Noodles & Company's Q3 2025: Contradictions Emerge on Menu Value Perception, Ramen, Marketing Investment, and Store Closures

Date of Call: November 5, 2025

Financials Results

• Revenue: $122.1M, down 0.5% YOY
• EPS: $-0.20 per diluted share, compared to -$0.15 prior year
• Gross Margin: 13.2% restaurant contribution margin, up 40 basis points from 12.8% prior year

Guidance:

• Total revenue for 2025 expected $492M to $495M; comp restaurant sales +3.6% to +4.2%.
• Restaurant contribution margin expected 12.3%–12.7%.
• G&A expected $48M–$49M (including ~ $3.3M stock-based comp).
• Depreciation & amortization $28M–$29M; interest expense ~ $11M; capex $12M–$13M.
• Closure program expected to boost 2026 restaurant-level contribution by > $2M; 2025 cost-savings on track > $5M.

Business Commentary:

• Sales and Traffic Growth:
• Noodles & Company reported a 4% increase in comparable sales for Q3 2025, improving sequentially each month and accelerating to 8% in October.

• The growth was driven by strong value offerings like Delicious Duos, increased digital sales, and successful marketing and operational execution.

• Digital Sales and Third-Party Delivery:

• Noodles & Company saw a 12% year-over-year increase in digital sales, primarily driven by third-party delivery.
• 

• This increase was supported by strong digital marketing efforts and the convenience of third-party delivery platforms.

• Restaurant Closures and Cost Savings:

• The company closed 29 underperforming company-owned restaurants by October, with plans to close up to 34 by the end of 2025.

• These closures removed restaurants with negative cash flow, enhanced restaurant-level profitability, and are expected to positively impact 2026 sales by over $2 million.

• Menu Innovation and Limited-Time Offers:

• The introduction of new menu items and limited-time offers, such as Chili Garlic Ramen, contributed to strong sales and trial performances.
• These offerings resonated particularly with younger guests, driving curiosity and enthusiasm, and translating culinary innovation into cultural relevance.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted comp sales +4% in Q3 and October comp sales +8%, adjusted EBITDA improved by $1.6M (~33%), restaurant contribution margin rose to 13.2% (up 40 bps), and company is executing closures and cost-savings expected to improve profitability.

Q&A:

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): Can we kind of talk through how Duos are mixing or how you look at value on the menu? Just trying to figure out consumers accessing via value platform and then what they do upon repeat.
  Response: Delicious Duos mix ~4%–5% across restaurants and channels, delivers strong value scores and a halo effect for the brand.

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): What are you seeing for repeat frequency for customers that access the brand originally through Duos? Do they trade around the menu or remain Duo customers?
  Response: Mix is steady (~4%–5%); Duos bring both new and existing guests and team members are successfully upselling them to other new menu items.

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): How do we get our minds around organic traffic versus contribution from sales transfer to same-store sales from closed stores?
  Response: Closures have provided a material lift—about a 1.0 percentage-point (100 bps) boost to October comps from sales transfer.

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): Learnings from the ramen LTO and thoughts on rotating ramen or making it permanent?
  Response: Ramen is driving trial and repeat; it's early to decide permanence—could be a permanent item or recurring LTO; management will monitor performance.

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): What's the window for that LTO?
  Response: The ramen promotion is slated to end by the end of the year.

• Question from Todd Brooks (The Benchmark Company, LLC, Research Division): Did the ramen LTO start at the start of the quarter or earlier?
  Response: The promotion began in October.

• Question from Ivan Yu (Jefferies LLC, Research Division): Can you share the benefit from the underperforming closures, particularly on margins—are you seeing near-term impact?
  Response: Closures contributed roughly $300,000 to Q3 adjusted EBITDA (limited in Q3 due to back-weighted timing).

• Question from Ivan Yu (Jefferies LLC, Research Division): Regarding the fourth-quarter check benefit as you lap prior-year promotions, does that fall off significantly after Thanksgiving into December?
  Response: Yes—most of the prior-year discount impact falls off post-Thanksgiving, and December should show a more normal year-over-year check increase.

• Question from Ivan Yu (Jefferies LLC, Research Division): To confirm, are the check benefit and sales transfers embedded in the full-year and Q4 guidance?
  Response: Yes—both the check benefit from lapping discounts and the sales-transfer impact from closures are included in the guidance.

Contradiction Point 1

Menu Value Perception and Delicious Duos

It involves the company's response to changes in consumer value perception and the introduction of the Delicious Duos value platform, which directly impacts their menu strategy and consumer engagement.

