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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

As submitted confidentially to the Securities and Exchange Commission on March 22, 2013

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



NOODLES & COMPANY
(Exact name of registrant as specified in its charter)



Delaware
(State or other jurisdiction of incorporation or organization)
  5812
(Primary Standard Industrial
Classification Code Number)
  84-1303469
(I.R.S. Employer
Identification Number)



520 Zang Street, Suite D
Broomfield, CO 80021
(720) 214-1900

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)



Kevin Reddy
Chairman & Chief Executive Officer
Noodles & Company
520 Zang Street, Suite D
Broomfield, CO 80021
(720) 214-1900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)



Copies to:
Andrew L. Fabens
Steven R. Shoemate
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
(212) 351-4000
  Paul A. Strasen
Executive Vice President, General Counsel & Secretary
Noodles & Company
520 Zang Street, Suite D
Broomfield, CO 80021
(720) 214-1900
  Joshua N. Korff
Michael Kim
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
(212) 446-4800



          Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

          If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

          If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

CALCULATION OF REGISTRATION FEE

       
 
TITLE OF EACH CLASS OF SECURITIES
TO BE REGISTERED

  PROPOSED MAXIMUM
AGGREGATE OFFERING
PRICE(1)(2)

  AMOUNT OF
REGISTRATION FEE

 

Class A Common Stock, par value $0.01 per share

  $                                              $                                           

 

(1)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(2)
Includes shares which the underwriters have the option to purchase to cover over-allotments, if any.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission acting pursuant to such section 8(a) may determine.

   


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PROSPECTUS (Subject to Completion)
Issued                             , 2013

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

                       Shares

LOGO

CLASS A COMMON STOCK



Noodles & Company is offering                      shares of its Class A common stock. This is our initial public offering and no public market currently exists for our Class A common stock. We anticipate that the initial public offering price will be between $               and $               per share.

Following this offering, we will have two classes of outstanding common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except that our Class B common stock does not vote on the election or removal of directors unless converted on a share-for-share basis into Class A common stock.



We expect to apply to list our Class A common stock on the Nasdaq Global Select Market or the New York Stock Exchange under the symbol NDLS.



Noodles & Company is an "emerging growth company" as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements in future reports after the closing of this offering.



Investing in our Class A common stock involves risks. See "Risk Factors" beginning on page 12.



PRICE $     A SHARE



 
 
Price to
Public
 
Underwriting
Discounts and
Commissions
 
Proceeds to
Noodles & Company

Per Share

  $        $            $         

Total

  $                     $                     $                  

We have granted the underwriters the right to purchase up to an additional                     shares of Class A common stock to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of Class A common stock to purchasers on or about                           , 2013.



MORGAN STANLEY   UBS INVESTMENT BANK



BofA MERRILL LYNCH   JEFFERIES   BAIRD   PIPER JAFFRAY

   

                           , 2013


Table of Contents


TABLE OF CONTENTS

 
  Page  

Prospectus Summary

    1  

Risk Factors

    12  

Special Note Regarding Forward-Looking Statements

    31  

Use of Proceeds

    32  

Dividend Policy

    33  

Capitalization

    34  

Dilution

    36  

Selected Consolidated Financial Data

    37  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    40  

Business

    61  

Management

    74  

Executive Compensation

    79  

Principal Stockholders

    86  

Certain Relationships and Related Transactions

    88  

Description of Capital Stock

    90  

Shares Eligible for Future Sale

    94  

Material U.S. Federal Income Tax Consequences

    96  

Underwriting

    101  

Legal Matters

    108  

Experts

    108  

Where You Can Find Additional Information

    108  

Index to Consolidated Financial Statements

    F-1  



        You should rely only on the information contained in this prospectus or in any free-writing prospectus we may authorize to be delivered or made available to you. We have not, and the underwriters have not, authorized anyone to provide you with additional or different information. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus or any free-writing prospectus is accurate only as of its date, regardless of its time of delivery or of any sale of shares of our Class A common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

        Until                        , 2013 (25 days after the commencement of this offering), all dealers that buy, sell or trade shares of our Class A common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

        For investors outside the United States: We have not, and the underwriters have not, done anything that would permit this offering, or possession or distribution of this prospectus, in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.

        "Noodles & Company" is our primary registered trademark. This prospectus contains this trademark and some of our other trademarks, trade names and service marks. Each trademark, trade name or service mark of any other company appearing in this prospectus belongs to its respective holder.

