BROOMFIELD — Fast-casual pasta chain Noodles & Co. said Thursday that it will close 55 underperforming restaurants nationwide “to eliminate the negative cash flow of these restaurants and improve overall performance.”
Noodles also filed a form S-1 with the U.S. Securities and Exchange Commission for a public offering of its common stock, seeking to raise up to $36.8 million. The offering is not yet effective.
The restaurant closures will come during the first and second quarter of 2017 and represent more than 10 percent of the company’s 510 locations, though Noodles did not immediately specify which restaurants will close.
Closure of the 55 locations will alleviate a burden on Noodles’ profitability, with the company saying that its “financial performance has been adversely impacted by these restaurants, many of which were opened in the last two to three years in newer markets where brand awareness … is not as strong as in other markets.”
Noodles also announced that it has raised $18.5 million through a private placement of stock and warrants to an existing shareholder controlled by L Catterton, a venture-capital and private-equity firm based in Greenwich, Conn. That transaction closed Feb. 8 and was done “to strengthen the Company’s balance sheet and fund strategic initiatives,” the company said.
Proceeds from the private placement and the public offering will be used to pay costs associated with its plan to close underperforming restaurants, to satisfy liabilities arising from a data breach that occurred in 2016 and to fund, in part, capital expenditures in its remaining company-owned restaurants, the company said.
The company’s filing with the SEC places costs associated with the restaurant closings at $24 million to $29 million.
Noodles said it has also amended its existing credit facility, allowing for greater financial flexibility.
The company also is implementing some menu changes to boost sales.
“Today we announced important initiatives that we believe are critical to the long term success of Noodles & Co.,” Dave Boennighausen, Noodles chief financial officer and interim CEO, said in a statement. “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.”
Noodles released preliminary fourth-quarter financial results, showing quarterly revenue of $129 million, representing a 1.3 percent decline in comparable-restaurant sales.
The company also will record a charge during the fiscal quarter that ended Jan. 3, 2017, of $11 million for liabilities related to a data security breach that occurred during 2016.