# EDGAR Filing Document

**Accession Number:** 0001275158
**File Stem:** 0001275158-23-000034
**Filing Date:** 2023-3
**Character Count:** 78841
**Document Hash:** e62d9375693dd7bc6732b810d663f320
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001275158-23-000034.hdr.sgml**: 20230331

**ACCESSION NUMBER**: 0001275158-23-000034

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20230103

**FILED AS OF DATE**: 20230331

**DATE AS OF CHANGE**: 20230330

**EFFECTIVENESS DATE**: 20230331

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** NOODLES & Co
- **CENTRAL INDEX KEY:** 0001275158
- **STANDARD INDUSTRIAL CLASSIFICATION:** RETAIL-EATING PLACES [5812]
- **IRS NUMBER:** 841303469
- **FISCAL YEAR END:** 0103

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-35987
- **FILM NUMBER:** 23782094

**BUSINESS ADDRESS:**
- **STREET 1:** 520 ZANG ST., SUITE D
- **CITY:** BROOMFIELD
- **STATE:** CO
- **ZIP:** 80021
- **BUSINESS PHONE:** 720-214-1906

**MAIL ADDRESS:**
- **STREET 1:** 520 ZANG ST., SUITE D
- **CITY:** BROOMFIELD
- **STATE:** CO
- **ZIP:** 80021

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** NOODLES & CO
- **DATE OF NAME CHANGE:** 20040102

### Attached PDF Documents

**Attachment 1:** `ndls2022annualreport.pdf`

# **UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
**WASHINGTON, D.C. 20549**
**FORM 10-K**

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 3, 2023

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________
Commission File Number: 001-35987

# **NOODLES & COMPANY**

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

84-1303469

(IRS Employer Identification No.)

520 Zang Street, Suite D
Broomfield, CO

(Address of principal executive offices)

80021

(Zip Code)

Registrant's telephone number, including area code: (720) 214-1900

Securities registered pursuant to Section 12(b) of the Act:

| Title of each class | Trading Symbol | Name of each exchange on which registered |
| --- | --- | --- |
| Class A common stock, par value $0.01 per share | NDLS | Nasdaq Global Select Market |

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

| Large accelerated filer | ☐ | Accelerated filer | ☒ |
| --- | --- | --- | --- |
| Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
|  |  | Emerging growth company | ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common stock held by non-affiliates as of June 28, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, was $230.3 million. This amount was calculated based on the closing price of the common stock on June 28,

2022 on the Nasdaq Global Select Market. All executive officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.

As of March 3, 2023, there were 46,040,427 shares of the registrant’s Class A common stock, par value of $0.01 per share outstanding.

#### **DOCUMENTS INCORPORATED BY REFERENCE**

Portions of the registrant’s proxy statement relating to its 2023 Annual Meeting of Stockholders, to be held on or about May 15, 2023, are incorporated by reference into Part III of this Annual Report on Form 10-K, where so indicated. Such proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

# TABLE OF CONTENTS

|  | Page |
| --- | --- |
| PART I |  |
| ITEM 1. Business | 1 |
| ITEM 1A. Risk Factors | 10 |
| ITEM 1B. Unresolved Staff Comments | 23 |
| ITEM 2. Properties | 24 |
| ITEM 3. Legal Proceedings | 25 |
| ITEM 4. Mine Safety Disclosures | 25 |
| PART II |  |
| ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 26 |
| ITEM 6. [Reserved] | 26 |
| ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 27 |
| ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk | 39 |
| ITEM 8. Financial Statements and Supplementary Data | 40 |
| ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 64 |
| ITEM 9A. Controls and Procedures | 64 |
| ITEM 9B. Other Information | 66 |
| ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 66 |
| PART III |  |
| ITEM 10. Directors, Executive Officers and Corporate Governance | 66 |
| ITEM 11. Executive Compensation | 66 |
| ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 66 |
| ITEM 13. Certain Relationships and Related Transactions, and Director Independence | 66 |
| ITEM 14. Principal Accounting Fees and Services | 66 |
| PART IV |  |
| ITEM 15. Exhibits, Financial Statement Schedules | 67 |
| ITEM 16. Form 10-K Summary | 71 |
| SIGNATURES |  |
| EXHIBITS |  |

i

# PART I

## ITEM 1. Business

### General

Noodles & Company is a restaurant concept offering lunch and dinner within the fast-casual segment of the restaurant industry. Our core offerings include noodle and pasta dishes, staples of many different cuisines, with the goal of delivering fresh ingredients and flavors from around the world under one roof. Today, our globally-inspired menu includes a wide variety of high quality, cooked-to-order dishes, including noodles and pasta, salads, soups and appetizers. We believe that we offer our customers value, with per person spend of $12.50. As of January 3, 2023, we operated 461 restaurants in 31 states, which included 368 company locations and 93 franchise locations.

We offer approximately 20 globally-inspired and highly customizable dishes together on a single menu that can be enjoyed inside our restaurants, taken to-go, or delivered to our customers. We believe we will continue to benefit from recent trends in consumer preferences such as the increasing desire for convenience and to engage with brands digitally, as well as the broader demand for international cuisines. At many restaurants, customers are limited to a particular ethnic cuisine or type of dish, such as a sandwich, burrito or burger. At Noodles & Company, we aim to eliminate the “veto vote” by satisfying the preferences of a wide range of customers, whether a family or parent with kids, a group of coworkers, an individual or a large party.

Our menu is well suited for off-premise dining occasions in which customers order at our restaurant or online but then eat their meal from the comfort of their home or office. Our menu items travel particularly well, with a high variety of options to meet a broad range of lifestyle needs. In addition, our digital capabilities position the brand well for consumer trends focused on convenience. We also believe that our globally-inspired menu, focused on noodle and pasta dishes, differentiates us from other restaurants. We believe our attributes-global flavors, variety, dishes prepared-to-order and fast service-allow us to compete against multiple segments throughout the restaurant industry and provide us a larger addressable market for lunch and dinner than competitors who focus on a single cuisine. We strive to provide a pleasant dining, pick-up or delivery experience by quickly preparing fresh food with friendly service at a price point we believe is attractive to our customers.

Noodles & Company is a Delaware corporation that was organized in 2002. Noodles & Company and its subsidiaries are sometimes referred to as “we,” “us,” “our,” and the “Company” in this report. We refer to our Class A Common Stock, par value $0.01 per share, as our “common stock.”

