivable from credit card processors as of December 30, 2025 and December 31, 2024, which are included in cash and cash equivalents, were $0.9 million and $0.8 million, respectively. Additionally, the Company records “book overdrafts” when outstanding checks at year end are in excess of cash and cash equivalents. Such book overdrafts are recorded within accounts payable in the accompanying Consolidated Balance Sheets and within operating activities in the accompanying Consolidated Statements of Cash Flows.
Accounts Receivable
Inventories
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NOODLES & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and December 31, 2024, smallwares inventory of $6.4 million and $6.7 million, respectively, was included in the accompanying Consolidated Balance Sheets.
Property and Equipment
The estimated useful lives for property and equipment are:
| Property and Equipment | Estimated Useful Lives | |||||||
| Leasehold improvements | Shorter of lease term or estimated useful life, not to exceed | |||||||
| Furniture and fixtures | ||||||||
| Equipment | ||||||||
The Company capitalizes internal payroll and payroll-related costs directly related to the successful acquisition, development, design and construction of its new restaurants. Capitalized internal costs were $0.1 million, $0.4 million and $0.5 million in 2025, 2024 and 2023, respectively. Interest incurred on funds used to construct company-owned restaurants is capitalized and amortized over the estimated useful life of the related assets. Capitalized interest totaled $0.1 million, $0.4 million and $0.9 million in 2025, 2024 and 2023, respectively.
Goodwill
Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired. Goodwill is not subject to amortization, but instead is tested for impairment at least annually (or more often, if necessary) as of the first day of the Company’s fourth fiscal quarter.
Goodwill is evaluated at the level of the Company’s single operating segment, which also represents the Company’s only reporting unit. In 2025, 2024 and 2023, the Company performed a qualitative impairment assessment. Under this approach, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. If after performing the qualitative assessment, the Company determines there is less than a 50 percent chance that the fair value of its reporting unit is less than its carrying amount, then performing the quantitative test is unnecessary. Based on the qualitative assessment performed, management does not believe that it is more likely than not that the Company’s goodwill has been impaired.
Intangibles, net
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NOODLES & COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment on a regular basis, in addition to whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets. Identifiable cash flows are measured at the lowest level for which they are largely independent of the cash flows of other groups of assets and liabilities, generally at the restaurant level. If the assets are determined to be impaired, the amount of impairment recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Estimates of future cash flows are based on the Company’s experience and knowledge of local operations. During 2025, 2024 and 2023, the Company recorded impairment charges of certain long-lived assets which are included in restaurant impairments, closure costs and asset disposals in the Consolidated Statements of Operations. See Note 6, Restaurant Impairments, Closure Costs and Asset Disposals. Fair value of the restaurant assets was determined using Level 3 inputs (as described in Note 5, Fair Value Measurements).
Debt Issuance Costs
Self-Insurance Programs
The Company self-insures for health, workers’ compensation, general liability and property damage. Predetermined loss limits have been arranged with insurance companies to limit the Company’s per occurrence cash outlay. Estimated costs to settle reported claims and incurred but unreported claims for health and workers’ compensation self-insured plans are recorded in accrued payroll and benefits and for general liability and property damage in accrued expenses and other current liabilities in the Consolidated Balance Sheets.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company’s cash balances may exceed federally insured limits. Credit card transactions at the Company’s restaurants are processed by one service provider. Concentration of credit risk related to accounts receivable are limited, as the Company’s receivables are primarily amounts due from franchisees and the Company directly pulls the amounts owed from the franchisees bank accounts.
Revenue Recognition
Revenue consists of sales from restaurant operations and franchise royalties and fees. Revenue from the operation of company-owned restaurants is recognized when sales occur. The Company reports revenue net of sales and use taxes collected from customers and remitted to governmental taxing authorities. Delivery services are fulfilled by third-party service providers. In some cases, the Company makes delivery through its website or mobile app. In other cases, the Company makes delivery sales through a non-company owned channel, such as the delivery partner's website or mobile app. With respect to sales made through the Company website or mobile app, the Company controls the delivery services and generally recognizes revenue, including delivery fees, when the delivery partner transfers food to the guest. For those sales, the Company receives payment directly from the guest at the time of sale. With respect to sale not through the Company website or mobile app, the Company generally recognizes revenue, excluding delivery fees collected by the delivery parter, when control of the food is transferred to the guest. The Company receives payment from the delivery partner subsequent to the transfer of food and the payment terms are short-term in nature.
Gift Cards
The Company sells gift cards which do not have an expiration date, and it does not deduct non-usage fees from outstanding gift card balances. The Company recognizes revenue from gift cards when the gift card is redeemed by the customer or the Company determines the likelihood of the gift card being redeemed by the customer is remote (“gift card breakage”). The determination of the gift card breakage rate is based upon Company-specific historical redemption patterns. The Company has determined that approximately 15 % of gift cards will not be redeemed, which is recognized ratably over the estimated redemption period of the gift card, approximately 24 months.
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Loyalty Program
The Company operates the Noodles Rewards program, which is primarily a spend-based loyalty program. With each purchase, Noodles Rewards members earn loyalty points that can be redeemed for rewards, including free products. Using an estimate of the value of reward redemptions, we defer revenue associated with points earned, net of estimated points that will not be redeemed. Points generally expire after six months. Revenue is recognized in a future period when the reward points are redeemed.
Franchise Royalties
As of December 30, 2025, December 31, 2024 and January 2, 2024, there were 83 , 92 and 90 franchise restaurants in operation, respectively. Franchisees opened three restaurants in 2024. Nine franchise restaurants closed in 2025, seven franchise restaurants closed in 2024 and three closed in 2023. In addition, there were six company-owned locations acquired by a franchisee in 2024.
Sublease Income
Pre-Opening Costs
Pre-opening costs, including rent, wages, benefits and travel for the training and opening teams, food, beverage and other restaurant operating costs, are expensed as incurred prior to a restaurant opening for business.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and were $14.8 million, $12.7 million and $10.8 million in 2025, 2024 and 2023, respectively. These costs are included in other restaurant operating costs, general and administrative expenses and pre-opening costs based on the nature of the advertising and marketing costs incurred.
Rent
Rent expense for the Company’s leases, which generally have escalating rentals over the term of the lease, is recorded 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. 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.
Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes is accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
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existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those deferred amounts are expected to be recovered or settled. Valuation allowances are recorded for deferred tax assets that more likely than not will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company’s policy is to recognize interest to be paid on an underpayment of income taxes in interest expense and any related statutory penalties in provision (benefit) for income taxes in the Consolidated Statements of Operations.
Stock-Based Compensation Expense
Stock-based compensation expense is measured at the grant date based upon the estimated fair value of the portion of the award that is ultimately expected to vest and is recognized as expense over the applicable vesting period of the award generally using the straight-line method (see Note 9, Stock-Based Compensation for more information).
Recently Adopted Accounting Pronouncement
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company adopted ASU No. 2023-09 during the year ended December 30, 2025. See Note 7, Income Taxes for further detail.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, "Disaggregation of Income Statement Expenses (Subtopic 220-40)." The ASU requires public entities to disaggregate, in a tabular presentation, certain income statement expenses into different categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and may be applied retrospectively. The Company is currently evaluating the impact of adopting the new ASU on its consolidated financial statements and related disclosures.
