As consumers tighten their belts, some chains get left behind.
If you're not a value play Burger King, McDonald's, or Wendy's, an affordable indulgence like Starbucks, or a brand people consider a true treat like Chic-fil-A, people are passing.
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That has sent second and third-tier chains into a sales spiral. Noodle & Company has not been immune to that. The chain has always been more of a higher-priced better for you fast-food angle than a value play or anyone's favorite and it's finding itself a brand in search of an audience.
The chain's second-quarter results were not all bad.
“While we delivered positive same-store sales in a choppy consumer environment for our segment, overall results were below our expectations going into the quarter,” said outgoing CEO Andrew H. Madsen.
He made it clear that traffic was not what the company had hoped for and he identified why during Noodles & Company's second-quarter earnings call.
“Specifically, we experienced an unexpected decline in guest value perception following our menu launch in March, something we did not see during our test market phase last year,” he added.
Noodles & Company closing stores
In addition to working on its perceived value and food quality, Noodles & Company plans to close between 28 and 32 restaurants this year. That will be followed by the chain closing another 12 to 17 restaurants in 2026.
That would be a major cut to the 371-unit chain.
Nine company-owned and one franchised location have already closed in 2025.
“Last year, during the second quarter, we performed an initial review of our portfolio and identified a group of approximately 20 underperforming restaurants to close on or before lease end dates. A year later, we're pleased with the results from closing underperforming restaurants,” CFO Michael Hynes shared.
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The company has to be aggressive as its losing and has limited borrowing ability left. It closed the quarter with a debt balance of $108.3 million and only $13 million available for future borrowing under its revolving credit facility.
“The closures have removed restaurants with negative cash flow from our system. And post closure, we've seen nearby Noodles restaurants experience an increase in sales and profits. Based on these results, we recently expanded our efforts to close underperforming restaurants,” he shared.
Noodles & Company Q2 loss notes:
- Net loss for the second quarter was $17.6 million or a loss of $0.38 per diluted share compared to a net loss of $13.6 million or a loss of $0.30 per diluted share last year.
- The loss in the second quarter of 2025 included an $11.9 million noncash impairment charge compared to a $10.9 million impairment charge in 2024.
Noodles & Company needs a turnaround
Even with locations being closed, the near-term future for Noodles & Company is bleak.
“Based on our revised guidance, we no longer expect to be free cash flow positive in 2025, but we'll continue working toward becoming free cash flow positive in 2026,” Hynes shared.
Madsen, who is stepping down at the end of the month due to what he called “health reasons,” will remain on the board.
He tried to end the call on a positive note.
“The portfolio optimization reviewed by Mike, combined with ongoing cost reduction will give us a stronger and more profitable foundation moving forward. And to deliver sustained top line sales growth, we will continue to build on the improvements made to date that will clearly establish Noodles & Company as the best choice for more customers to satisfy their comfort food cravings,” he said.
Noodles & Company same-store numbers:
- In the second quarter, our total revenue decreased 0.7% compared to last year to $126.4 million.
- System-wide comp restaurant sales during the second quarter increased 1.5%, including an increase of 1.5% at company-owned restaurants and an increase of 1.6% at franchise restaurants.
- Company comp traffic during the second quarter decreased 2.5% and average check increased 4%, inclusive of 2.6% effective pricing during the quarter, primarily related to our menu launch.
- Company average unit volumes in the second quarter increased 2.3% to $1.35 million.
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