Noodles & Company to Shutter Dozens of Underperforming Restaurants in Profitability Push

Noodles & Company plans to close a significant number of restaurants over the next two years as part of a broader initiative to improve profitability and sharpen its geographic focus.

Strategic Retrenchment

The Broomfield, Colorado–based fast-casual chain intends to shut up to 49 company-owned locations by the end of 2026. Management outlined the effort during its third-quarter 2025 earnings call, describing the move as a “disciplined” response to persistent performance gaps at certain units. For the 2025 fiscal year, the company expects 28 to 32 company-owned closures and four franchised shutdowns. Six company-owned units and two franchised restaurants had already gone dark in the second quarter of 2025, following 13 corporate and seven franchise closures in 2024.

Executives said the closures target stores that consistently miss sales and margin benchmarks. Many of the affected restaurants are located in trade areas where foot traffic has shifted, rents have climbed, or competitive pressures have intensified. By exiting those sites, management expects to concentrate capital and operational attention on markets with stronger demand profiles.

Sales Transfer and Operational Savings

The company anticipates retaining roughly 30% of the revenue generated by each closed restaurant through sales migration to nearby units. That expectation is based on performance observed after previous shutdowns. Consolidating volumes into fewer, better-performing stores is projected to lift restaurant-level margins by increasing throughput and spreading fixed costs over higher average sales.

Although the company is closing more restaurants than it is opening, expansion has not halted entirely. Two new company-owned units are scheduled to debut in 2025, underscoring a selective growth approach that favors trade areas with proven demographics and favorable cost structures.

Latest Financial Results

In the third quarter ended 2025, total revenue slipped 0.5% year over year to $122.1 million. Comparable sales rose 4.0% across the system, with company-owned restaurants matching the 4.0% gain and franchised locations edging slightly higher at 4.3%. The bottom line remained negative: the chain reported a net loss of $9.2 million, or $0.20 per diluted share, compared with a $6.8 million loss, or $0.15 per share, in the same quarter a year earlier.

The wider loss largely reflected $5.3 million in pre-tax asset impairments tied to the planned closures. Impairments in the 2024 period were minimal at $0.2 million. Despite the net loss, operating margin improved to 5.2%, up from 3.9% a year earlier, suggesting incremental benefits from earlier consolidation measures.

Analyst Reception

Equity analysts have generally supported the downsizing strategy. A recent note from Jefferies described the exit plan as prudent and argued that the risk–reward profile of the stock remains favorable as management works through its turnaround agenda.

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Academic research supports the premise that selective contraction can enhance chain value. A study led by faculty at the University of Texas, Michigan State University, and Pennsylvania State University found that mature brands often increase firm value by eliminating low-performing stores, whereas aggressive unit expansion can generate profitability concerns.

Industry Context

Restaurant rationalization is not unique to Noodles & Company. Rising commercial rents, shifting consumer patterns and the continued growth of delivery have prompted many chains to reassess brick-and-mortar footprints. Analysts at Archamedia Accountants recently told IFAMagazine that store closures frequently signal evolution rather than decline, especially when companies redirect investment toward e-commerce, digital ordering and off-premise channels.

Regulatory filings, such as those available through the U.S. Securities and Exchange Commission, show that Noodles & Company has been increasing its mix of off-premise sales, a factor management cited when predicting a 30% sales transfer rate from closed restaurants.

Looking Ahead

Executing the closure program remains a central element in the company’s plan to restore sustained profitability. Management indicated that, once the underperforming restaurants are out of the system, resources will shift toward menu innovation, operational upgrades and targeted openings in high-potential markets. The company believes those steps will bolster the guest experience and generate healthier unit economics.

While the timeline extends through 2026, the near-term financial statements will continue to reflect impairment charges and transition costs. However, leadership maintains that the long-term benefits—higher average unit volumes, improved margins and streamlined oversight—outweigh the temporary drag on earnings.

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