2. Supplemental Financial Information
Accounts receivable consist of the following (in thousands):
| 2025 | 2024 | |||||||||||||
| Delivery program receivables | $ | $ | ||||||||||||
| Vendor rebate receivables | ||||||||||||||
| Franchise receivables | ||||||||||||||
| Other receivables | ||||||||||||||
| Accounts receivable | $ | $ | ||||||||||||
Prepaid expenses and other assets consist of the following (in thousands):
| 2025 | 2024 | |||||||||||||
| Prepaid occupancy related costs | $ | $ | ||||||||||||
| Prepaid insurance | ||||||||||||||
| Prepaid expenses | ||||||||||||||
| Other current assets | ||||||||||||||
| Prepaid expenses and other assets | $ | $ | ||||||||||||
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Property and equipment, net, consist of the following (in thousands):
| 2025 | 2024 | |||||||||||||
| Leasehold improvements | $ | $ | ||||||||||||
| Furniture, fixtures and equipment | ||||||||||||||
| Construction in progress | ||||||||||||||
| Accumulated depreciation and amortization | ( | ( | ||||||||||||
| Property and equipment, net | $ | $ | ||||||||||||
Accrued payroll and benefits consist of the following (in thousands):
| 2025 | 2024 | |||||||||||||
| Accrued payroll and related liabilities | $ | $ | ||||||||||||
| Accrued bonus | ||||||||||||||
| Insurance liabilities | ||||||||||||||
| Accrued payroll and benefits | $ | $ | ||||||||||||
Accrued expenses and other current liabilities consist of the following (in thousands):
| 2025 | 2024 | |||||||||||||
| Gift card liability | $ | $ | ||||||||||||
| Occupancy related | ||||||||||||||
| Utilities | ||||||||||||||
| Current portion of finance lease liability | ||||||||||||||
| Other restaurant expense accruals | ||||||||||||||
| Other corporate expense accruals | ||||||||||||||
| Accrued expenses and other current liabilities | $ | $ | ||||||||||||
3. Goodwill and Intangible Assets
The Company had no 7.2
The following table presents intangible assets subject to amortization as of December 30, 2025 and December 31, 2024, (in thousands):
| 2025 | 2024 | |||||||||||||
| Amortized intangible assets: | ||||||||||||||
| Reacquired franchise rights | $ | $ | ||||||||||||
| Accumulated amortization | ( | ( | ||||||||||||
| Amortized intangible assets, net | ||||||||||||||
| Non-amortized intangible assets: | ||||||||||||||
| Trademark rights | ||||||||||||||
| Intangibles, net | $ | $ | ||||||||||||
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The estimated aggregate future amortization expense as of December 30, 2025 is as follows, (in thousands):
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| $ | ||||||||
4. Long-Term Debt
Credit Facility
On July 27, 2022, the Company entered into the Amended and Restated Credit Agreement (as further amended, restated, extended, supplemented, modified and otherwise in effect from time to time, the “A&R Credit Agreement”), with each other Loan Party (as defined in the A&R Credit Agreement) party thereto, each lender from time to time party thereto, and U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Lender (each as defined in the A&R Credit Agreement). The A&R Credit Agreement matures on July 27, 2027. Among other things, the A&R Credit Agreement: (i) increased the credit facility from $100.0 million to $125.0 million; (ii) eliminated the term loan and principal amortization components of the credit facility; (iii) removed the Company’s capital expenditure covenant; (iv) enhanced flexibility for certain covenants and restrictions; and (v) lowered the spread of the Company’s cost of borrowing and transitioned from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.50 % to 2.50 % per annum, based upon the consolidated total lease-adjusted leverage ratio. The A&R Credit Agreement is secured by a pledge of stock of substantially all of the Company’s subsidiaries and a lien on substantially all of the personal property assets of the Company and its subsidiaries. The A&R Credit Agreement was subsequently amended on December 21, 2023.
On October 29, 2024, the Company further amended its A&R Credit Agreement, by entering into that certain Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). Among the modifications, the Second Amendment: (i) increased the maximum applicable rate ranges with respect to certain loans, (ii) conditioned the use of the general restricted payment basket on satisfaction of a Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) of less than or equal to 4.00 to 1.00 and a Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) of greater than or equal to 1.25 to 1.00, (iii) restricted entry into new lease agreements so long as the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement is greater than or equal to 4.50 to 1.00, (iv) increased the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the A&R Credit Agreement to be no greater than (x) 5.50 to 1.00 for the fiscal quarter ending on October 1, 2024 until and including the last day of the fiscal quarter ending September 30, 2025 and (y) stepping down to (1) 5.25 to 1.00 for the fiscal quarter ending December 30, 2025, (2) 5.00 to 1.00 for the fiscal quarters ending March 31, 2026 and June 30, 2026, (3) 4.75 to 1.00 for the fiscal quarters ending September 29, 2026 and December 29, 2026 and (4) 4.50 to 1.00 for the fiscal quarter ended March 30, 2027 and thereafter and (v) amended the Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(b) of the A&R Credit Agreement to be no less than (x) 1.05 to 1.00 for the fiscal quarter ending on October 1, 2024 until and including the last day of the fiscal quarter ending September 30, 2025 and (y) stepping up to (1) 1.15 to 1.00 for the fiscal quarters ending December 30, 2025 and March 31, 2026 and (2) 1.25 to 1.00 for the fiscal quarter ending June 30, 2026 and thereafter.
As of December 30, 2025, the Company had $110.2 million of indebtedness (excluding $1.4 million of unamortized debt issuance costs) and $3.0 million of letters of credit outstanding under the A&R Credit Agreement.
Availability of borrowings under the A&R Credit Agreement is conditioned upon the Company’s compliance with the terms of the A&R Credit Agreement, including the financial covenants and other customary affirmative and negative covenants, such as limitations on additional borrowings, acquisitions, dividend payments and lease commitments, and customary representations and warranties. As of December 30, 2025, the Company was in compliance with all of its debt covenants.
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The Company expects to meet all applicable financial covenants in its A&R Credit Agreement through at least the next four fiscal quarters. However, there can be no assurance that the Company will meet such financial covenants. If such covenants are not met, the Company would be required to seek a waiver or amendment from the banks participating in the credit facility. There can be no assurance that such waiver or amendment would be granted, which could have a material adverse impact on the Company’s liquidity.
The Company also maintains outstanding letters of credit to secure obligations under its workers’ compensation program and certain lease obligations. As of December 30, 2025, the Company was in compliance with all of its debt covenants.
The Company’s revolver, which had a balance of $109.8 million as of December 30, 2025, bore interest at rates between 7.58 % to 10.25 % during 2025. The Company’s swingline, which had a balance of $0.4 million as of December 30, 2025, bore interest at rates between 9.50 % and 10.25 % in 2025. The Company recorded interest expense of $10.9 million, $8.4 million and $4.8 million for 2025, 2024 and 2023, respectively, of which $0.9 million, $0.6 million and $0.4 million was amortization of debt issuance costs in each of the respective years.
5. Fair Value Measurements
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current assets and liabilities approximate fair values due to their short-term nature. The carrying amounts of borrowings approximate fair value as the line of credit and borrowings vary with market interest rates and negotiated terms and conditions are consistent with current market rates. The fair value of the Company’s revolving line of credit borrowings is measured using Level 2 inputs.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets recognized or disclosed at fair value in the consolidated financial statements on a non-recurring basis include items such as leasehold improvements, property and equipment, operating lease assets, goodwill and other intangible assets. These assets are measured at fair value if determined to be impaired or when acquired. Adjustments to the fair value of assets measured at fair value on a non-recurring basis as of December 30, 2025 and December 31, 2024, are discussed in Note 6, Restaurant Impairments, Closure Costs and Asset Disposals.
The fair values are assigned a level within the fair value hierarchy, depending on the source of the inputs into the calculation.