Can you explain how Duos are being used or how menu value is assessed? How do consumers access the value platform and what is their repeat behavior? - [Todd Brooks](The Benchmark Company, LLC, Research Division)

2025Q3: Delicious Duos since we launched it at the end of July, certainly filled the void of value that we have with our guests. And we're mixing around 4% to 5% depending on the restaurants. What we're encouraged by is we see that throughout the business, not just during lunch or dinner or on our third-party platforms. - [Joseph Christina](CEO)

What were the main challenges in Q2, and how are you addressing them? - [Michael Hynes](Noodles & Company)

2025Q2: We experienced an unexpected decline in guest value perception following our menu launch in March, due to a change in the consumer environment and growing demand for value and affordability. In response, we introduced the delicious Duos value platform on July 30. - [Andrew H. Madsen](CEO)

Contradiction Point 2

Menu Innovation and Ramen

It highlights the company's approach to menu innovation and the introduction of new dishes like ramen, which could impact consumer interest and revenue.

What are your key learnings from the ramen LTO success and considerations for making ramen a permanent menu category? - [Todd Brooks](The Benchmark Company, LLC, Research Division)

2025Q3: It's too early to tell if it's something that we need to have permanently on our menu. It's working. Both trial and repeat business is there. It's a bold dish for us with a bold taste that fits our platform. - [Joseph Christina](CEO)

What are the new strategies for improving traffic and value perception? - [Andrew H. Madsen](Noodles & Company)

2025Q2: We are strengthening our value offers with the introduction of delicious Duos starting at $9.95 and will continue to improve our digital platforms. We are also enhancing our brand messaging to differentiate ourselves and attract more customers. - [Andrew H. Madsen](CEO)

Contradiction Point 3

Marketing Strategy and Investment

It involves changes in marketing strategy and investment levels, which directly impact brand visibility and customer engagement.

How are Duos integrated into the menu pricing strategy? Can you explain consumer purchasing behavior and repeat order patterns after initial access via the value platform? - [Todd Brooks](The Benchmark Company, LLC, Research Division)

2025Q3: The marketing investment has been doubled over the first several months of the new menu. Investments are in broader reach awareness-generating vehicles like connected TV and digital audio. - [Andrew Madsen](CMO)

How will the marketing investment for the new menu decrease over the year? Will the spending remain consistent throughout? Additionally, how are loyalty customers responding to the menu compared to new customers? - [Todd Brooks](The Benchmark Company, LLC, Research Division)

2025Q1: We've invested significantly into our new menu proposition including reimagining the entrée offerings and expanding the flavor profile with new dishes. And in the first quarter, we doubled our marketing investment over the first several months of the new menu. - [Andrew Madsen](CEO)

Contradiction Point 4

Menu Reception and Performance

It involves the reception and performance of the new menu, which affects customer satisfaction and sales growth.

Does that drop significantly beyond Thanksgiving into December? Can we understand the magnitude of the impact? - [Ivan Yu](KeyBanc Capital Markets)

2025Q3: Sales growth and transactions have remained strong since the menu launched in March, up over 5% through April. We are excited about the momentum and expect new news later this year but at a lower level than the menu transformation. - [Andrew Madsen](CMO)

How has traffic changed since the menu launch, and what plans does Noodles have to sustain this momentum for the rest of the year? - [Jake Bartlett](SunTrust Robinson Humphrey)

2025Q1: Sales growth and transactions have remained strong since the menu launched in March, up over 5% through April. - [Andrew Madsen](CEO)

Contradiction Point 5

Impact of Store Closures on Same-Store Sales

It involves the impact of store closures on same-store sales, which directly affects revenue and operational efficiency.

How do we distinguish organic traffic from sales transfer contributions from closed stores to existing stores in the same-store sales traffic numbers? - [Todd Brooks](The Benchmark Company, LLC, Research Division)

2025Q3: We are experiencing a lift -- experiencing a sales lift from our closures. And the closures have really been weighted towards the back half. So we're really seeing that accelerate recently. In October, that was about a 1%, 100 basis point lift for us. And hopefully, that will continue as we expand the effort. - [Michael Hynes](CFO)

Which areas show the most change in guest satisfaction scores, and how do these changes influence future decisions? - [Andrew Barish](Jefferies)

2024Q4: As we look into 2024, we believe we can have a great year. We're going to do a lot of things better than we did in 2023. We'll continue to support our loyal guests with great food and service. We'll continue to innovate on our menu. We'll deliver great value, and it's all part of delivering sales growth. - [Andrew Madsen](CEO)