### Our Concept and Business Strengths

*Convenience.* Our customers experience the Noodles brand through our company-owned and franchise operated locations, through our website www.noodles.com and through our mobile app. In 2022, approximately 54% of our sales were derived from digital ordering, where guests have the opportunity to select in restaurant quick pick-up or delivery to their home or office. In select restaurants, particularly new locations, we offer the added convenience of order-ahead drive through windows. We believe that the breadth of ways that consumers can access our brand, the variety inherent in our menu, and how well our food travels is a business strength in relation to consumer trends towards convenience.

*Variety.* We have purposefully chosen a range of healthy to indulgent dishes to satisfy multiple dietary and lifestyle preferences. Our menu encourages customers to customize their meals to meet their tastes and nutritional preferences with our selection of a variety of fresh vegetables and seven proteins. Additionally, customers are able to customize the noodle that their dish is prepared with, including healthy options such as our zucchini noodle (“Zoodles”), gluten free pipette noodle or the recently launched LEANguini noodle (“LEANguini”), which features significantly fewer carbs and more protein than a traditional wheat noodle.

All of our dishes are cooked-to-order with fresh, high quality ingredients sourced from our carefully selected suppliers. Our commitment to the freshness of our ingredients is further demonstrated by our use of fresh produce and healthy add-in options such as seasoned tofu. Our culinary team strives to develop new dishes and limited time offerings to further reinforce our brand positioning and regularly provide our customers with additional options. Choice and customization have always been a great strength of the brand, and we continue to innovate in ways that allow guests to enjoy the world flavors they know and love, as well as discover new ones with all of the benefits of healthier options. This focus on culinary innovation allows us to prepare and serve high quality food, meet changing consumer trends and acquire new customers. As we add healthy alternatives, we additionally from time to time introduce more classic noodle and pasta dishes, such as our Tortelloni.

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*Value.* The quality of our food and the welcoming ambiance of our restaurants creates an overall customer experience that we believe is unique and differentiated. Our per person spend is competitive not only within the fast-casual segment, but also within the quick-service segment. Our digital menu available on our mobile app and website, features an *Everyday Value* landing page where guests can select an entry-level item for around $7 per dish. During 2022, we featured our *Everyday Value* menu through a brand marketing message called *7 for $7*. In addition, we also offer kids meals which, at a fixed low price, provide the opportunity for parents to feed their children a balanced meal with sides such as broccoli, applesauce and a smaller portion of our house made rice crispy treat.

*Our Brand Experience.* Our locations are designed individually, which we believe creates an inviting restaurant environment. We believe the ambiance is warm and welcoming, with muted lighting and colors, comfortable seating and our own custom music mix, which is intended to make our customers feel relaxed and at home. We believe we deliver an exceptional overall dining experience. Our customers expect not only great food from our restaurants, but also warm hospitality and attentive service.

Consistent with our culture of enhanced customer service, we seek to hire, develop and retain individuals who will deliver prompt, attentive service by engaging customers the moment they enter our restaurants. Our training philosophy empowers both our restaurant managers and team members, also referred to as employees, to add a personal touch when engaging with our customers. Our restaurant managers are critical to our success, as we believe that their entrepreneurial spirit and outreach efforts build our brand in our communities.

Our guests also experience the Noodles brand through our digital platforms, including orders placed on our website or our mobile app, contactless and in-restaurant pick-ups and delivery through our own channels or a third-party aggregator. Our multi-channel approach allows us to adapt to potential changes in customer behavior, and has been strengthened by our investments in our off-premise channel, such as our elevated technology capabilities and our quick-pick up counters. Additionally, in some of our locations, we provide curbside pick-up available to our guests directly through our mobile app and website. Finally, the majority of our new locations have incorporated order ahead drive-thru windows to increase our level of convenience.

## **Our Operational Strategy**

We believe our brand and globally-inspired menu resonates with consumers, and we believe our restaurants, team members and online engagement provide customers a unique and high-quality experience. We are focused on offering customers flavorful, cooked-to-order dishes in a warm and welcoming environment at an attractive value.

*Restaurant initiatives.* Our plan to improve our performance includes the following four key strategies:

- *Enhancing convenience for our customers.* We have meaningfully improved convenience for customers during the past few years. In 2022, we revamped our website and digital app layout which enhanced customization of orders and quick add options. In addition, we added convenience with group ordering, Apple pay and order status. Our *Noodles Rewards* program, relaunched in 2019 incorporates points and tier-based rewards to further drive customer engagement. We believe there still remains a significant opportunity to enhance our *Noodles Rewards* program and digital experience for our guests. Additionally, we have reduced friction for off-premise channels through the use of our quick pick-up counter within our locations and through our third-party delivery program.
- *Focusing on our global flavors and menu offerings.* We believe that our globally-inspired menu, focused on noodle and pasta dishes, differentiates us from other restaurants. We also believe this global variety, which includes a range of healthy to indulgent dishes that are cooked to order with fresh, high-quality ingredients, remains a competitive strength. Our menu innovation has significant potential to broaden awareness and drive new guests with our healthy noodle alternatives, including zucchini and LEANguini dishes, and continued innovation in our classic noodle dishes.

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- *Improving efficiencies and unit-level margins.* The increased demand for off-premise and digital sales has accelerated our ability to optimize our staffing model and vendor efficiencies. We are actively enhancing our supply chain and food preparation procedures to reduce inbound ingredient costs and improve labor efficiency through our ongoing Kitchen of the Future Initiative. Since 2018, the Kitchen of the Future Initiative has identified several areas of in-restaurant labor reductions, including upgrading to a sales-based labor model, reducing hours for front of house cashiers, optimizing pre-prepared ingredients and investing in steamer equipment. This ongoing initiative is anticipated to further optimize our restaurant efficiencies by identifying new processes, equipment and technology which we believe will help offset increases in food and wage inflation.
- *Improving manager selection, training and development of our teams.* Team member retention is a critical component to our success. We have increased our focus on the selection, training and development of our restaurant teams by implementing certain changes to our restaurant compensation program and an expanded benefits program. Our previous investments in extensive training tools and learning management systems have improved overall training execution, improved employee turnover and encouraged career development within our teams.

## Restaurant Portfolio and Franchising

*Restaurant Portfolio.* As of January 3, 2023, we had 368 company-owned restaurants and 93 franchise restaurants in 31 states. Our restaurants are typically between 2,000 and 2,600 square feet and are located in end-cap, in-line or free-standing locations across a variety of suburban, collegiate and urban markets. We are currently executing a smaller square footage design which largely includes order ahead drive-thru windows as we embed an off-premise focused operating model into new restaurants. We anticipate that this design will better facilitate future expansion and better meet the needs of the changing consumer experience.

*Restaurant Development.* In 2022, we opened sixteen new company-owned restaurants and three franchised locations. We anticipate approximately 7.5% new unit growth in 2023, and between 7% to 10% during 2024 and beyond, based on our disciplined identification of sites and growing pipeline. We anticipate this unit growth to include a combination of both company and franchise development.