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2—Quoted prices in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3—Prices or valuation techniques which require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
6. Restaurant Impairments, Closure Costs and Asset Disposals
The following table presents restaurant impairments, closure costs and asset disposals for fiscal years 2025, 2024 and 2023 (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
Restaurant impairments(1) | $ | $ | $ | ||||||||||||||
Closure costs including gains and losses on lease remeasurement(1) | ( | ||||||||||||||||
| Loss on disposal of assets and other | |||||||||||||||||
| Total restaurant impairments, closure costs and asset disposals | $ | $ | $ | ||||||||||||||
_____________________
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Restaurant Impairments
Impairment is based on management’s current assessment of the expected future cash flows of its company-owned restaurants based on recent results and other specific market factors. Impairment expense is a Level 3 fair value measure and is determined by comparing the carrying value of restaurant assets to the estimated fair market value of the restaurant assets at resale value.
The Company has identified a group of restaurants that the Company will seek to close on or before their next lease renewal dates, and are unlikely to recover the net book value of their assets. During 2025, the Company recorded fixed asset impairment on 25 restaurants and wrote down lease related assets on 16 restaurants. In 2024, the Company recognized an impairment charge related to the fixed assets on 16 restaurants and a write-down of its lease related assets on seven restaurants. In 2023, the Company impaired the fixed assets on two restaurants and the lease related assets on four restaurants. Additionally, the Company wrote-off its lease related assets on 12 previously closed restaurants in 2025 and two
Closure Costs and Lease Remeasurements
Closure costs during 2025, 2024 and 2023 pertain to ongoing costs of restaurants that closed in previous years, as well as costs related to the closure of 33 , 13 , and six restaurants, respectively. These closure costs were offset by gains of $0.6 million in 2025, $0.6 million in 2024 and $0.2 million in 2023 resulting from lease asset remeasurements and the adjustments to liabilities as lease terminations occur. Closure costs can also include fees from real estate advisors and brokers related to terminations of the leases and charges resulting from final adjustments to liabilities as lease terminations occur.
Losses on Disposal of Assets and Other
All periods include asset disposals in the normal course of business and lease related costs and expenses that the Company is still obligated for. In 2024, the Company recognized a gain of $0.5 million from the sale of six company-owned restaurants to a franchisee (“DND Sale”). Losses on disposal of assets and other in 2023 were partially offset by $0.2 million gain on insurance proceeds from property damage.
Sublease Expense
7. Income Taxes
The components of the provision (benefit) for income taxes are as follows for 2025, 2024 and 2023 (in thousands):
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current tax provision (benefit): | ||||||||||||||||||||
| Federal | $ | $ | $ | |||||||||||||||||
| State | ( | |||||||||||||||||||
| ( | ||||||||||||||||||||
| Deferred tax (benefit) provision: | ||||||||||||||||||||
| Federal | ( | |||||||||||||||||||
| State | ||||||||||||||||||||
| Total provision for income taxes | $ | $ | $ | |||||||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The reconciliation of the income tax (benefit) provision that would result from applying the federal statutory income tax rate to pre-tax income, as shown in the accompanying consolidated statements of operations, is presented below (in thousands) for 2024 and 2023 under the income tax disclosure guidance in effect for those periods. The reconciliation for the year ended December 30, 2025, prepared in accordance with ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, is presented separately below.
| 2024 | 2023 | |||||||||||||
| Federal income tax (benefit) at federal rate | $ | ( | $ | ( | ||||||||||
| State income tax (benefit), net of federal tax | ( | ( | ||||||||||||
| Other permanent differences | ||||||||||||||
| Tax credits | ( | ( | ||||||||||||
| Change in valuation allowance | ||||||||||||||
| Tax rate change | ||||||||||||||
| Deferred tax asset write-off | ||||||||||||||
| Other items, net | ( | |||||||||||||
| Provision for income taxes | $ | $ | ||||||||||||
| Effective income tax rate | ( | % | ( | % | ||||||||||
Effective in 2025, the Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis. As a result, the following table presents (in thousands) an expanded reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate for the year ended December 30, 2025, in accordance with the enhanced disclosure requirements of the new standard. The reconciliations for 2024 and 2023 above were prepared under the guidance in effect for those periods and have not been retrospectively adjusted. As the Company operates exclusively in the United States, certain reconciling items related to foreign jurisdictions required by ASU 2023-09 are not applicable and have been omitted.
| 2025 | ||||||||||||||
| Amount | % | |||||||||||||
| U.S Federal Statutory Tax Rate | $ | ( | % | |||||||||||
| State and Local Income Taxes, Net of Federal Income Tax Effect * | ( | % | ||||||||||||
| Effect of Changes in Tax Laws or Rates Enacted in the Current Period | % | |||||||||||||
| Tax Credits | ||||||||||||||
| Work Opportunity Tax Credit (WOTC) | ( | % | ||||||||||||
| Federal Insurance Contributions Act (FICA) Tip Credit | ( | % | ||||||||||||
| Changes in Valuation Allowances | ( | % | ||||||||||||
| Nontaxable or Nondeductible Items | ||||||||||||||
| Excess Tax Benefit from Stock Comp | ( | % | ||||||||||||
| Other Permanent Items | ( | % | ||||||||||||
| Changes in Unrecognized Tax Benefits | % | |||||||||||||
| Other Adjustments, net | ( | % | ||||||||||||
| Effective Tax Rate | $ | ( | % | |||||||||||
*State taxes in Minnesota made up the majority (greater than 50 percent) of the tax effect in this category.
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, requires disclosure of cash income taxes paid disaggregated by federal, state, and foreign jurisdictions. The Company adopted the guidance prospectively in 2025; accordingly, cash income taxes paid by jurisdiction are presented below for the year ended December 30, 2025 only. Prior periods are not presented as the disclosure was not required for those periods.
As the Company operates exclusively in the United States, cash income taxes paid to foreign jurisdictions are not applicable. In addition, the Company maintains a full valuation allowance on its deferred tax assets and has significant net operating loss
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(“NOL”) carryforwards, and as a result, no federal income taxes were paid during the year ended December 30, 2025. The Company also has significant state net operating loss carryforwards and state tax credit carryforwards, and as a result, state income taxes paid during the year were limited to minimum or franchise tax amounts. Total cash taxes paid to all state jurisdictions for the year ended December 30, 2025 was diminimus.
The Company’s total deferred tax assets and liabilities are as follows (in thousands):
| 2025 | 2024 | |||||||||||||
| Deferred tax assets | $ | $ | ||||||||||||
| Deferred tax liabilities | ( | ( | ||||||||||||
| Total deferred tax assets | ||||||||||||||
| Valuation allowance | ( | ( | ||||||||||||
| Net deferred tax liabilities | $ | ( | $ | ( | ||||||||||
Deferred income taxes arise because of the differences in the book and tax bases of certain assets and liabilities. Deferred income tax liabilities and assets consist of the following (in thousands):
| 2025 | 2024 | |||||||||||||
| Deferred tax assets (liabilities): | ||||||||||||||
| Loss carry forwards | $ | $ | ||||||||||||
| Deferred franchise revenue | ||||||||||||||
| Property, equipment and intangible assets | ( | ( | ||||||||||||
| Stock-based compensation | ||||||||||||||
| Tax credit carry forwards | ||||||||||||||
| Interest expense | ||||||||||||||
| Inventory smallwares | ( | ( | ||||||||||||
| Other accrued expenses | ||||||||||||||
| Operating lease assets | ( | ( | ||||||||||||
| Operating lease liabilities | ||||||||||||||
| Other | ||||||||||||||
| Total net deferred tax assets | ||||||||||||||
| Valuation allowance | ( | ( | ||||||||||||
| Net deferred tax liabilities | $ | ( | $ | ( | ||||||||||
For the year ended December 30, 2025, the Company determined that it was appropriate to maintain a valuation allowance of $70.8 million against U.S. deferred tax assets due to uncertainty regarding the realizability of future tax benefits. The valuation allowance is recorded against net deferred tax assets, exclusive of indefinite-lived assets and liabilities. The Company will maintain the remaining valuation allowance until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit to the effective tax rate.
