News

Noodles & Co closing 55 units, selling stock

February 10, 2017

In an effort to stay afloat, Noodles & Company is closing 55 under-performing company-owned restaurants and has sold $18.5 million in stock, according to a company press release.

During a call with investors Friday, Interim CEO and CFO Dave Boennighausen described the moves as a way to "eliminate the negative cash flow of these restaurants and improve overall performance."

"Today we announced important initiatives that we believe are critical to the long-term success of Noodles & Company," he said. These initiatives focus on our strong go-forward restaurant portfolio, shore up our balance sheet and give us the financial flexibility to further our in-restaurant operational and culinary initiatives."

Boennighausen said the chain’s financial performance has been adversely impacted by the 55 under-performing restaurants, which are below the company’s averages. They generated AUVs of about  $0.7 million and an aggregate restaurant contribution margin of approximately 20 percent during the 12-month period ended Sept. 27, 2016. If such restaurants had not been in operation during the 12-month period ended Sept. 27, 2016, the company's restaurant contribution, as adjusted, would have been $7.3 million higher and the company's restaurant contribution margin, as adjusted, would have been 280 basis points higher.

Part of the problem, according to the company, was that many were opened in the last two to three years in newer markets where brand awareness was not as strong as in other markets.

Selling stock

In a Private Placement transaction, the company issued to L Catterton 18,500 shares of Series A Convertible Preferred Stock convertible into 4,252,873 shares of the company's Class A Common Stock, and warrants entitling L Catterton to purchase 1,913,793 shares during the five-year period beginning six months following their issuance at an exercise price per.

The gross proceeds of the Private Placement were $18.5 million, which will be used, to satisfy liabilities associated with its plan to close under-performing restaurants, as well as to satisfy liabilities arising from the data breach that occurred in 2016 and to fund, in part, capital expenditures related to investments in the remaining company-owned restaurants, according to the release.

Other Q4 highlights

• Total revenue between $129 and $130 million.
• Restaurant contribution margin between 11.5 percent and 12 percent.  Restaurant contribution margin is calculated as revenues less restaurant operating costs, as a percentage of revenues, each as reported for the company's restaurant segment.
• A system-wide decrease in comparable restaurant sales of 1.3 percent, including a 1.8 percent decline at company-owned restaurants and a 2 percent increase at franchised locations.