*Certain Restaurant Closures.* We closed five company-owned restaurants in 2022, most of which were at or approaching the expiration of their leases or in trade areas that are not as well positioned for current consumer trends. We currently do not anticipate a significant number of restaurant closures for the foreseeable future; however, we may from time to time close or relocate certain restaurants, that are at, or near, the expiration of their leases or in trade areas that are not as well positioned for current consumer trends.

*Franchising.* As of January 3, 2023, we had 93 franchise units in 18 states operated by 11 franchisees. In 2022, our franchisees opened three restaurants and closed one restaurant. We have a total of eight area developers who have signed development agreements providing for the opening of 97 additional restaurants in their respective territories. In January of 2022, we completed the sale of 15 restaurants in California to a new franchise partner (the “Warner Sale”). We expect franchising to be a part of our growth strategy in future years. We look for experienced, well-capitalized franchise partners who are able to leverage their existing infrastructure and local knowledge in a manner that benefits both our franchisees and us. We expect to continue to offer development rights in markets where we do not intend to build company-owned restaurants. We may offer such rights to larger developers who commit to open 10 or more units, or to smaller developers who may commit to open fewer restaurants. We do not currently intend to offer single-unit franchises. We believe the strength and attractiveness of our brand will attract experienced and well-capitalized area developers.

## Site Development and Expansion

We consider our site selection and development process critical to our long-term success. We have used a combination of our own internal team and outside real estate consultants to locate, evaluate and negotiate new sites using various criteria. In making site selection decisions, we use several analytical tools designed to uncover the key site, demographic, business, retail, competitive and traffic characteristics that drive successful locations. Once a location has been approved by our executive-level selection committee, we begin a design process to match the characteristics and feel of the location to the trade area.

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## Restaurant Management and Operations

*Friendly Team Members.* We believe our genuine, friendly team members separate us from our competitors. We value the individuality of our team members, which we believe results in a management, operations and training philosophy distinct from that of our competitors. We strive to hire team members who share our values, a passion for food, have a competitive spirit and will operate our restaurants in a way that is consistent with our high standards. We seek to hire individuals who will deliver prompt, attentive service by engaging customers at all points during the Noodles brand experience. We empower our team members to enrich the experience of our customers and directly address any concerns that may arise in a manner that contributes to the success of our business.

*Restaurant Management and Employees.* Each restaurant typically has a general manager, an assistant general manager, multiple shift managers and team members. We cross-train our employees in an effort to create a depth of competency in our critical restaurant functions. To lead our restaurant management teams, we have area managers (each of whom is responsible for between five and 10 restaurants), as well as regional directors (each of whom is responsible for between approximately 50 and 60 restaurants).

*Training and Career Development.* We believe that our training efforts create a culture of continuous learning and professional growth that allows our team members to continue their career development with us. Within each restaurant, two to four team members are designated to lead the training efforts and ensure a consistent approach to team member development. We produce training materials that encourage individual contributions and participation from our team members while also requiring adherence to certain guidelines and procedures.

*Food Preparation and Quality.* Our teams use classic professional cooking methods, including sautéing many of our vegetables, in full kitchens resembling those of full-service restaurants. All team members, including our restaurant managers, spend their first several days working solely with food and learning these techniques, and we spend a significant amount of time ensuring that each team member learns how to prepare and cook our food properly.

The majority of our restaurants have exhibition-style kitchens. This design demonstrates our commitment to cooking fresh food in an accessible manner. We provide each customer with individual attention and make every effort to respond to customer suggestions and concerns in a personal and hospitable way.

We require all of our dishes to be cooked to order at food safe temperatures or, in the case of salads, subject to our produce washing protocols, which helps to ensure that the food we serve to our customers is safe. We have designed our food safety and quality assurance programs to maintain high standards for our food and food preparation procedures. Our director of quality assurance oversees comprehensive restaurant and supplier audits based upon the potential food safety risk of each food. We also consider food safety and quality assurance when selecting our distributors and suppliers. Our suppliers are inspected by federal, state and local regulators or other reputable, qualified inspection services, which helps ensure their compliance with all federal food safety and quality guidelines. We regularly inspect our suppliers to ensure that the ingredients we buy conform to our quality standards and that the prices we pay are competitive. We also rely on our own recipes, specifications and protocols to ensure that our food is consistently the best quality that is possible when it is served, including a physical examination of ingredients when they arrive at our restaurants. We train our employees to pay detailed attention to food quality at every stage of the food preparation cycle, and we have developed a daily checklist that our employees use to assess the freshness and quality of food supplies. Finally, we encourage our customers to provide feedback regarding our food quality so that we can identify and resolve problems or concerns as quickly as possible.

## Restaurant Marketing

Our strategic marketing efforts seek to drive sales and increase brand loyalty by highlighting our competitive strengths through a variety of channels including digital marketing, social media, public relations, guest engagement and local marketing. We focus on attributes that set us apart including the breadth and customization of our menu and our best-in-class convenience offerings, and ultimately use a data-driven approach to guide our strategy.

- *Our Menu Offering.* At the heart of our marketing is our ongoing mission to always nourish and inspire every team member, guest and community we serve. We focus some of our marketing efforts on new menu offerings to broaden our appeal to our customers. For example, during 2022, our new menu offering efforts centered around the launch of

4

LEANguini, our proprietary low-carb, high-protein noodle dish. Most of these marketing efforts are focused on prompt consumer action to directly drive traffic and trial.

- *Brand Platform.* During 2022, we launched a new brand platform called *Uncommon Goodness*, under the tagline “we infuse Uncommon Goodness in everything we do.” The focus of the platform is to strengthen our brand awareness, introduce the Noodles brand to new guests and remind existing guests what makes Noodles unique.
- *Loyalty Program.* Our *Noodles Rewards* program grew 12.5% during 2022 to more than 4.5 million members and allows us to connect directly with each guest. The program allows guests to accumulate reward points associated with each purchase that can be redeemed for offers such as free bowls, shareables and delivery. Rewards members are typically the first to learn about new offerings, and in some cases are provided exclusive access to certain menu items. The data acquired from rewards members is used to target and personalize offers and communications.
- *Seamless Digital Experiences.* Digital properties inclusive of our website and our app offer guests a differentiated and seamless ordering experience. Our digital experience has been carefully designed to showcase our food. From exploring, selecting and ordering new dishes, to finding the perfect shareable or redeeming rewards points, the digital experience is a critical part of the guest journey.
- *Digital Marketing.* We use targeted digital advertising across all markets spanning email, search, display, social, video and other related channels. This helps to increase top of mind awareness with potential guests and drives frequency, trial and guest spend. We leverage zero-party and first-party data to drive effective and efficient advertising spend, ensuring we are improving the return on our investment. In addition, digital advertising provides us with the opportunity to promote specific product categories, highlight convenient off-premise channel offerings, communicate rewards and encourage consumer action, resulting in immediate increases in our customer traffic and long-term customer loyalty. In 2022, we began the rollout of digital menu boards across our locations, which we expect to complete in 2023. Digital menu boards allow us to showcase key menu features, target guest communication, enhance our pricing capabilities and increase flexibility for culinary testing.

