Noodles & Company will close 55 underperforming restaurants — more than 10 percent of its 528 locations — as it works to right its financial ship amid persistently weak sales, the fast-casual operator said Thursday.
In addition, Broomfield, Colo.-based Noodles & Company said that an existing shareholder, the private-equity group L Catterton, has agreed to pay $18.5 million for preferred stock and the rights to buy additional shares of the company in the coming months.
Dave Boennighausen, Noodles & Company’s interim CEO, said in a statement Thursday that the initiatives “are critical to the long-term success of Noodles & Company.”
“These initiatives focus on our strong, go-forward restaurant portfolio; shore up our balance sheet; and give us the financial flexibility to further our in-restaurant operational and culinary initiatives,” Boennighausen said.
Under the deal, L Catterton will get 18,400 preferred shares that can be converted into 4.3 million shares of common stock. The group also has the right to buy 1.9 million shares at $4.35 per share.
Noodles & Company plans to use cash from the deal to satisfy liabilities associated with the closure of restaurants, as well as liabilities associated with a data breach last year. The company also plans to use funds on investments in its remaining restaurants.
Noodles & Company said it would close 55 locations in the first and second quarters. The restaurants have “significantly underperformed the company’s restaurant averages,” with unit volumes of about $700,000, and have lost money, the operator said.
Noodles & Company said its total restaurant margin would have been $7.3 million higher without the 55 locations in the 12 months ended Sept. 27.
The company’s restaurant margin was between 11.5 percent and 12 percent in the fourth quarter ended Jan. 3. It also said systemwide same-store sales declined 1.3 percent. The operator expects to take a charge ranging from $30.5 million to $31.5 million related to restaurants it needs to close.
Noodles & Company also estimated that the data breach will cost it $11 million.
In the first three quarters of 2016, ended Sept. 27, Noodles & Company reported a loss of $26.3 million, or 95 cents per share.
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