        Certain monetary amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them. In this prospectus, "Noodles & Company," "Noodles," "we," "us" and the "Company" refer to Noodles & Company and, where appropriate, its subsidiaries, unless expressly indicated or the context otherwise requires. We refer to our Class A common stock as "common stock," unless the context otherwise requires. We sometimes refer to our common stock and Class B common stock as "equity interests" when described on an aggregate basis. Our quarters are generally comprised of three periods, the first two periods of which are four weeks and the last period of which is five weeks.

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PROSPECTUS SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before deciding to invest in our Class A common stock, which we refer to in this prospectus as "common stock," unless the context otherwise requires. The rights of the holders of our Class A common stock and our Class B common stock are identical in all respects, except that our Class B common stock does not vote on the election or removal of directors unless converted on a share-for-share basis into Class A common stock. You should read the entire prospectus carefully, including "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes to those consolidated financial statements, before making an investment decision.


NOODLES & COMPANY
A World of Flavors Under One Roof

        Noodles & Company is a high growth, fast casual restaurant concept offering lunch and dinner at a compelling value within the fastest growing segment of the restaurant industry. We opened our first location in 1995, offering noodle and pasta dishes, staples of many cuisines, with the goal of delivering fresh ingredients and flavors from around the world under one roof—from Pad Thai to Mac & Cheese. Today, our globally inspired menu includes a wide variety of high quality, cooked-to-order dishes, including noodles and pasta, soups, salads and sandwiches, which are served on china by our friendly team members. We have 331 restaurants, comprised of 280 company-owned and 51 franchised locations, across 25 states and the District of Columbia, as of March 15, 2013. Our revenue and income from operations have grown from $170 million and $2 million in 2008 to $300 million and $16 million in 2012, representing compound annual growth rates ("CAGRs") of 15.2% and 67.5%.


YOUR WORLD KITCHEN
Our Differentiated Offering

        Your World Kitchen captures the breadth of our differentiated offering and defines our guests' experience. Our company was founded on the core principle that food can be served quickly and conveniently in an inviting environment without sacrificing quality, freshness or flavor.

        "Your" . . . On trend with our world today, where customization is commonplace, we put control into our guests' hands. Each dish is cooked-to-order and can be customized to each guest's personal tastes. "Your" also represents the control our guests have over their dining experience, whether they want a meal to go, a quick sit-down lunch or a leisurely dinner with friends or family.

        "World" . . . We offer globally inspired flavors with more than 25 Asian, Mediterranean and American dishes together in a single menu. At many restaurants, people are limited to a particular ethnic cuisine or type of dish, such as a sandwich, burrito or burger. At Noodles & Company, we aim to eliminate the "veto vote" by satisfying the preferences of a wide range of guests, whether a mother with kids, a group of coworkers, an individual or a large party.

        "Kitchen" . . . Open kitchens are the focal point of our restaurants. Our guests can watch their food being cooked, which reinforces our commitment to quality and freshness. "Kitchen" says "cooking" and emphasizes that we cook each dish to order, unlike many of our competitors that only assemble-to-order.


LEADING RESTAURANT GROWTH AND PERFORMANCE

        From 2004 to 2012, we increased the number of our total restaurants from 100 to 327, representing a CAGR of 16.0%. We believe we can grow to 2,500 restaurants across the United States.


Total Restaurants at End of Fiscal Year

GRAPHIC

 

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        We have experienced steady growth in comparable restaurant sales (at restaurants open for at least 18 full periods) in 27 of the last 28 quarters, due primarily to an increase in guest traffic. System-wide comparable restaurant sales growth for 2010, 2011 and 2012 was 3.7%, 4.8% and 5.4%, respectively. Our company-owned restaurant average unit volumes ("AUVs") grew from $1,098,000 at the beginning of 2010 to $1,178,000 at the end of 2012. In 2012, our company-owned restaurant contribution margin was 20.3% for all restaurants and 22.3% for restaurants in the comparable base, placing us in the top-tier of the restaurant industry.

        Our new restaurant investment model calls for a total cash investment of approximately $725,000, net of tenant allowances, and we target a cash-on-cash return in the third operating year above 30%. Our company-owned restaurants have generally exceeded that target.


OUR INDUSTRY
We Think of Ourselves as a "Category of One"

        We operate in the fast casual segment of the restaurant industry. According to Technomic, in 2011 the 150 largest fast casual concepts grew sales by 8.4% to $21.5 billion, compared with 3.5% for the 500 overall largest restaurant chains in the United States.