As of December 30, 2025 and December 31, 2024, NOL carry forwards for federal income tax purposes of approximately $197.0 million and $184.0 million, respectively, were available to offset future taxable income. Of these amounts, $106.8 million is available to offset future taxable income through 2038 and $90.2 million can be carried forward indefinitely, but can only offset 80% of future taxable income. The Internal Revenue Code Section 382 generally limits the utilization of NOLs when there is an ownership change. Prior to the utilization of NOLs in the future, the Company will determine whether there are any limitations under Section 382. If such a limitation exists, it is possible that a portion of the NOLs may not be available for use before expiration.
Uncertain tax positions are recognized if it is more likely than not that the Company will be able to sustain the tax position taken, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon resolution
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of the benefit. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.
There were no
On July 4, 2025, the United States Congress enacted H.R.1, commonly known as the One Big Beautiful Bill Act, which introduces a wide range of tax reform measures. These include extensions and modifications of key provisions from the Tax Cuts and Jobs Act, as well as changes to rules allowing accelerated tax deductions for qualified property and research expenditures. The legislation includes multiple effective dates, with certain provisions taking effect in 2025 and others phased in through 2027. The net effect of the legislation did not have a material impact on the Company’s effective tax rate for the year ended December 30, 2025. We will continue to monitor forthcoming administrative guidance and regulatory developments that may further clarify the implementation of the provisions.
8. Stockholders’ Equity
Common Stock
The Company has 181,000,000 shares of stock authorized, consisting of 150,000,000 shares of Class A common stock, par value $0.01 per share; 30,000,000 shares of Class B common stock, par value $0.01 and 1,000,000 shares of preferred stock, par value $0.01 per share. Preferred stock rights are determined by the Company’s Board of Directors when preferred shares are issued. The following summarizes the rights of common stock:
Voting—Shares of Class A common stock and Class B common stock are entitled to one vote per share in all voting matters, with the exception that Class B common stock does not vote on the election or removal of directors.
Conversion—Each share of Class B common stock is convertible, at the option of the holder, into one share of Class A common stock.
Dividends—Class A common stock and Class B common stock share equally if a dividend is declared or paid to either class, but they do not have rights to any special dividend.
Liquidation, Dissolution or Winding Up—Class A common stock and Class B common stock share equally in distributions in liquidation, dissolution or winding up of the corporation.
Share Repurchases
On July 26, 2023, the Company announced a share repurchase program (the “2023 Share Repurchase Program”) of up to $5.0 million of the Company’s Class A common stock. Under this program, the Company purchased shares of the Company's Class A common stock in the open market. The Company conducted any open market share repurchase activities in compliance with the safe harbor provisions of Rule 10b-18 of the Exchange Act. During 2023, the Company repurchased 216,494 (1,731,952 prior to the Reverse Stock Split) shares of its common stock for approximately $5.0 million in open market transactions at an average price of $22.88 ($2.86 prior to the Reverse Stock Split) per share. Share repurchases were accounted for under the retirement method and all repurchased shares were retired and cancelled. The excess of the purchase price over the par value of the shares was recorded as a reduction in additional paid-in capital. The 2023 Share Repurchase Program and the remaining de minimus balance was cancelled by the Company’s Board of Directors in the fourth quarter of 2023.
9. Stock-Based Compensation
In May of 2023, the Company’s Board of Directors adopted the 2023 Stock Incentive Plan, which was approved at the annual meeting of stockholders on May 16, 2023 (the “2023 Plan”). The 2023 Plan authorizes the grant of non-qualified stock options, incentive stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance share units (“PSUs”) and incentive bonuses to employees, officers, non-employee directors and other service providers, as applicable. The Company’s 2013 Stock Incentive Plan, as amended and restated in May of 2013 was terminated. The 2023 Plan is administered by the Compensation Committee of the Company’s Board of Directors (the “Board”) or another committee designated by the Board, or in the absence of any such committee, the Board itself (the “administrator”). Stock options are granted at a price determined by the administrator at an exercise price that is not less than the fair market value of the underlying stock on the date of grant. The administrator may also grant SARs, RSUs and PSUs with terms determined by the administrator in
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
accordance with the 2023 Plan. All share-based awards (except for RSUs and PSUs) granted under the 2023 Plan have a life of ten years . Most awards vest ratably over four years ; however, some have been granted with different vesting schedules. Of the awards outstanding, none have been granted to non-employees (except those granted to non-employee members of the Board of Directors of the Company) under the 2023 Plan. In 2022, the Company launched the General Manager (“GM”) Equity program which granted RSUs to top performing general managers with a three year cliff vesting. The final grant under the GM Equity program was in the first quarter of 2024. At December 30, 2025, approximately 0.4 million (3.3 million prior to the Reverse Stock Split) share-based awards were available to be granted under the 2023 Plan. The number of shares have been restated to reflect the 1-for-8 Reverse Stock Split effectuated on February 18, 2026. All historical share and per share amounts reflected in this Report have been adjusted to reflect the Reverse Stock Split. Refer to Note 18: Subsequent Event for further discussion.
In July of 2024, the Company’s Board of Directors adopted the 2024 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the potential grant of options, SARs, restricted stock and RSUs, any of which may be performance-based, and for incentive bonuses, which may be paid in cash or stock or a combination thereof, for certain newly hired employees. As of December 30, 2025, approximately 37,982 (303,851 prior to the Reverse Stock Split) share-based awards were available to be granted under the Inducement Plan.
Stock-based compensation expense is generally recognized on a straight-line basis over the service period of the awards. In 2025, 2024 and 2023, non-cash stock-based compensation expense of $3.0 million, $3.7 million and $4.3 million, respectively, was included in general and administrative expense. As of December 30, 2025, there was $3.0 million of unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the 2023 Plan, which is expected to be recognized over 2.1 years.
The Company has estimated forfeiture rates that average 32 % based upon the class of employees receiving stock-based compensation in its calculation of stock-based compensation expense for the year ended December 30, 2025. These estimates are based on historical forfeiture behavior exhibited by employees of the Company.
Stock Options
The estimated fair value of each option granted is calculated using the Black-Scholes option-pricing model. Expected volatilities are based on the Company’s historical data and implied volatility. The Company uses historical data to estimate expected employee forfeitures of stock options. The expected life of options granted is management’s best estimate using recent and expected transactions. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. In 2024, the Company granted 31,250 performance-based stock options to its chief executive officer, which were to vest and become exercisable on the third anniversary of the grant date subject to the achievement of stock price target conditions at the end of the three-year performance period; however these options expired upon the resignation of such chief executive officer in August 2025. The fair value of each option share was $8.40 at grant date and calculated using a Monte Carlo valuation model. The Company did not
A summary of aggregate option award activity under the 2023 Plan as of December 30, 2025, and changes during the fiscal year then ended is presented below:
| Awards | Weighted- Average Exercise Price | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value (1) (in thousands) | |||||||||||||||||||||||
| Outstanding—December 31, 2024 | $ | |||||||||||||||||||||||||
Granted | ||||||||||||||||||||||||||
| Forfeited or expired | ( | |||||||||||||||||||||||||
| Exercised | ||||||||||||||||||||||||||
| Outstanding—December 30, 2025 | $ | $ | ||||||||||||||||||||||||
| Vested | $ | $ | ||||||||||||||||||||||||
| Exercisable as of December 30, 2025 | $ | $ | ||||||||||||||||||||||||
_____________
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Restricted Stock Units (RSUs) and Performance Stock Units (PSUs)
The Company grants RSUs and PSUs to its executive officers under the 2023 Plan, and such awards may be granted under the Inducement Plan. The RSU awards vest over a four-year period subject to continued employment as of the applicable vesting date. The PSU awards are earned over a three-year performance period subject to the achievement of certain target performance conditions. The number of shares eligible to vest ranges from 0 % to 200 %, however no share shall vest if the defined minimum targets are not met. During fiscal years 2021 and 2022, PSUs were granted based on target performance measures over the Company’s comparable sales growth and Adjusted EBITDA (“Financial PSU”). For fiscal year 2021 to 2023, the Company also awarded PSUs based on a total shareholder return based metric (“TSR”), which compares the stock price of the Company’s shares to a group of peer companies. In fiscal year 2024, the Company awarded PSUs based on a volume-weighted average stock price for the Company’s shares. In fiscal year 2025, the Company awarded PSUs based on an absolute stock price of the Company’s shares on the measurement date.
