October 31, 2003

Noodles signs S. Calif. franchise deal

BOULDER — Noodles & Company has signed its first franchise operator agreement for a territory in Southern California that will include the right to open 56 noodle restaurants.

Founder and Co-Chief Executive Aaron Kennedy, while speaking as a panelist at a Boulder Chamber of Commerce Esprit Entrepreneur forum Oct. 15, said this is the Boulder-based noodle chain’s first franchise deal.

The California expansion would nearly double the number of Noodles locations in the United States. Noodles has 70-company owned restaurants in nine states. Kennedy said at the forum that Noodles is offering its franchises to people already in the restaurant business.

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Noodles & Company has been steadily establishing new locations in various states since opening its first restaurant in Denver’s Cherry Creek shopping area eight years ago. In May, it announced its intention to launch a franchise program and open about 350 restaurants by the end of 2006. The California expansion represents the beginning of that effort.

The company was tight-lipped when asked about the deal. Kennedy and P.J. Evans, vice president of franchise development, said they couldn’t comment further on the franchise deal. Nobody at the company would disclose the name of the franchisee, the timetable for the expansion or the precise geographical footprint of future restaurants on the West Coast.

Ken Keymer, president and co-chief executive of Noodles, said Noodles stores will appear in Southern California in about a year, explaining it takes time for acquiring permits and construction of the restaurants.

Noodles soon will be bumping bowls with competing noodle eateries across the country, especially around the Los Angeles area.

Canada-based Zyng Noodlery just inked a deal with an operator to open 20 Zyng locations in Southern California’s Orange and Riverside counties starting this fall. Mama Fu’s Noodle House has opened or is slated to open restaurants in nine states, including the Golden State. And tiny Wild Noodles in Arizona prominently publicizes information about franchising opportunities on its Web site.

“The restaurant business can be replicated, menus can be shared and marketing lends itself to a common theme (across a chain), making it a natural for franchising,´ said Don DeBolt, president of the International Franchise Association, a trade group for the franchising industry.

He said 320,000 franchised businesses are operating across the country, and that franchising is growing at a 10 percent to 12 percent annual pace.

Like most restaurant chains, Noodles features a homogenous look and feel from one location to the next. The formulaic layout of the restaurants and tightly controlled product offerings makes it ripe for franchising, especially in a down economy, DeBolt said.

“The reason people gravitate toward franchising in a bad economy is that you’ve got a proven business model than you can research yourself as a franchisee,” he said. “It minimizes risk.”

DeBolt said franchisees typically pay anywhere from a $20,000 to $50,000 initial franchise fee for a restaurant, plus an ongoing royalty of 4 percent to 7 percent of sales for the right to use the company’s name, trademarks, recipes and operating procedures.

Franchise operators must invest hundreds of thousands more for a lease on a building, equipment and corporate-approved fixtures and signage. Typically, he said, a franchisee can reach positive cash flow within a year or two of being in operation.

Noodles plans to put potential franchisees through a rigorous testing and vetting process before allowing them to open a Noodles restaurant. This includes interviews with company executives and cultural leaders, personality testing and reference checking. In return, Noodles will help the franchisee select a site, train managers and employees, and market the brand.

The company seeks candidates who already operate other “restaurant concepts at a very high level,” Kennedy said, and who financially qualify to make and maintain the necessary investment. Noodles, which is a private company, had $50 million in revenues last year.

Peter Meersman, head of the Colorado Restaurant Association, said Noodles is well positioned for growth because the fast-casual restaurant category that its $5 noodle bowls fall into is growing solidly.

“That category is the fastest-growing category in the business right now,” he said. “Noodles provides a quick, convenient and delicious way to fulfill the needs of people on the go.”

BOULDER — Noodles & Company has signed its first franchise operator agreement for a territory in Southern California that will include the right to open 56 noodle restaurants.

Founder and Co-Chief Executive Aaron Kennedy, while speaking as a panelist at a Boulder Chamber of Commerce Esprit Entrepreneur forum Oct. 15, said this is the Boulder-based noodle chain’s first franchise deal.

The California expansion would nearly double the number of Noodles locations in the United States. Noodles has 70-company owned restaurants in nine states. Kennedy said at the forum that Noodles is offering its franchises to people already in the restaurant…

Christopher Wood
Christopher Wood is editor and publisher of BizWest, a regional business journal covering Boulder, Broomfield, Larimer and Weld counties. Wood co-founded the Northern Colorado Business Report in 1995 and served as publisher of the Boulder County Business Report until the two publications were merged to form BizWest in 2014. From 1990 to 1995, Wood served as reporter and managing editor of the Denver Business Journal. He is a Marine Corps veteran and a graduate of the University of Colorado Boulder. He has won numerous awards from the Colorado Press Association, Society of Professional Journalists and the Alliance of Area Business Publishers.
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