Popular comfort food brand closing dozens of restaurants

Getting smaller isn't always a bad thing.

Even really successful brands need to close stores in some situations due to population shifts, rent increases, or other operating changes.

That's something Amazon's account firm, Archamedia Accountants, stressed to IFAMagazine.

“It is important to recognise that despite the many store closures in recent times, retail is not dying, but evolving. Therefore, it is essential that businesses constantly adapt and react to the market. Store closures themselves don’t always need to signal a ‘downfall’ or an ‘end’, sometimes they can signify a key step toward financial recovery and a shift in focus on areas such as e-commerce.” 

Penn State Smeal College of Business Assistant Professor Hari Sridhar and his colleagues from the University of Texas and Michigan State University found that selective closures can be a positive.

"Researchers find that chain retailers with a high market share tend to gain firm value when stores are closed but that value suffers when new stores are opened. Store closings enhance firm value by closing less profitable store locations, but new store openings may raise concerns about profitability," their research showed.

One struggling fast food chain has been closing locations, but it's doing so in an effort to make the rest of the company healthy.

Noodles & Company is closing restaurants

Noodles & Company CEO Joseph D. Christina explained why the chain has been closing stores.

"Turning to earnings and margin growth, we continue to make disciplined decisions that strengthen our business and position us for sustained profitability. One of the most significant levers we can pull is the strategic closure of underperforming restaurants," he shared during the chain's third-quarter earnings call.

He made if clear that closing a store is not an easy decision.

"We are approaching these closures thoughtfully, focusing on locations where we can effectively transfer sales to nearby restaurants given a high mix of off-premise revenue," he added.

Closing restaurants, the CEO made clear, won't result in losing 100% of the sales those locations generated.

"From the restaurants we plan to close, we expect to retain approximately 30% of sales through transfer to neighboring units, consistent with the performance of recent closed locations. These actions improve overall sales leverage and enhance restaurant-level profitability and efficiency," he said.

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These shutdowns will put the company in a better position.

"These closures are never easy, but they are the right ones for the long-term health of the brand. By tightening our portfolio and focusing on high-performing restaurants and markets, we can strengthen operations, elevate the guest experience, and focus on innovation that drives continued growth in sales and margin," he added.

Noodles & Company store closings timeline

• Noodles plans to shut up to 49 company-owned restaurants by the end of 2026.
  Source: Restaurant Business Online
• For 2025 specifically, the company expects to close 28–32 company-owned locations and 4 franchised restaurants.
  Source: Nation's Restaurant News
• As of its Q2 2025 report, 6 company-owned and 2 franchise restaurants were closed in just that quarter.
  Source: Noodles & Company investor relations
• In 2024, Noodles closed 13 company-owned restaurants and 7 franchise locations; 10 new company‑owned restaurants opened.
  Source: Noodle & Company investor relations
• Despite the closures, Noodles is also opening new restaurants: for example, two company-owned units are expected in 2025.
  Source: Nation's Restaurant News

Noodles & Company had a mixed quarter

• Total revenue decreased 0.5% to $122.1 million from $122.8 million in the third quarter of 2024.
• Comparable restaurant sales increased 4.% system-wide, comprised of a 4.% increase at company-owned restaurants and a 4.3% increase at franchise restaurants.
• Net loss was $9.2 million, or $0.20 loss per diluted share, compared to net loss of $6.8 million, or $0.15 loss per diluted share, in the third quarter of 2024.
  Net loss in the third quarter of 2025 included $5.3 million of pre-tax restaurant impairments primarily related to the planned closures of underperforming restaurants. Net loss in the third quarter of 2024 included $0.2 million of pre-tax restaurant impairments.
• Operating margin was (5.2)% compared to (3.9)% in the third quarter of 2024.
  Source: Noodles & Company investor relations

Jefferies analysts took a positive view of the store closures.

"The firm also viewed Noodles & Co.’s decision to close more underperforming stores in 2025-2026 as prudent, acknowledging that while the company’s turnaround will take time, the risk/reward profile remains positively skewed," Investing.com reported.