Each share of the Financial PSUs has a fair value equal to the Company’s stock price at the date of grant while the fair value of each share of TSRs and the 2024-2025 PSUs is determined using a Monte Carlo valuation model. The Financial PSU stock-based compensation expense is recognized during the three-year period and is adjusted for the number of shares that are expected to vest based on the probability of achieving the targeted performance measures. Stock-based compensation expense for TSR and PSU awards is recognized straight-line over the term of the award. PSUs remain unvested until the end of the performance period and through the post-performance holding period of three to six months (“vest date”) if applicable. For TSR awards, there is a mandatory post-vest holding period of one year. PSUs are forfeited in the event of termination prior to the vest date.
The stock-based compensation expense recognized from the PSUs amounted to $(0.1 ) million, $0.2 million and $(0.6 ) million during 2025, 2024 and 2023, respectively. In 2025 the Company recorded a reversal of previously recognized compensation costs due to forfeitures of $0.4 million related to executive officer departures. In 2023, the Company recorded a reversal of previously recognized compensation costs due to forfeitures of $0.3 million related to executive officer departures and $0.5 million reversal due to target performance measures not being met.
A summary of the status of the Company’s aggregate non-vested RSUs and PSUs as of December 30, 2025 and changes during the year then ended is presented below:
| Awards | Weighted-Average Grant Date Fair Value | |||||||||||||
| Outstanding—December 31, 2024 | $ | |||||||||||||
| Granted | ||||||||||||||
| Vested | ( | |||||||||||||
| Forfeited | ( | |||||||||||||
| Non-vested at December 30, 2025 | $ | |||||||||||||
10. Loss Per Share
Basic (loss) earnings per share (“EPS”) is calculated by dividing net (loss) income available to common shareholders by the weighted-average number of shares of common stock outstanding during each period. Diluted EPS is calculated using net (loss) income available to common stockholders divided by diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include shares of common stock underlying stock options and restricted common stock. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the computations of basic and diluted EPS (in thousands, except share and per share data). The number of shares and per share have been restated to reflect the 1-for-8 Reverse Stock Split effectuated on February 18, 2026. Refer to Note 18: Subsequent Event for further discussion.
| 2025 | 2024 | 2023 | ||||||||||||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Shares: | ||||||||||||||||||||
| Basic weighted average shares outstanding | ||||||||||||||||||||
| Effect of dilutive securities | ||||||||||||||||||||
| Diluted weighted average number of shares outstanding | ||||||||||||||||||||
Loss per share: | ||||||||||||||||||||
Basic loss per share | $ | ( | $ | ( | $ | ( | ||||||||||||||
Diluted loss per share | $ | ( | $ | ( | $ | ( | ||||||||||||||
11. Employee Benefit Plans
Defined Contribution Plan
In October 2003, the Company adopted a defined contribution plan, The Noodles & Company 401(k) Plan (the “401(k) Plan”). Company employees aged 21 or older, are eligible to participate in the 401(k) Plan beginning on the first day of the calendar month following 30 days of employment. Under the provisions of the 401(k) Plan, the Company may, at its discretion, make contributions to the 401(k) Plan. Participants are 100 % vested in their own contributions. In 2019, the board of directors authorized matching contributions equal to 25 % of the first 4 % of compensation that is deferred by the participant. The Company recognized matching contribution expense of $0.4
Deferred Compensation Plan
The Company’s deferred compensation plan, under which compensation deferrals began in 2013, is a non-qualified deferred compensation plan which allows highly compensated employees to defer a portion of their base salary and variable compensation, including 401(k) refund, each plan year. To offset its obligation, the Company holds a portfolio of mutual funds in a Rabbi Trust. As of December 30, 2025 and December 31, 2024, $1.0 million and $1.2 million, respectively, were included in other assets, net, which represents the value of the mutual funds, and $1.0 million and $1.2 million, respectively, were included in accrued expenses and other current liabilities and other long-term liabilities, which represents the carrying value of the liability for deferred compensation.
Employee Stock Purchase Plan
In 2013, the Company adopted an Employee Stock Purchase Plan (the “ESPP”) under which eligible team members may voluntarily contribute up to 15 % of their salaries, subject to limitations, to purchase common stock at a price equal to 85 % of the fair market value of a share of the Company’s common stock on the first day of each offering period or 85 % of the fair market value of a share of the Company’s common stock on the last day of each offering period, whichever amount is less. In general, all non-highly compensated employees who have been employed by the Company for at least 30 days prior to the offering period and who are regularly scheduled to work more than 20 hours per week and for more than five months in any calendar year, are eligible to participate in the ESPP which operates in-line with the Company’s fiscal quarters. A total of 93,750 shares of common stock are available for issuance under the ESPP. The Company has issued a total of 81,189 shares under this plan, of which 19,940 shares were issued during 2025. A total of 12,561 shares remain available for future issuance. The number of shares reflect the 1-for-8 Reverse Stock Split effectuated on February 18, 2026. All historical share and per share amounts reflected in this Report have been adjusted to reflect the Reverse Stock Split. Refer to Note 18: Subsequent Event for further discussion.
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For 2025, in accordance with the guidance for accounting for stock compensation, the Company estimated the fair value of the stock purchase plan using the Black-Scholes multiple-option pricing model. The average assumptions used in the model included a 3.77 % risk-free interest rate; 0.25 years expected life; expected volatility of 103.4 %; and a zero percent dividend yield. The weighted average fair value per share at grant date was $0.24 . In 2025, the Company recognized $36,000 of compensation expense related to the ESPP.
12. Leases
The Company leases restaurant facilities, office space and certain equipment that expire on various dates through October 2039. 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 2025, 2024 and 2023 was approximately $36.9 million, $39.4 million and $39.2 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 operating results and the underlying asset values of the restaurant lease. 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 $5.0 million, $1.7 million, and $1.6 million in 2025, 2024 and 2023 respectively.
