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Noodles & Company Could Be a Tasty Offering

The multi-cuisine chain is growing like crazy


Fast-casual restaurant chain Noodles & Company — “A World of Flavors Under One Roof” — has filed for an initial public offering.

The chain’s concept is fairly unique — because noodles span a number of cuisines, the company is able to serve up a diverse offering of foods, including 25 Asian, Mediterranean and American dishes. Customers can customize orders, and they have the option of either to-go or quick sit-down lunches where food is delivered to your table and served on china.

Noodles & Company features open kitchens and focuses on fresh, high-quality ingredients, but the menu still is value-based, with the average per-person ticket price running roughly $8.

The restaurant has sprung up like a week since its founding in 1995, now spanning 339 restaurants — of which 288 are company-owned — across 25 states. From 2008 to 2012, revenues jumped from $170 million to $300 million, while income from operations has climbed from $2 million to $16 million. Last year, comparable sales growth was a healthy 5.4%.

Noodles & Company’s per-restaurant economics are definitely attractive. It costs roughly $725,000 to build a location, but within three years, the cash-on-cash return is a juicy 30%.

It also has a top-notch management team. CEO Kevin Reddy and President and COO Keith Kinsey were executives at Chipotle (CMG) from 2000 to 2005, during which the burrito chain went from being a small operator to a major fast-casual force.

Noodles still plans to remain focused on the U.S. market for the time being, though there’s still plenty of room for expansion within the country. Management thinks the company can reach a base of 2,500 restaurants within the next 15 to 20 years, and for the current year, it plans to open between 38 and 42 locations and six to eight franchises.

Broadly speaking, the fast-casual segment has been a hot one. According to research from Technomic, the average sales growth is about 8.4% or so, compared to 3.5% overall growth in the restaurant industry.

As for the IPO, Noodles & Company has plans to list under the symbol of NDLS, though the exchange has yet to be selected). Lead underwriters include Morgan Stanley (MS) and UBS Investment Bank (UBS).

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

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