        We believe we are the only national fast casual restaurant concept offering a menu with a wide variety of noodle and pasta dishes, soups, salads and sandwiches inspired by global flavors. We believe our unique combination of attributes—global flavors and variety, fast service and upscale atmosphere—allows us to compete against multiple segments within and outside of the restaurant industry. Accordingly, we have a larger addressable market for lunch and dinner. We believe we provide a better overall experience than our casual dining competitors by quickly delivering superior quality food with friendly service at an attractive price point. Unlike quick-service and many fast casual competitors, you do not have to jostle your gear or schlep trays of food to or from your table. Grab a drink, have a seat and we will deliver your food to your table—all without the need to tip.

Our Strengths

        We believe the following strengths set us apart from our competitors:

Variety Makes Togetherness Possible

        We have purposefully chosen a range of healthy to indulgent dishes to satisfy carnivores and vegetarians. Our menu encourages guests to customize their meals to meet their tastes and nutritional preferences with our selection of 14 fresh vegetables and six proteins—beef, pork, chicken, meatballs, shrimp and organic tofu. We believe our variety ensures that even the pickiest of eaters can find something to crave, which eliminates the "veto vote" and encourages people with different tastes to enjoy a meal together.

        All of our dishes are cooked-to-order with fresh, high quality ingredients sourced from carefully selected suppliers. Our innovative, passionate and nutritionally-minded culinary team strives to develop new dishes and limited time offers ("LTOs") that incorporate seasonal ingredients to bring nature's best to our guests. For example, our Spinach & Fresh Fruit Salad rotates between fresh strawberries in the summer and Fuji apples in the winter. We recently introduced our award-winning slow-braised, naturally raised pork, serving it on our BBQ Mac & Cheese, our Peppery Pork Sandwich or as an add-on to any of our other dishes.

Value That Is Greater Than Our Attractive Price Point

        Our compelling value proposition, the quality of our food, the sophistication of our recipes and the warmth of our restaurants create an overall guest experience that we believe is second-to-none. Our 2012 per person spend of $7.80 is competitive not only within the fast casual segment, but also within the quick-

 

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service segment. We believe the speed of our service and the quality of our food contribute to a value proposition that enables us to take market share from casual dining restaurants. We deliver compelling value by combining a family-friendly dining environment with the opportunity to enjoy luxurious dishes, such as our Truffle Mac & Cheese, at an affordable price point.

Everything Is a Little Nicer Here

        We design each location individually, which we believe creates an inviting restaurant environment. The ambience is warm and welcoming, with muted lighting and colors, comfortable seating and our own custom music mix, which is intended to make our guests feel relaxed and at home.

        We deliver an exceptional overall dining experience. Our guests should expect not only great food from our restaurants, but also excellent service and warm hospitality. Whether you are a mother with kids or a businessperson with a BlackBerry, you simply order your food, grab a drink and take a seat. We cook each dish to order in approximately five minutes and bring the food right to your table. Our guests may enjoy a relaxed meal or just eat and run.

        Consistent with our culture of enhanced guest service, we seek to hire genuine individuals with unique personalities and train them to deliver prompt, attentive service by engaging guests the moment they enter our restaurants. Our training philosophy empowers both our restaurant managers and team members to add a personal touch when serving our guests, such as coming out from behind the counter to explain our menu and guide guests to the right dish. Our restaurant managers are critical to our success, as their entrepreneurial spirit and outreach efforts generate the warmth of our environment and build our brand in our communities.

        After our guests order at the counter, their food is served on china by our friendly team members. To further enhance our guests' dining experience, we check on them throughout their meal. We offer them drink refills, a glass of wine or dessert, so they do not have to leave their seats.

Desirable and Loyal Consumer Base

        Approximately 40% of our guests visit our restaurants at least once each month. Our guests skew slightly younger and more affluent than the general population, and according to a recent Gallup survey, this demographic spends more on dining than others. We believe the variety of our food and our ability to accomodate a guest's desire to eat quickly or to enjoy a longer meal enable us to draw sales almost equally between lunch and dinner. Our broad appeal and strong guest loyalty have led to industry and media recognition:

    Nation's Restaurant News, MenuMasters Award, 2013, Golden Chain Winner, 2010

    The International Foodservice Manufacturers Association, COEX Innovator Award, 2013

    DigitalCoco, Top 10 "Most Loved" food and beverage brands in social media, 2012

    Restaurant Social Media Index, Top Social Media Brands and Top Social Consumer Sentiment, 2012

    Parents Magazine, Parents Top 10 Family-Friendly Restaurant Chains, 2011 and 2009

    Health Magazine, America's Top 10 Healthiest Fast Food Restaurants, 2009, America's Healthiest Restaurants, 2008

Powerful Restaurant Economics and a Flexible Footprint

        We have a proven restaurant model that generates strong cash flow, consistent restaurant-level financial results and a high return on investment. Our restaurants have been successful in diverse geographic regions, with a broad range of population densities and real estate settings. We believe we are an attractive tenant to the owners and developers of a wide variety of real estate development types, which

 

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allows us to be highly selective in our evaluation of potential new sites. Our disciplined approach to site selection is grounded in an analytical data-driven model with strict criteria including population density, demographics and traffic generators. We take pride in selecting excellent sites where we can design and construct a comfortable, warm environment for our guests.