Supplemental balance sheet information related to leases is as follows (in thousands):
| Classification | 2025 | 2024 | |||||||||||||||
| Assets | |||||||||||||||||
| Operating | Operating lease assets, net | $ | $ | ||||||||||||||
| Finance | Property and equipment | ||||||||||||||||
| Total leased assets | $ | $ | |||||||||||||||
| Liabilities | |||||||||||||||||
| Current lease liabilities | |||||||||||||||||
| Operating | Current operating lease liabilities | $ | $ | ||||||||||||||
| Finance | Accrued expenses and other current liabilities | ||||||||||||||||
| Long-term lease liabilities | |||||||||||||||||
| Operating | Long-term operating lease liabilities | ||||||||||||||||
| Finance | Other long-term liabilities | ||||||||||||||||
| Total lease liabilities | $ | $ | |||||||||||||||
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The components of lease costs are as follows (in thousands):
| Year Ended | Year Ended | Year Ended | |||||||||||||||||||||
| Classification | December 30, 2025 | December 31, 2024 | January 2, 2024 | ||||||||||||||||||||
| Operating lease cost | Occupancy, other restaurant operating costs, general and administrative expenses, and pre-opening costs | $ | $ | $ | |||||||||||||||||||
| Closure costs, loss on disposals and other | |||||||||||||||||||||||
| Finance lease cost | |||||||||||||||||||||||
| Amortization of lease assets | Depreciation and amortization | ||||||||||||||||||||||
| Interest on lease liabilities | Interest expense, net | ||||||||||||||||||||||
| Sublease income | Franchising royalties and fees, and other | ( | ( | ( | |||||||||||||||||||
| Total lease cost, net | $ | $ | $ | ||||||||||||||||||||
Future minimum lease payments required under existing leases as of December 30, 2025 are as follows (in thousands):
| Operating Leases | Finance Leases | Total | |||||||||||||||
| 2026 | $ | $ | $ | ||||||||||||||
| 2027 | |||||||||||||||||
| 2028 | |||||||||||||||||
| 2029 | |||||||||||||||||
| 2030 | |||||||||||||||||
| Thereafter | |||||||||||||||||
| Total lease payments | |||||||||||||||||
| Less: Imputed interest | |||||||||||||||||
| Present value of lease liabilities | $ | $ | $ | ||||||||||||||
Operating lease payments include $43.9 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $0.5 million of legally binding minimum lease payments for lease renewals signed but not yet commenced.
Lease term and discount rate are as follows:
| December 30, 2025 | December 31, 2024 | ||||||||||
| Weighted average remaining lease term (years): | |||||||||||
| Operating | |||||||||||
| Finance | |||||||||||
| Weighted average discount rate: | |||||||||||
| Operating | % | % | |||||||||
| Finance | % | % | |||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Supplemental disclosures of cash flow information related to leases are as follows (in thousands):
| Cash paid for lease liabilities: | 2025 | 2024 | ||||||||||||
| Operating leases | $ | $ | ||||||||||||
| Finance leases | ||||||||||||||
| $ | $ | |||||||||||||
| Right-of-use assets obtained in exchange for new lease liabilities: | ||||||||||||||
| Operating leases | $ | $ | ||||||||||||
| Finance leases | ||||||||||||||
| $ | $ | |||||||||||||
13. Supplemental Disclosures to Consolidated Statements of Cash Flows
The following table presents the supplemental disclosures to the Consolidated Statements of Cash Flows for 2025, 2024 and 2023 (in thousands):
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Interest paid (net of amounts capitalized) | $ | $ | $ | |||||||||||||||||
Income taxes paid | ||||||||||||||||||||
| Purchases of property and equipment accrued in accounts payable | ||||||||||||||||||||
14. Commitments and Contingencies
In the normal course of business, the Company is subject to other proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, the Company is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of December 30, 2025. These matters could affect the operating results of any one financial reporting period when resolved in future periods. The Company believes that an unfavorable outcome with respect to these matters is remote or a potential range of loss is not material to its consolidated financial statements. Significant increases in the number of these claims, or one or more successful claims that result in greater liabilities than the Company currently anticipates, could materially and adversely affect its business, financial condition, results of operations or cash flows.
15. Related Party Transactions
Securities Purchase Agreement
Under the securities purchase agreement with Mill Road Capital II, L.P. (“Mill Road”), if at any time Mill Road owns 10.0 % or more of our outstanding common stock, Mill Road has the right to designate one nominee for election to our Board of Directors. If Mill Road’s ownership level falls below 10.0 % of our outstanding common stock, Mill Road will no longer have a right to designate a nominee. As of December 30, 2025, Mill Road continues to have holdings above the parameters in the agreement and Thomas Lynch of Mill Road is a member of the Company’s Board of Directors.
Support Agreement
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Revenue Recognition
Gift Cards
As of December 30, 2025 and December 31, 2024, the current portion of the gift card liability, $2.2 million and $2.0 million, respectively, is included in accrued expenses and other current liabilities, and the long-term portion, $0.8 million and $1.0 million, respectively, is included in other long-term liabilities in the Consolidated Balance Sheets.
Revenue recognized in the Consolidated Statements of Operations for the redemption of gift cards was $2.3 million, $2.6 million and $2.8 million in 2025, 2024 and 2023, respectively. The Company recognized gift card breakage in restaurant revenue of approximately $0.3 million, $0.4 million and $0.3 million in 2025, 2024 and 2023, respectively.
Franchise Fees
Initial fees received from franchisees are recognized as revenue over the term of each respective franchise agreement, which is typically 20 years. The Company recognized revenue of $0.3 million, $0.3 million and $0.2 million in 2025, 2024 and 2023, respectively related to initial fees from franchisees that were included in the contract liability balance at the beginning of the year. The Company expects to recognize approximately $0.1 0.5 million thereafter related to performance obligations that are unsatisfied as of December 30, 2025.
Loyalty Program
The Company operates the Noodles Rewards program, which is primarily a spend-based loyalty program. With each purchase, Noodles Rewards members earn loyalty points that can be redeemed for rewards, including free products. Using an estimate of the value of reward redemptions, we defer revenue associated with points earned, net of estimated points that will not be redeemed. Points generally expire after six months. Revenue is recognized in a future period when the reward points are redeemed. Deferred revenue related to the rewards was $1.1 million and $1.0 million as of December 30, 2025 and December 31, 2024, respectively, and was included in accrued expenses and other current liabilities in the Consolidated Balance Sheets.
17. Segment Reporting
The Company’s Chief Operating Decision Maker (“CODM”) is the senior executive team that includes the President and Chief Executive Officer and the Chief Financial Officer. The Company has one reportable operating segment. The reportable operating segment is comprised of one operating segment. The one reportable segment derives its revenue from company-owned restaurants and franchise owned restaurants. No guest accounts for 10% or more of the Company’s revenues. The Company’s CODM uses income (loss) from operations to evaluate performance and make key operating decisions, such as deciding the rate at which we invest resources into the segment.
The following table presents selected financial information with respect to our single reportable segment regularly reviewed by our CODM for 2025, 2024 and 2023 (in thousands):
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Restaurant revenue | $ | $ | $ | |||||||||||||||||
| Franchising royalties and fees, and other | ||||||||||||||||||||
Total segment revenue | ||||||||||||||||||||
Less: | ||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Labor | ||||||||||||||||||||
| Occupancy | ||||||||||||||||||||
| Other restaurant operating costs | ||||||||||||||||||||
| General and administrative | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Pre-opening | ||||||||||||||||||||
| Restaurant impairments, closure costs and asset disposals | ||||||||||||||||||||
Total segment expenses | ||||||||||||||||||||
| Segment loss from operations | $ | ( | $ | ( | $ | ( | ||||||||||||||
Reconciliation: | ||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||
| Consolidated loss before income taxes | $ | ( | $ | ( | $ | ( | ||||||||||||||
| December 30, 2025 | December 31, 2024 | ||||||||||
Other segment disclosures (in thousands): | |||||||||||
Total long-lived assets (1) | $ | $ | |||||||||
| Total assets | $ | $ | |||||||||
_____________________
18. Subsequent Event
Reverse Stock Split
65
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Noodles & Company
Opinion on the financial statements
We have audited the accompanying consolidated balance sheet of Noodles & Company and subsidiaries (the “Company”) as of December 30, 2025, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the period ended December 30, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2025, and the results of its operations and its cash flows for the period ended December 30, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ | ||||||||
We have served as the Company’s auditor since 2025.
March 25, 2026
66
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Noodles & Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Noodles & Company (the Company) as of December 31, 2024, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We served as the Company’s auditor from 2009 to 2025.
March 7, 2025
except for the consolidated balance sheet, consolidated statements of operations, consolidated statements of stockholders’ equity (deficit), Note 8, Note 9 and Note 10 as to which the date is
March 25, 2026
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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
The management of Noodles & Company is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United State of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on our financial statements.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of our internal control over financial reporting as of December 30, 2025 based on the criteria in “Internal Control - Integrated Framework (the 2013 framework)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 30, 2025.
