How Many Noodles And Company Are There?

Noodles & Company went public recently at price of $18. The stock soared more than 100% on the opening day of trading to $36. 75 and has since risen steadily, reaching a market closing price of $45 per share on July 3rd. The company has actively promoted the stock in the expected media outlets, such as CNBC, WSJ, etc., which undoubtedly helped the price rise. First, using the current share price of $45 per share, how does Noodles compare to the competition in terms of valuation? Second, who does Noodles directly and indirectly compete against, and how will that impact both their future upside and downside? I’ll delve into these two issues in-depth in this piece, and I hope it will help investors understand how to assess this stock.

Noodles has joined a growing number of fast food restaurants that are attempting to transform the industry from one that feels greasy, low quality, and cheap to one that feels warm, welcoming, and high quality. Chipotle and Panera Bread launched this industry already, and they are making progress against the venerable McDonalds and other traditional fast food chains. We must ask ourselves, using fundamental analysis, what the P/E multiples of these companies reveal about market expectations for future earnings.

The market expects Noodles to grow roughly 30 times faster than McDonald’s, 15 times faster than Panera, and roughly 10 times faster than Chipotle, according to this table. I believe it is obvious that those are some unrealistic expectations, but let’s consider them for a moment. What would Noodles need to do to meet these expectations?.

On page 64 of their S-1 filing, Noodles states, “From 2004 to 2012, we increased the number of our total restaurants from 100 to 327, representing a CAGR [compound annual growth rate] of 16%. First, we need to set a time horizon – over what period will the company outperform, say, Chipotle by 10 times? 0%. Over the next 15 to 20 years, if we keep growing at our current rate, we anticipate having 2,500 restaurants nationwide. Let’s use Noodles & Co.’s apparent 15-year plan as our time frame.

We need to calculate the revenue and profit Noodles & Co can make from these stores in order to model their growth over the next 15 years.

Noodles & Co has both company operated stores and franchisees. 239 company-owned Noodles & Co. locations generated $253 million in revenue last year, and $2 45 franchised stores generated $6 million in sales, bringing the total revenue from 284 restaurants to $256 million. Together, these stores generated $3. 8 million of profit, or 1. 5% net margins for shareholders. According to the aforementioned averages, each company-owned store made about $1 million, while each franchised store made about $60,000; company-owned stores made up 85% of all stores, while franchises made up the remaining 15%. Let’s focus on the potential revenue that Noodles & Co. could generate from its own stores, followed by the revenues from its franchisees, and finally, their net margins.

McDonalds has 6,500 company owned stores which generated $18. 6 billion in sales last year, or around $2. 5 million per store, roughly 2. 5 times the amount Noodles & Co generated. Without going into too much detail, Noodles & Co. only offers lunch and dinner, compared to McDonalds stores that serve breakfast, lunch, and dinner, giving them only 2/3 as many opportunities to generate revenue. Noodles & Co. could make about $1 if they can raise their revenue to a level comparable to McDonald’s, assuming they avoid entering the breakfast market. 5 million in revenue from each store. This figure corresponds with their internal growth rates. Noodles & Co’s revenue growth per restaurant has increased by 1 percent over the previous four years. 5-2% range, which, compounded over 15 years, would give them just under $1 (with the notable exception of 2010). 5 million in revenue per company owned store.

McDonald’s receives money from its franchisees in two ways: it owns the buildings they use and charges them rent, and it receives a royalty from every sale. The only source of income for Noodles & Co. is royalties because it does not own any of the properties that its franchisees use. With 27,882 franchisees, McDonald’s generated $3 billion in the royalty portion of the franchisee revenue stream, giving them an average of $100,000 from each franchisee. Noodles & Co. currently earns about $60,000 from its franchisees, significantly less than McDonalds, but if they can seize their growth opportunity, they may reach revenue levels comparable to McDonalds.

Finally, we need to deal with net margins. With net margins of about 1%, Noodles & Co. is comparable to Chipotle and Panera. However, because franchisees run more than 80% of McDonalds restaurants, which generate 83% margins, McDonalds has much higher net margins, close to 18%.

Now we need to put all of this information together. By 2025, Noodles & Co. will have just over 2,252 restaurants if their restaurant growth continues at a 16% CAGR over the following 13 years. They will have 1,801 company-owned stores and 450 franchise stores, assuming they maintain their 80/20 split between the two types of stores. We predicted above that Noodles & Co could generate $1. revenue of $5 million from each company-owned location and $100,000 from each franchise location Around $25 million of the company-owned revenue and $34 million of the franchise revenue will go directly to the bottom line, assuming 1% net margins for company-owned stores and 80% margins for franchise stores. Net revenue from 2012 to 2025 will climb from $5. 5 million to $60 million for a CAGR of 16. 67%. Since everyone enjoys a good model, take a look below (and click here for a link to the model in Google Spreadsheets).

Let’s complete the circle by saying that I believe the example I provided above is the best case scenario for Noodles & Co., giving them a 16% CAGR. Now, based on current market prices, Panera and Noodles & Co. should grow at about six times the rate that McDonald’s should. 8% and Chipotle at around 3. 7%. Put differently, McDonalds should only have a . Chipotle should only have a 1% CAGR, Panera should have a 5% CAGR, and 6% CAGR (see table).