## Human Capital Management

We believe the strength of our workforce is one of the significant contributors to our success as a brand. This is largely attributed to our team members who strive every day to create an environment for our guests where they feel welcomed and cared for. Therefore, one of our strategic priorities is to develop people as a differentiator, including investing in the following areas of focus:

*Oversight and Management.* We recognize the diversity of our team members, guests and communities, and believe in creating an inclusive and equitable environment that represents a broad spectrum of backgrounds and cultures. Working under these principles, our Human Resources department is tasked with managing employment-related matters, including recruiting and hiring, onboarding and training, compensation and benefit planning, performance management and talent development. Our management and cross-functional teams also work closely to evaluate human capital management issues such as team member retention, workplace safety, harassment and bullying, as well as to implement measures to mitigate these risks.

Our Board of Directors and Board committees provide oversight on certain human capital matters as part of their overall engagement in our Environmental, Social and Governance practices. Our Compensation Committee, with input from members of our management and a third-party compensation consultant who provides benchmarked data, has responsibility for administering and approving annually certain elements of compensation, including our incentive compensation plans and equity-based plans. Management provides input into the design of our incentive compensation programs to ensure that these programs support the Company’s business objectives and strategic priorities. The annual business plan initially established by our management, but approved by our Board, is an important element of our Compensation Committee’s decision-making process for performance measures and goals.

5

*Total Rewards.* We have demonstrated a history of investing in our workforce by offering competitive salaries and wages. To foster a stronger sense of ownership and align the interests of our team members with shareholders, restricted stock units are provided to eligible team members under our stock incentive programs. Additionally, we provide incentive compensation through annual bonus plans for all eligible team members. Furthermore, we offer comprehensive, targeted and innovative benefits to all eligible team members. This includes comprehensive health, dental and vision insurance coverage, a 401(k) program and paid time off.

In 2022, we announced the expansion of our already comprehensive team member benefits program called *LifeAtNoodles*. The new benefits include financial planning services, immigration reimbursement program, GM equity partner program, introduction of Noodles Resource Groups and expansion of our balance bucks program.

- *GM Equity Partner Program.* Continuity of our General Managers (“GM”) is directly correlated to the positive financial performance of our restaurants. Our new GM Equity Partner Program is designed to reward and motivate our top performers. Twice a year top performing GMs (identified by performance against key financial and operational metrics) are invited into the program and are granted RSUs with a three year cliff vest. We firmly believe that investing in this key talent will drive retention of our leaders.
- *Immigration Reimbursement Program.* Many of our team members come from different parts of the world. Remaining eligible to work in the United States can be timely and costly. We provide financial reimbursement to support our team members as they navigate their immigration process.
- *Noodles Balance Bucks Program.* We offer numerous mental, financial and physical health benefits to our team. In 2022, we expanded on our existing Balance Bucks Program, which allows eligible team members to be reimbursed for fitness and physical health related purchases and expenses. In 2022, this program expanded to support a broader range of eligible expenses and now includes purchases and expenses related to team members mental and financial well-being, along with physical fitness and health. We also expanded eligibility of this program in 2022 so that now all Assistant General Managers and above are eligible for the program.
- *Inclusion & Diversity.* At Noodles, we live our core values every day by working towards creating an inclusive and welcoming environment for all. In 2022, we believe we have made much traction in this area. One of the most impactful programs we put in place in 2022 in this space are Noodles’ versions of Employee Resource Groups, called NRGs (“Noodles Resource Groups”). We introduced two different NRGs in 2022 that are led by executive sponsors. One group, THRIVE, supports the BIPOC community and their allies. Our second group is PROUD which supports the LGBTQIA+ community and their allies. These groups are designed to help elevate the voice of these underrepresented populations and increase recruiting and retention efforts. These groups also support Noodles by bringing forward key ideas that can help advance the business and identify additional ways for Noodles to improve its community presence by getting involved in various community organizations and events.

We are continually focused on how we can offer the best workplace in our industry and we are proud of these benefits that honor our commitment to inclusion and diversity. We were named one of America’s Favorite Restaurants by Newsweek, and one of the Top 500 Franchises by Franchise Times. Noodles has been recognized by Forbes as one of America’s Best Employers for Diversity in 2021 and 2022 and one of America’s Best Employers for Women in 2021. Additionally, QSR recently named Noodles one of 2022’s Best Brands to Work For, and the Denver Business Journal has called Noodles one of the Best Places to Work for its unique culture focused on Uncommon Goodness and built on the value of “Loving Life,” which begins by nourishing and inspiring its communities and every team member and guest who walks through the door. We have also earned the Women in the Lead Certification for our investment in women-empowering initiatives for its female team members and have proudly partnered with the Multicultural Foodservice & Hospitality Alliance to build cultural intelligence within our teams. Finally, we released our first Nourish & Inspire impact report in October of 2021 detailing the progress we have made across four important areas of our business: food, people, planet, and community.

As of January 3, 2023, we had approximately 8,100 employees, including approximately 600 salaried employees and approximately 7,500 hourly employees. None of our employees are unionized or covered by a collective bargaining agreement, and we consider our current employee relations to be good.

6

# **NOODLES & COMPANY**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

A summary of the status of the Company’s non-vested restricted share units as of January 3, 2023 and changes during the year then ended is presented below:

|  | Awards | Weighted-Average Grant Date Fair Value |
| --- | --- | --- |
| Outstanding-December 28, 2021 | 1,164,827 | $8.23 |
| Granted | 1,678,080 | 5.57 |
| Vested | (393,062) | 7.51 |
| Forfeited | (126,171) | 6.39 |
| Non-vested at January 3, 2023 | 2,323,674 | $6.45 |

The Company had 393,062 restricted stock units that vested during the year ended January 3, 2023. These units had a total estimated fair value of $2.2 million at the date of vesting for the year ended January 3, 2023.

# **10. (Loss) Earnings Per Share**

Basic (loss) earnings per share (“EPS”) is calculated by dividing net (loss) income available to common shareholders by the weighted-average number of shares of common stock outstanding during each period. Diluted EPS is calculated using net (loss) income available to common stockholders divided by diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include shares of common stock underlying stock options and restricted common stock. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.