Attestation Report of the Independent Registered Public Accounting Firm
Our independent registered public accounting firm, Grant Thornton LLP, is not required to issue an attestation report on the effectiveness of our internal control over financial reporting as of December 30, 2025.
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ITEM 9B. Other Information
Director and Executive Officer Trading
During the quarter ended December 30, 2025, no director or officer adopted terminated
ITEM 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
We have adopted a Code of Business Conduct and Ethics that applies to our directors and a Code of Business Conduct and Ethics that applies to our officers and employees (collectively, the “Codes”), including our principal executive, financial and accounting officers, and persons performing similar functions. These Codes are published on our corporate governance website located at investor.noodles.com/corporate-governance.cfm. We intend to disclose certain future amendments to provisions of our Codes, or waivers of provisions of the Codes granted to executive officers and directors, on the website within four business days following the date of such amendment or waiver.
The remaining information required by this item is incorporated herein by reference to the sections entitled “Proposal No. 1 - Election of Directors,” “Delinquent Section 16(a) Report,” “Executive Officers,” “Board Committees—Policy Regarding Stockholder Recommendations,” “Insider Trading Policy,” and “Board Committees—Audit Committee” in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 13, 2026 (the “Proxy Statement”).
ITEM 11. Executive Compensation
The information required by this item is incorporated by reference to the sections entitled “Executive Compensation,” “Director Compensation” and “Board Committees—Compensation Committee Interlocks and Insider Participation” in the Proxy Statement.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the sections entitled “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the sections entitled “Transactions with Related Persons” and “Directors and Corporate Governance—Board Independence” in the Proxy Statement.
ITEM 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to the section entitled “Proposal No. 3 - Ratification of Appointment of Independent Registered Public Accounting Firm for 2026” in the Proxy Statement.
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PART IV
ITEM 15. Exhibits, Financial Statement Schedules
1.Our Consolidated Financial Statements and Notes thereto are included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
2.All financial schedules have been omitted either because they are not applicable or because the required information is provided in our Consolidated Financial Statements and Notes thereto, included in Item 8 of this Annual Report on Form 10-K.
3.The Index to Exhibits is incorporated herein by reference and is filed as part of this Annual Report on Form 10-K.
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EXHIBITS
| Description of Exhibit Incorporated Herein by Reference | ||||||||||||||||||||||||||||||||||||||
| Exhibit Number | Exhibit Description | Form | File No. | Filing Date | Exhibit Number | Filed Herewith | ||||||||||||||||||||||||||||||||
| 3.1 | Amended and Restated Certificate of Incorporation | S-1 | 333-192402 | November 19, 2013 | 3.1 | |||||||||||||||||||||||||||||||||
| 3.2 | Certificate of Amendment of Amended and Restated Certificate of Incorporation | 8-K | 001-35987 | February 13, 2026 | 3.1 | |||||||||||||||||||||||||||||||||
| 3.3 | Second Amended and Restated Bylaws | 8-K | 001-35987 | August 24, 2015 | 3.1 | |||||||||||||||||||||||||||||||||
| 4.1 | Specimen Stock Certificate | S-1/A | 333-188783 | June 17, 2013 | 4.1 | |||||||||||||||||||||||||||||||||
| 4.2 | Description of Securities | 10-K | 001-35987 | February 26, 2021 | 4.4 | |||||||||||||||||||||||||||||||||
| 10.1 | Amended and Restated Credit Agreement dated July 27, 2022, by and among Noodles & Company, each of the Guarantors signatory thereto, U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Issuer and the lenders signatory thereto | 8-K | 001-35987 | July 27, 2022 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.2 | First Amendment to Amended and Restated Credit Agreement, dated as of December 21, 2023, by and among Noodles & Company, each of the Guarantors signatory thereto, U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Issuer and the lenders signatory thereto | 8-K | 001-35987 | December 26, 2023 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.3 | Second Amendment to Amended and Restated Credit Agreement, dated as of October 29, 2024, by and among Noodles & Company, each of the Guarantors signatory thereto, U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Issuer and the lenders signatory thereto | 8-K | 001-35987 | October 30, 2024 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.4 | Security Agreement, dated May 9, 2018, by and between Noodles & Company and U.S. Bank National Association, as administrative agent | 10-Q | 001-35987 | May 11, 2018 | 10.2 | |||||||||||||||||||||||||||||||||
| 10.5 | Pledge Agreement, dated May 9, 2018, by and between Noodles & Company and U.S. Bank National Association, as administrative agent | 10-Q | 001-35987 | May 11, 2018 | 10.3 | |||||||||||||||||||||||||||||||||
| 10.6 | Form of Indemnification Agreement by and between Noodles & Company and each of its directors | S-1/A | 333-188783 | June 17, 2013 | 10.15 | |||||||||||||||||||||||||||||||||
| 10.7 | Letter Agreement, dated February 15, 2017, between Noodles & Company and Mill Road Capital Management LLC | 8-K | 001-35987 | March 14, 2017 | 10.2 | |||||||||||||||||||||||||||||||||
| 10.8 | Securities Purchase Agreement, dated March 13, 2017, between Noodles & Company and Mill Road Capital Management LLC | 8-K | 001-35987 | March 14, 2017 | 10.1 | |||||||||||||||||||||||||||||||||
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| 10.9 | Support Agreement dated June 6, 2024, between Noodles & Company and Hoak & Co, James M. Hoak, Jr., J. Hale Hoak, Hoak Public Equities, L.P., Zierk Family 2010 Irrevocable Trust and Hoak Fund Management, L.P. and Britain Peakes | 8-K | 001-35987 | June 11, 2024 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.10 | Form of Area Development Agreement | 10-K | 001-35987 | February 24, 2015 | 10.9 | |||||||||||||||||||||||||||||||||
| 10.11 | Form of Franchise Agreement | 10-K | 001-35987 | February 24, 2015 | 10.10 | |||||||||||||||||||||||||||||||||
| 10.12* | Noodles & Company Amended and Restated 2010 Stock Incentive Plan | S-1/A | 333-188783 | June 17, 2013 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.13* | Form of Stock Option Agreement under Amended & Restated 2010 Stock Incentive Plan (Nonqualified Stock Options) | 10-Q | 001-35987 | November 9, 2017 | 10.7 | |||||||||||||||||||||||||||||||||
| 10.14* | Form of 2022 Performance Restricted Stock Unit Agreement under Amended & Restated 2010 Stock Incentive Plan | 10-Q | 001-35987 | April 28, 2022 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.15* | Form of 2022 Restricted Stock Unit Agreement for General Manager Equity Partner Plan under Amended & Restated 2010 Stock Incentive Plan | 10-Q | 001-35987 | November 4, 2022 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.16* | Noodles & Company 2013 Employee Stock Purchase Plan | S-1/A | 333-188783 | June 17, 2013 | 10.2 | |||||||||||||||||||||||||||||||||
| 10.17* | The Executive Nonqualified “Excess” Plan Adoption Agreement, adopted by Noodles & Company on May 16, 2013 | S-1/A | 333-188783 | June 17, 2013 | 10.22 | |||||||||||||||||||||||||||||||||