Compare this to the actual net income CAGRs for the aforementioned businesses over the last, say, five years.

These businesses will keep growing at a good clip and completely refute the current Noodles & Co valuation, assuming they do not crash and burn quickly.

Noodles & Co., as previously mentioned, competes both directly and more indirectly with McDonald’s and upscale fast food chains like Chipotle and Panera. Noodles & Co. has now successfully ridden the wave of coolness and popularity to increase their sales to hundreds of millions of dollars. But we must consider what would happen if that juice ran out, and what kind of landing we would witness.

Simply put, Noodles & Co. will fall and fall hard if they are unable to maintain this wave of popularity. They list $160 million in assets in their S-1 filing, the majority of which are leasehold improvements and equipment. Only Noodles & Co. places much value on these assets, so selling them would not bring in a lot of money.

Contrast this with McDonalds. In a related article I wrote about Chipotle on Seeking, I pointed out that investors would still have a lot of downside protection from McDonalds even if they lost favor. Particularly, McDonalds runs 35,000 restaurants globally, and they all either have capital leases or are owned by them. They receive income from two sources: royalties on sales and the rent they charge their franchisees. To quote from that article:

With 35,000 restaurants and an average restaurant size of 4,000 square feet, McDonald’s owns 122 million square feet of space in total. By using this metric, McDonald’s would come in third place behind General Growth Properties (GGP) and Simon Property Group (SPG), which have 242 million and 139 million square feet of real estate, respectively. Put differently, McDonalds generated $5. 86 billion in rent last year, making McDonald’s the largest REIT in the world by this metric.

We need to ask: Can the market absorb another operator in this market given the rise of other alternative fast food restaurants like Shake Shack, Potbelly Sandwiches, Pret-A-Manager, Le Pain Quotdien, Chipotle, and Panera? Given how fierce the competition is, I believe we should pause.

When I was growing up, in the late 1990s and early 2000s, Cosi’s (COSI), a well-known alternative fast food restaurant, opened up. Cosi’s began trading on the stock market in 2002 for $30, reaching a high of $43 four years later. They had similar potential to Noodles & Co, and the stock is currently trading at $2. I don’t think Noodles & Co. (or businesses like it) will go out of business the way Cosi’s did, but if you want to invest in the restaurant industry, make sure your money can withstand both good and bad times.

Actually, Noodles & Co. can only support its valuation if it quickly and aggressively adopts the franchise model. If there were a 50/50 split between privately held companies and franchise, they could transition more to a 50/50 model, and then they could begin quickly accelerating growth. Noodles & Co. will need to continue riding their wave of popularity in the long run, though, as they lack any tangible assets to stop their decline. The current numbers, however, do not justify the stock price in the short term.

Daniel Lauchheimer has no position in any stocks mentioned. The Motley Fool suggests Panera Bread, McDonald’s, and Chipotle Mexican Grill. The Motley Fool owns shares of Panera Bread, McDonald’s, and Chipotle Mexican Grill. For 30 days, try any of our foolish newsletter services for free. Although we Fools may not all share the same views, we all think that taking into account a variety of viewpoints helps us become better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Join us and submit your own if you think you can do better!

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Top 10 States with the most Noodles & Company locations

13% of the total Noodles & Company locations—or one for every 99,293 people—are in Colorado.

A location for every 222,316 people, or about 12% of the total Noodles & Company locations, are in Illinois.

Wisconsin has about 11% of the total number of Noodles & Company locations, or one location per 109,849 residents.

In the United States, there are 31 states and territories with Noodles & Company locations.

How many Noodles & Company locations are there in the United States?

As of October 7, 2022, there are 462 Noodles & Company locations across the country. With 58 locations, or about 13% of all Noodles & Company locations in the US, Colorado is the state with the most Noodles & Company locations. 462 Locations 31 States and Territories 317 Cities.

Remove the first five digits and enter the remaining 14 numbers if you have a crave card that starts with 884 and are having trouble using the card to make purchases online or through our app. Please contact us at guestrelations@noodles if the payment is still not being accepted for some reason. com.

Our name at Noodles & Company pretty much sums everything up. We’re all about the noodle shops and the people who make them even more fun. It’s the reason we make each dish by hand to your specifications and serve each order with the flavors and experiences that make it truly special. When it comes to Noodles & Company, we can satisfy all of your cravings from preparing classics to serving salads, sides, and desserts.

FAQ

How many locations does Noodles and Co have?

The fast-casual pasta chain 1Noodles & Company, which has more than 450 locations across 30 states, offers a wide selection of imaginative noodle bowls that are influenced by Italian, Mexican, Korean, Thai, and other international cuisines.

What state has the most Noodles and company?

As of October 7, 2022, there are 462 Noodles & Company locations across the country. With 58 locations, or about 13% of all Noodles & Company locations in the US, Colorado is the state with the most Noodles & Company locations.

Is Noodles and company only in Colorado?

Aaron Kennedy established Noodles & Company in 1995; its headquarters are in Broomfield, Colorado. The business went public in 2013 and had revenue of $457 million in 2017. There were 458 Noodles & Company locations spread across 31 states by the middle of 2022.

Are there any Noodles and company in Texas?

Consequently, Texas has markets like Dallas, Houston, and Austin.