The following table sets forth the computations of basic and diluted EPS (in thousands, except share and per share data):

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| Net (loss) income attributable to common stockholders | $(3,314) | $3,665 | $(23,259) |
| Shares: |  |  |  |
| Basic weighted average shares outstanding | 45,913,787 | 45,483,029 | 44,272,474 |
| Effect of dilutive securities | - | 642,357 | - |
| Diluted weighted average number of shares outstanding | 45,913,787 | 46,125,386 | 44,272,474 |
| (Loss) earnings per share: |  |  |  |
| Basic (loss) earnings per share | $(0.07) | $0.08 | $(0.53) |
| Diluted (loss) earnings per share | $(0.07) | $0.08 | $(0.53) |

The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. Potential common shares are excluded from the computation of diluted earnings per share when the effect would be anti-dilutive. Shares issuable on the vesting or exercise of share-based awards or exercise of outstanding warrants were excluded from the calculation of diluted loss per share because the effect of their inclusion would have been anti-dilutive totaled 2,402,238, 503,142 and 3,175,472 for 2022, 2021 and 2020, respectively.

# **11. Employee Benefit Plans**

# ***Defined Contribution Plan***

In October 2003, the Company adopted a defined contribution plan, The Noodles & Company 401(k) Plan (the “401(k) Plan”). Company employees aged 21 or older, are eligible to participate in the 401(k) Plan beginning on the first day of the calendar month following 30 days of employment. Under the provisions of the 401(k) Plan, the Company may, at its discretion, make contributions to the 401(k) Plan. Participants are 100% vested in their own contributions. In 2019, the board of directors authorized matching contributions equal to 25% of the first 4% of compensation that is deferred by the participant. The Company recognized matching contribution expense of $0.4 million, $0.3 million and $0.1 million in 2022, 2021 and 2020, respectively.

57

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

### *Deferred Compensation Plan*

The Company's deferred compensation plan, under which compensation deferrals began in 2013, is a non-qualified deferred compensation plan which allows highly compensated employees to defer a portion of their base salary and variable compensation each plan year. To offset its obligation, the Company purchases Company-owned whole-life insurance contracts on certain employees. As of January 3, 2023 and December 28, 2021, $0.7 million and $2.5 million, respectively, were included in other assets, net, which represents the cash surrender value of the associated life insurance policies, and $0.7 million and $0.5 million, respectively, were included in accrued expenses and other current liabilities and other long-term liabilities, which represents the carrying value of the liability for deferred compensation.

### *Employee Stock Purchase Plan*

In 2013, the Company adopted an Employee Stock Purchase Plan (the 'ESPP') under which eligible team members may voluntarily contribute up to 15% of their salaries, subject to limitations, to purchase common stock at a price equal to 85% of the fair market value of a share of the Company's common stock on the first day of each offering period or 85% of the fair market value of a share of the Company's common stock on the last day of each offering period, whichever amount is less. In general, all non-highly compensated employees who have been employed by the Company for at least 30 days prior to the offering period and who are regularly scheduled to work more than 20 hours per week and for more than five months in any calendar year, are eligible to participate in the ESPP which operates in-line with the Company's fiscal quarters. A total of 750,000 shares of common stock are available for issuance under the ESPP. The Company has issued a total of 267,729 shares under this plan, of which 40,838 shares were issued during 2022. A total of 482,271 shares remain available for future issuance. For 2022, in accordance with the guidance for accounting for stock compensation, the Company estimated the fair value of the stock purchase plan using the Black-Scholes multiple-option pricing model. The average assumptions used in the model included a 3.31% risk-free interest rate; 0.25 years year expected life; expected volatility of 66.4%; and a zero percent dividend yield. The weighted average fair value per share at grant date was $1.12. In 2022, the Company recognized $46,000 of compensation expense related to the ESPP.

### **12. Leases**

The Company leases restaurant facilities, office space and certain equipment that expire on various dates through April 2038. Lease terms for restaurants in traditional shopping centers generally include a base term of 10 years, with options to extend these leases for additional periods of five to 15 years.

The Company's leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term. Total rent expense for operating leases for 2022, 2021 and 2020 was approximately $38.5 million, $39.1 million and $39.9 million, respectively.

Some of the Company's leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant's sales in excess of stipulated amounts. Lease expense associated with rent escalation and contingent rental provisions is not material and is included within operating lease cost. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company elected the practical expedient to account for lease and non-lease components as a single component for substantially all lease types.

As most of the Company's leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

During 2020, the onset of the COVID-19 Pandemic impacted the Company's business significantly, including temporary closures of our dining rooms starting in March 2020. The COVID-19 Pandemic had impacted certain of our restaurant operating results and the changes in the market trend of the trade area affected the underlying asset values of the restaurant lease. The Company recorded right-of-use asset impairment charges on two restaurants in 2022 and one restaurant in 2021 which reduced the carrying value of operating lease assets to their respective estimated fair value by $0.2 million and $0.1 million, respectively.

58

# **NOODLES & COMPANY**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Supplemental balance sheet information related to leases is as follows (in thousands):

| Classification |  | 2022 | 2021 |
| --- | --- | --- | --- |
| Assets |  |  |  |
| Operating | Operating lease assets, net | $183,392 | $188,440 |
| Finance | Property and equipment | 5,258 | 6,394 |
| Total leased assets |  | $188,650 | $194,834 |
| Liabilities |  |  |  |
| Current lease liabilities |  |  |  |
| Operating | Current operating lease liabilities | $28,581 | $26,617 |
| Finance | Accrued expenses and other current liabilities | 2,210 | 1,956 |
| Long-term lease liabilities |  |  |  |
| Operating | Long-term operating lease liabilities | 187,320 | 200,243 |
| Finance | Other long-term liabilities | 3,520 | 4,654 |
| Total lease liabilities |  | $221,631 | $233,470 |

The components of lease costs are as follows (in thousands):

| Classification |  | Year Ended January 3, 2023 | Year Ended December 28, 2021 |
| --- | --- | --- | --- |
| Operating lease cost | Occupancy, other restaurant operating costs, general and administrative expenses, and pre-opening costs | $38,514 | $39,075 |
|  | Closure costs, loss on disposals and other | 3,071 | 1,598 |
| Finance lease cost |  |  |  |
| Amortization of lease assets | Depreciation and amortization | 2,250 | 2,128 |
| Interest on lease liabilities | Interest expense, net | 401 | 487 |
|  |  | 44,236 | 43,288 |
| Sublease income | Franchising royalties and fees, and other | (3,242) | (1,832) |
| Total lease cost, net |  | $40,994 | $41,456 |

Future minimum lease payments required under existing leases as of January 3, 2023 are as follows (in thousands):

|  | Operating Leases | Finance Leases | Total |
| --- | --- | --- | --- |
| 2023 | $38,869 | $2,591 | $41,460 |
| 2024 | 43,107 | 2,350 | 45,457 |
| 2025 | 41,592 | 1,119 | 42,711 |
| 2026 | 37,879 | 37 | 37,916 |
| 2027 | 33,483 | 34 | 33,517 |
| Thereafter | 94,198 | 64 | 94,262 |
| Total lease payments | 289,128 | 6,195 | 295,323 |
| Less: Imputed interest | 73,227 | 465 | 73,692 |
| Present value of lease liabilities | $215,901 | $5,730 | $221,631 |

Operating lease payments include $98.6 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $17.8 million of legally binding minimum lease payments for leases signed but not yet commenced.