| 10.18* | Noodles & Company 2023 Stock Incentive Plan | S-8 | 333-272120 | May 22, 2023 | 99.1 | |||||||||||||||||||||||||||||||||
| 10.19* | Form of 2023 Restricted Stock Unit Agreement under the 2023 Stock Incentive Plan | 10-Q | 001-35987 | May 11, 2023 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.20* | Form of 2023 Performance Restricted Stock Unit Agreement under the 2023 Stock Incentive Plan | 10-Q | 001-35987 | May 11, 2023 | 10.2 | |||||||||||||||||||||||||||||||||
| 10.21* | Form of 2023 Restricted Stock Unit Agreement For General Manager Equity Partner Plan under the 2023 Stock Incentive Plan | 10-Q | 001-35987 | May 11, 2023 | 10.3 | |||||||||||||||||||||||||||||||||
| 10.22* | Restricted Stock Unit Agreement, dated November 9, 2023, between Noodles & Company and Drew Madsen | 8-K | 001-35987 | November 13, 2023 | 10.2 | |||||||||||||||||||||||||||||||||
| 10.23* | Form of 2024 Restricted Stock Unit Agreement For General Manager Equity Partner Plan under the 2023 Stock Incentive Plan | 10-Q | 001-35987 | May 09, 2024 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.24* | Stock Option Agreement (Nonqualified Stock Options), dated March 6, 2024, between Noodles & Company and Drew Madsen | 8-K | 001-35987 | March 07, 2024 | 10.2 | |||||||||||||||||||||||||||||||||
| 10.25* | Restricted Stock Unit Agreement, dated March 6, 2024, between Noodles & Company and Drew Madsen | 8-K | 001-35987 | March 07, 2024 | 10.3 | |||||||||||||||||||||||||||||||||
| 10.26* | Performance Stock Unit Agreement, dated March 6, 2024, between Noodles & Company and Drew Madsen | 8-K | 001-35987 | March 07, 2024 | 10.4 | |||||||||||||||||||||||||||||||||
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| 10.27* | Form of 2024 Restricted Stock Unit Agreement under the 2023 Stock Incentive Plan | 10-Q | 001-35987 | August 08, 2024 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.28* | Form of 2024 Performance Restricted Stock Unit Agreement under the 2023 Stock Incentive Plan | 10-Q | 001-35987 | August 08, 2024 | 10.2 | |||||||||||||||||||||||||||||||||
| 10.29* | Form of 2025 Restricted Stock Unit Agreement under the 2023 Stock Incentive Plan | 10-Q | 001-35987 | August 14, 2025 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.30* | Form of 2025 Performance Restricted Stock Unit Agreement under the 2023 Stock Incentive Plan | 10-Q | 001-35987 | August 14, 2025 | 10.2 | |||||||||||||||||||||||||||||||||
| 10.31* | Compensation Plan for Non-employee Directors, Amended and Restated May 15, 2023 | 10-Q | 001-35987 | August 10, 2023 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.32* | Form of Restricted Stock Unit Agreement for Non-Employee Directors (beginning 2025) | 10-Q | 001-35987 | August 14, 2025 | 10.3 | |||||||||||||||||||||||||||||||||
| 10.33* | Employment Agreement, dated August 2, 2021, between Noodles & Company and Kathy Lockhart | 10-Q | 001-35987 | August 4, 2021 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.34* | Employment Agreement, dated July 30, 2021, between Noodles & Company and Corey Kline | 10-Q | 001-35987 | August 4, 2021 | 10.3 | |||||||||||||||||||||||||||||||||
| 10.35* | Mike Hynes Offer Letter | 8-K | 001-35987 | June 26, 2023 | 10.2 | |||||||||||||||||||||||||||||||||
| 10.36* | Mike Hynes Employment Agreement | 8-K | 001-35987 | June 26, 2023 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.37* | Drew Madsen Offer Letter | 8-K | 001-35987 | November 13, 2023 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.38* | Madsen Employment Agreement | 8-K | 001-35987 | March 07, 2024 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.39* | Transition Agreement, between Noodles & Company and Drew Madsen dated August 5, 2025 | 10-Q | 001-35987 | August 14, 2025 | 10.4 | |||||||||||||||||||||||||||||||||
| 10.40* | Employment Agreement, dated June 10, 2024, between Noodles & Company and Scott Davis | 10-Q | 001-35987 | August 08, 2024 | 10.4 | |||||||||||||||||||||||||||||||||
| 10.41* | Transition Services and Separation Agreement between Noodles & Company and Brad West dated September 10, 2024 | 8-K | 001-35987 | September 11, 2024 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.42* | Separation Agreement between Noodles & Company and Melissa Heidman dated June 18, 2024 | 8-K | 001-35987 | June 25, 2024 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.43* | Joseph Christina Offer Letter | 10-K | 001-35987 | March 07, 2025 | 10.49 | |||||||||||||||||||||||||||||||||
| 10.44* | Employment agreement dated February 12, 2025, between Noodles & Company and Joseph Christina | 8-K | 001-35987 | February 19, 2025 | 10.1 | |||||||||||||||||||||||||||||||||
| 10.45* | Amended and Restated Employment Agreement, between Noodles & Company and Joseph Christina dated August 5, 2025 | 10-Q | 001-35987 | August 14, 2025 | 10.5 | |||||||||||||||||||||||||||||||||
| 16 | Letter from Ernst & Young LLP | 8-K | 001-35987 | September 12, 2025 | 16 | |||||||||||||||||||||||||||||||||
| 19.1 | X | |||||||||||||||||||||||||||||||||||||
| 21.1 | List of Subsidiaries of Noodles & Company | X | ||||||||||||||||||||||||||||||||||||
| 23.1 | Consent of Grant Thornton LLP | X | ||||||||||||||||||||||||||||||||||||
| 23.2 | Consent of Ernst & Young LLP | X | ||||||||||||||||||||||||||||||||||||
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| 24.1 | Power of Attorney (included on signature page of this report) | X | ||||||||||||||||||||||||||||||||||||
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||||||||||||||||||||
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||||||||||||||||||||
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||||||||||||||||||||
| 97.1 | Noodles & Company Dodd-Frank Clawback Policy | 10-K | 001-35987 | March 08, 2024 | 97.1 | |||||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | X | ||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X | ||||||||||||||||||||||||||||||||||||
_____________
* Management contract or compensatory plan or arrangement.
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ITEM 16. Form 10-K Summary.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 26, 2026.
| NOODLES & COMPANY | |||||
| By: /s/ JOSEPH CHRISTINA | |||||
| Joseph Christina | |||||
| Chief Executive Officer | |||||
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature appears below constitutes and appoints Kathy Lockhart as such person’s true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or their or such person’s substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||||||
| /s/ JOSEPH CHRISTINA | ||||||||
| Joseph Christina | Director, Chief Executive Officer (principal executive officer) | March 26, 2026 | ||||||
| /s/ MIKE HYNES | ||||||||
| Mike Hynes | Chief Financial Officer (principal financial officer) | March 26, 2026 | ||||||
| /s/ KATHY LOCKHART | ||||||||
| Kathy Lockhart | Chief Accounting Officer (principal accounting officer) | March 26, 2026 | ||||||
| /s/ JEFFREY JONES | ||||||||
| Jeffrey Jones | Chairman | March 26, 2026 | ||||||
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| /s/ ROBERT HARTNETT | ||||||||
| Robert Hartnett | Director | March 26, 2026 | ||||||
| /s/ MARY EGAN | ||||||||
| Mary Egan | Director | March 26, 2026 | ||||||
/s/ THOMAS LYNCH | ||||||||
Thomas Lynch | Director | March 26, 2026 | ||||||
| /s/ DREW MADSEN | ||||||||
| Drew Madsen | Director | March 26, 2026 | ||||||
/s/ BRITAIN PEAKES | ||||||||
Britain Peakes | Director | March 26, 2026 | ||||||
| /s/ ELISA SCHREIBER | ||||||||
| Elisa Schreiber | Director | March 26, 2026 | ||||||
| /s/ SHAWN TAYLOR | ||||||||
| Shawn Taylor | Director | March 26, 2026 | ||||||
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Noodles & Co
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