59

# **NOODLES & COMPANY**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Lease term and discount rate are as follows:

|  | January 3, 2023 | December 28, 2021 |
| --- | --- | --- |
| Weighted average remaining lease term (years): |  |  |
| Operating | 7.9 | 8.1 |
| Finance | 2.6 | 3.4 |
| Weighted average discount rate: |  |  |
| Operating | 8.0% | 8.2% |
| Finance | 6.4% | 6.5% |

Supplemental disclosures of cash flow information related to leases are as follows (in thousands):

| Cash paid for lease liabilities: | 2022 | 2021 |
| --- | --- | --- |
| Operating leases | $45,158 | $42,231 |
| Finance leases | 2,391 | 2,413 |
|  | $47,549 | $44,644 |
| Right-of-use assets obtained in exchange for new lease liabilities: |  |  |
| Operating leases | $19,584 | $15,642 |
| Finance leases | 1,346 | 701 |
|  | $20,930 | $16,343 |

# **13. Supplemental Disclosures to Consolidated Statements of Cash Flows**

The following table presents the supplemental disclosures to the Consolidated Statements of Cash Flows for 2022, 2021 and 2020 (in thousands):

|  | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| Interest paid (net of amounts capitalized) | $1,500 | $1,400 | $2,500 |
| Income taxes paid (refunded) | 123 | 106 | (66) |
| Purchases of property and equipment accrued in accounts payable | 5,640 | 5,335 | 891 |

# **14. Commitments and Contingencies**

In the normal course of business, the Company is subject to other proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, the Company is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of January 3, 2023. These matters could affect the operating results of any one financial reporting period when resolved in future periods. The Company believes that an unfavorable outcome with respect to these matters is remote or a potential range of loss is not material to its consolidated financial statements. Significant increases in the number of these claims, or one or more successful claims that result in greater liabilities than the Company currently anticipates, could materially and adversely affect its business, financial condition, results of operations or cash flows.

# **15. Related Party Transactions**

# ***Securities Purchase Agreements***

Under the securities purchase agreement with Mill Road Capital II, L.P. ("Mill Road"), if at any time Mill Road owns 10.0% or more of our outstanding common stock, Mill Road has the right to designate one nominee for election to our Board of Directors. If Mill Road's ownership level falls below 10.0% of our outstanding common stock, Mill Road will no longer have a right to designate a nominee. As of January 3, 2023 and December 28, 2021, Mill Road did not hold a position on the Company's Board of Directors.

60

# **NOODLES & COMPANY**  
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# **16. Revenue Recognition**

# ***Gift Cards***

As of January 3, 2023 and December 28, 2021, the current portion of the gift card liability, $2.4 million and $2.8 million, respectively, is included in accrued expenses and other current liabilities, and the long-term portion, $0.7 million and $0.6 million, respectively, is included in other long-term liabilities in the Consolidated Balance Sheets.

Revenue recognized in the Consolidated Statements of Operations for the redemption of gift cards was $3.4 million, $3.2 million and $3.5 million in 2022, 2021 and 2020, respectively. The Company recognized gift card breakage in restaurant revenue of approximately $0.5 million, $0.3 million and $0.3 million in 2022, 2021 and 2020, respectively.

# ***Franchise Fees***

Initial fees received from franchisees are recognized as revenue over the term of each respective franchise agreement, which is typically 20 years. The Company recognized revenue of $0.1 million in 2022, 2021 and 2020 related to initial fees from franchisees that were included in the contract liability balance at the beginning of the year. The Company expects to recognize approximately $0.1 million each fiscal year through fiscal 2027 and approximately $0.9 million thereafter related to performance obligations that are unsatisfied as of January 3, 2023.

# ***Loyalty Program***

The Company operates the Noodles Rewards program, which is primarily a spend-based loyalty program. With each purchase, Noodles Rewards members earn loyalty points that can be redeemed for rewards, including free products. Using an estimate of the value of reward redemptions, we defer revenue associated with points earned, net of estimated points that will not be redeemed. Points generally expire after six months. Revenue is recognized in a future period when the reward points are redeemed. Deferred revenue related to the rewards was $0.3 million and $0.4 million as of January 3, 2023 and December 28, 2021, respectively, and was included in accrued expenses and other current liabilities in the Consolidated Balance Sheets.

61

# Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Noodles & Company

## Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Noodles & Company (the Company) as of January 3, 2023 and December 28, 2021, the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended January 3, 2023, and the related notes (collectively referred to as the 'consolidated financial statements'). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 3, 2023 and December 28, 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 3, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 3, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 8, 2023 expressed an unqualified opinion thereon.

## Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

## Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

62

# *Description of the Matter*

# ***Impairment of long-lived assets***

As more fully described in Notes 1 and 6 to the consolidated financial statements, during the year ended January 3, 2023, the Company recorded impairment charges of $1.4 million related to its restaurants. The Company evaluates its long-lived assets for impairment whenever events or changes indicate that the carrying amount of an asset may not be recoverable. Management groups and evaluates long-lived assets for impairment at the individual restaurant level, which is the lowest level at which independent identifiable cash flows are available. The Company estimates the future undiscounted cash flows expected to be generated by the assets and compares those estimates to the carrying value of the related assets. If the assets are determined to be impaired, they are written down to their fair values.

When indicators of impairment were identified, auditing the Company’s long-lived asset impairment analyses involved subjective auditor judgment in evaluating the expected restaurant revenues included in the future undiscounted cash flows. This assumption is subjective in nature and is affected by expectations about future market conditions for a given store.

# *How We Addressed the Matter in Our Audit*

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s assessment of the projected undiscounted cash flows to be generated by restaurants with indicators of impairment. This included testing controls over management’s review of the significant assumption of future restaurant revenues described above.

To test the significant assumption described above, our audit procedures included, among others, comparing estimated revenue trends to historical results for similar restaurants and evaluating current trends by restaurant and testing the data used in the calculations for completeness and accuracy. We inquired of the Company’s management to understand the business initiatives supporting the revenue assumption in the future cash flows. We performed a sensitivity analysis of the forecasted restaurant revenues to evaluate the change in future undiscounted cash flow estimates that would result from changes in the assumption.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2009.

63

# **ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure**

None.

# **ITEM 9A. Controls and Procedures**

# **Evaluation of Disclosure Controls and Procedures**

Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

# **Changes in Internal Control Over Financial Reporting**

There have been no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

# **Management's Annual Report on Internal Control Over Financial Reporting**

The management of Noodles & Company is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United State of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of our internal control over financial reporting as of January 3, 2023 based on the criteria in 'Internal Control - Integrated Framework (the 2013 framework)' issued by the Committee of Sponsoring Organizations of the Treadway Commission ('COSO'). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of January 3, 2023.

# **Attestation Report of the Independent Registered Public Accounting Firm**

Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the effectiveness of our internal control over financial reporting as of January 3, 2023. This report follows.

64

# Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Noodles & Company

## Opinion on Internal Control Over Financial Reporting

We have audited Noodles & Company's internal control over financial reporting as of January 3, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Noodles & Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 3, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 3, 2023 and December 28, 2021, the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended January 3, 2023, and the related notes and our report dated March 8, 2023 expressed an unqualified opinion thereon.

## Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

## Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Denver, Colorado March 8, 2023

65

# **ITEM 9B. Other Information**

None.

# **ITEM 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections**

Not applicable.

# **PART III**

# **ITEM 10. Directors, Executive Officers and Corporate Governance**

We have adopted a Code of Business Conduct and Ethics that applies to our directors and a Code of Business Conduct and Ethics that applies to our officers and employees (collectively, the “Codes”), including our principal executive, financial and accounting officers, and persons performing similar functions. These Codes are published on our corporate governance website located at *investor.noodles.com/corporate-governance.cfm*. We intend to disclose future amendments to provisions of our Codes, or waivers of provisions of the Codes granted to executive officers and directors, on the website within four business days following the date of such amendment or waiver.

The remaining information required by this item is incorporated herein by reference to the sections entitled “Proposal No. 1 - Election of Directors,” “Delinquent Section 16(a) Report,” “Executive Officers,” “Board Committees-Policy Regarding Stockholder Recommendations” and “Board Committees-Audit Committee” in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 15, 2023 (the “Proxy Statement”).

# **ITEM 11. Executive Compensation**

The information required by this item is incorporated by reference to the sections entitled “Executive Compensation,” “Director Compensation” and “Board Committees-Compensation Committee Interlocks and Insider Participation” in the Proxy Statement.

# **ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters**

The information required by this item is incorporated by reference to the sections entitled “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.

# **ITEM 13. Certain Relationships and Related Transactions, and Director Independence**

The information required by this item is incorporated by reference to the sections entitled “Transactions with Related Persons” and “Directors and Corporate Governance-Board Independence” in the Proxy Statement.

# **ITEM 14. Principal Accounting Fees and Services**

The information required by this item is incorporated by reference to the section entitled “Proposal No. 4 - Ratification of Appointment of Independent Registered Public Accounting Firm for 2023” in the Proxy Statement.

66

PART IV

# ITEM 15. Exhibits, Financial Statement Schedules

1. Our Consolidated Financial Statements and Notes thereto are included in Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
2. All financial schedules have been omitted either because they are not applicable or because the required information is provided in our Consolidated Financial Statements and Notes thereto, included in Item 8 of this Annual Report on Form 10-K.
3. The Index to Exhibits is incorporated herein by reference and is filed as part of this 10-K.

67

# EXHIBITS

# **Description of Exhibit Incorporated Herein by Reference**

| Exhibit Number | Exhibit Description | Form | File No. | Filing Date | Exhibit Number | Filed Herewith |
| --- | --- | --- | --- | --- | --- | --- |
| 3.1 | Amended and Restated Certificate of Incorporation | S-1 | 333-192402 | November 19, 2013 | 3.1 |  |
| 3.2 | Second Amended and Restated Bylaws | 8-K | 001-35987 | August 24, 2015 | 3.1 |  |
| 4.1 | Specimen Stock Certificate | S-1/A | 333-188783 | June 17, 2013 | 4.1 |  |
| 4.2 | Certificate of Designations for Series A Convertible Preferred Stock | 8-K | 001-35987 | February 9, 2017 | 4.1 |  |
| 4.3 | Form of Warrant to Purchase Class A Common Stock | 8-K | 001-35987 | February 9, 2017 | 4.2 |  |
| 4.4 | Description of Securities | 10-K | 001-35987 | February 26, 2021 | 4.4 |  |
| 10.1 | Noodles & Company Amended and Restated 2010 Stock Incentive Plan | S-1/A | 333-188783 | June 17, 2013 | 10.1 |  |
| 10.2 | Noodles & Company 2013 Employee Stock Purchase Plan | S-1/A | 333-188783 | June 17, 2013 | 10.2 |  |
| 10.3 | Amended and Restated Credit Agreement dated July 27, 2022, by and among Noodles & Company, each of the Guarantors signatory thereto, U.S. Bank National Association, as Administrative Agent, L/C Issuer and Swing Line Issuer and the lenders signatory thereto | 8-K | 001-35987 | July 27, 2022 | 10.1 |  |
| 10.4 | Security Agreement, dated May 9, 2018, by and between Noodles & Company and U.S. Bank National Association, as administrative agent | 10-Q | 001-35987 | May 11, 2018 | 10.2 |  |
| 10.5 | Pledge Agreement, dated May 9, 2018, by and between Noodles & Company and U.S. Bank National Association, as administrative agent | 10-Q | 001-35987 | May 11, 2018 | 10.3 |  |
| 10.6 | Form of Indemnification Agreement by and between Noodles & Company and each of its directors | S-1/A | 333-188783 | June 17, 2013 | 10.15 |  |
| 10.7 | Form of Area Development Agreement | 10-K | 001-35987 | February 24, 2015 | 10.9 |  |
| 10.8 | Form of Franchise Agreement | 10-K | 001-35987 | February 24, 2015 | 10.10 |  |
| 10.9 | Form of Stock Option Agreement (Nonqualified Stock Options) | 10-Q | 001-35987 | November 9, 2017 | 10.7 |  |
| 10.10 | Form of Restricted Stock Unit Agreement | 10-Q | 001-35987 | November 9, 2017 | 10.8 |  |
| 10.11 | Form of Restricted Stock Unit Agreement for Nonemployee Directors | 10-Q | 001-35987 | November 9, 2017 | 10.9 |  |
| 10.12 | The Executive Nonqualified 'Excess' Plan Adoption Agreement, adopted by Noodles & Company on May 16, 2013 | S-1/A | 333-188783 | June 17, 2013 | 10.22 |  |
| 10.13* | Employment Agreement, dated September 21, 2017, between Noodles & Company and Dave Boennighausen | 8-K | 001-35987 | September 25, 2017 | 10.1 |  |

68

| 10.14 | Letter Agreement, dated February 15, 2017, between Noodles & Company and Mill Road Capital Management LLC | 8-K | 001-35987 | March 14, 2017 | 10.2 |
| --- | --- | --- | --- | --- | --- |
| 10.15 | Securities Purchase Agreement, dated March 13, 2017, between Noodles & Company and Mill Road Capital Management LLC | 8-K | 001-35987 | March 14, 2017 | 10.1 |
| 10.16* | Stock Option Agreement (Nonqualified Stock Options), dated September 21, 2017, between Noodles & Company and Dave Boennighausen | 10-Q | 001-35987 | November 9, 2017 | 10.4 |
| 10.17* | Restricted Stock Unit Agreement, dated September 21, 2017, between Noodles & Company and Dave Boennighausen | 10-Q | 001-35987 | November 9, 2017 | 10.5 |
| 10.18* | Restricted Stock Unit Agreement, dated September 21, 2017, between Noodles & Company and Dave Boennighausen | 10-Q | 001-35987 | November 9, 2017 | 10.6 |
| 10.19* | Severance Agreement with Melissa Heidman, dated June 6, 2018 | 10-K | 001-35987 | March 15, 2019 | 10.32 |
| 10.20* | Amended and Restated Noodles & Company Compensation Plan for Non-Employee Directors, dated December 12, 2018 | 10-K | 001-35987 | March 15, 2019 | 10.34 |
| 10.21* | Compensation Plan for Non-Employee Directors Amended and Restated September 19, 2019 | 10-Q | 001-35987 | June 17, 2020 | 10.2 |
| 10.22* | Offer Letter, dated December 4, 2019, between Noodles & Company and Stacey Pool | 10-K | 001-35987 | February 26, 2020 | 10.34 |
| 10.23 | Form of 2020 Performance Restricted Stock Unit Agreement | 10-K | 001-35987 | February 26, 2020 | 10.35 |
| 10.24* | Employment Agreement, dated October 27, 2020, between Noodles & Company and Dave Boennighausen | 10-Q | 001-35987 | October 29, 2020 | 10.1 |
| 10.25* | Employment Agreement, dated October 27, 2020, between Noodles & Company and Brad West | 10-Q | 001-35987 | October 29, 2020 | 10.2 |
| 10.26* | Employment Agreement, dated October 27, 2020, between Noodles & Company and Stacey Pool | 10-Q | 001-35987 | October 29, 2020 | 10.3 |
| 10.27* | Employment Agreement, dated October 27, 2020, between Noodles & Company and Melissa Heidman | 10-Q | 001-35987 | October 29, 2020 | 10.4 |
| 10.28* | Carl Lukach Employment Agreement | 8-K | 001-35987 | November 2, 2020 | 10.1 |
| 10.29* | Carl Lukach Offer Letter | 8-K | 001-35987 | November 2, 2020 | 10.2 |
| 10.30* | Form of 2021 Performance Restricted Stock Unit Agreement | 10-Q | 001-35987 | April 30, 2021 | 10.1 |
| 10.31* | Employment Agreement, dated August 2, 2021, between Noodles & Company and Kathy Lockhart | 10-Q | 001-35987 | August 4, 2021 | 10.1 |
| 10.32* | Employment Agreement, dated August 2, 2021, between Noodles & Company and Sue Petersen | 10-Q | 001-35987 | August 4, 2021 | 10.2 |
| 10.33* | Employment Agreement, dated July 30, 2021, between Noodles & Company and Corey Kline | 10-Q | 001-35987 | August 4, 2021 | 10.3 |

69

| 10.34* | Form of 2019 Performance Restricted Stock Unit Agreement | 10-K | 001-35987 | February 24, 2022 | 10.40 |
| --- | --- | --- | --- | --- | --- |
| 10.35* | Form of 2022 Performance Restricted Stock Unit Agreement | 10-Q | 001-35987 | April 28, 2022 | 10.1 |
| 10.36 | Form of Restricted Stock Unit Agreement for General Manager Equity Partner Plan | 10-Q | 001-35987 | November 4, 2022 | 10.1 |
| 21.1 | List of Subsidiaries of Noodles & Company |  |  |  | X |
| 23.1 | Consent of Ernst & Young LLP |  |  |  | X |
| 24.1 | Power of Attorney (included on signature page of this report) |  |  |  | X |
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  | X |
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  | X |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  | X |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |  |  |  | X |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |  |  |  | X |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  | X |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |  |  |  | X |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |  |  |  | X |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  | X |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |  |  |  | X |

* Management contract or compensatory plan or arrangement.

70

# **ITEM 16. Form 10-K Summary.**

None.

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# SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 9, 2023.

# NOODLES & COMPANY

By: /s/ DAVE BOENNIGHAUSEN

Dave Boennighausen

*Chief Executive Officer*

# POWER OF ATTORNEY

Know all persons by these presents, that each person whose signature appears below constitutes and appoints Dave Boennighausen or Melissa M. Heidman, or any of them, as such person's true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for such person and in such person's name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or any of them or their or such person's substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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| Signature | Title | Date |
| --- | --- | --- |
| /s/ DAVE BOENNIGHAUSEN Dave Boennighausen | Director, Chief Executive Officer (principal executive officer) | March 9, 2023 |
| /s/ CARL LUKACH Carl Lukach | Chief Financial Officer (principal financial officer) | March 9, 2023 |
| /s/ KATHY LOCKHART Kathy Lockhart | Chief Accounting Officer (principal accounting officer) | March 9, 2023 |
| /s/ JEFFREY JONES Jeffrey Jones | Chairman | March 9, 2023 |
| /s/ ROBERT HARTNETT Robert Hartnett | Director | March 9, 2023 |
| /s/ MARY EGAN Mary Egan | Director | March 9, 2023 |
| /s/ DREW MADSEN Drew Madsen | Director | March 9, 2023 |
| /s/ ELISA SCHREIBER Elisa Schreiber | Director | March 9, 2023 |
| /s/ SHAWN TAYLOR Shawn Taylor | Director | March 9, 2023 |

73