Proven Leadership

        Our strategic vision and culture have been developed and nurtured by our senior management team under the stewardship of our Chairman and Chief Executive Officer, Kevin Reddy, and our President and Chief Operating Officer, Keith Kinsey. Kevin and Keith joined Noodles in 2005 after working at McDonald's and, more recently, Chipotle. At Chipotle, they were instrumental in growing the concept from a small number of restaurants to more than 400 across the country between 2000 and 2005 with the financial backing of McDonald's. They delivered a similar growth trajectory when they joined Noodles eight years ago, increasing the restaurant base from 100 to 327 between 2005 and 2012, a CAGR of 16.0%. Kevin and Keith have assembled a talented senior management team with significant restaurant experience across a broad range of disciplines. We believe our management team is integral to our success and has positioned us well for long-term growth.

Steady, Reliable Financial Performance

        Our globally inspired flavors and differentiated dining experience have resonated with our guests and resulted in our strong financial performance and a track record of building profitable restaurants. Since 2008, our revenue and income from operations have grown at CAGRs of 15.2% and 67.5%, respectively. We achieved our sales growth through a combination of new restaurant openings and comparable restaurant sales increases. Our approach has resulted in stable gross margins despite minimal price increases and allows us to stay true to our principle of quality food at an attractive price. By design, our selection of dishes is comprised of a diverse collection of ingredients, mitigating exposure to commodity price inflation.

A Clear Path Forward

        We believe we have significant growth potential because of our brand positioning, strong unit economics, proven track record of financial results and broad guest appeal. We believe there are significant opportunities to expand our business, strengthen our competitive position and enhance our brand through the continued implementation of the following strategies:

Continuing to Grow Our Restaurant Base

        We have more than doubled our restaurant base in the last six years to 331 locations in 25 states and the District of Columbia, as of March 15, 2013. In 2012, we opened 39 company-owned restaurants and six franchise restaurants. In 2013, we plan to open between 38 and 42 company-owned restaurants and between six and eight franchise restaurants. We believe we are at an early stage of nationwide expansion, and that we can grow to 2,500 restaurants across the United States based on our scalable infrastructure, broad appeal and flexible and portable real estate model.

        Although we expect the majority of our expansion to continue to be from company-owned restaurants, we are strategically expanding our base of franchise restaurants. Our franchise program is a low cost and high return model that allows us to expand our footprint and build brand awareness in markets that we do not plan to enter in the short to medium term. As of March 15, 2013, we have 51 franchise units in 10 states operated by eight franchisees. Our franchise partners plan to open between six and eight new restaurants in 2013.

 

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Improving Our Performance

        We plan to build on our growth performance by increasing brand awareness, guest frequency, new guest visits, per person spend and sales outside our restaurants. The following is our plan to achieve these goals:

    Heighten brand awareness.  We believe that our food is our best currency and that once people try it they become loyal and repeat guests; however, before guests can try our food, they need to know about us. We differentiate Noodles & Company through an innovative, community-based marketing strategy at the corporate and restaurant level to build brand awareness and guest loyalty. Our restaurant managers engage in local relationship marketing where they approach nearby businesses, groups and individuals for appreciation days, tastings and hero lunches to introduce our neighbors to our food. We also communicate directly to the 600,000 members in our Noodlegram club and use our other social media outlets to promote brand awareness.

    Increase existing guest frequency.  We recently refreshed the interior signage in all of our restaurants to encourage menu exploration, which we believe will increase guest frequency. Our new Welcome Wall menu board, placed at the entrance of each of our company-owned restaurants, shows pictures of our dishes in an easily understandable layout so guests can fully grasp our world of flavors without feeling overwhelmed. We believe this merchandising enables our guests to peruse our offerings without feeling the pressure of holding up a line of hungry people. This new merchandising has already resulted in meaningful improvements to AUVs in the restaurants where it has been implemented, and we expect similar results in the rest of our restaurant base.

    Increase new guest visits.  We would like to be top-of-mind for guests whenever they need to eat, drink or simply find a place where they feel welcome. Although we serve our food quickly, we would like guests to view our restaurants as places to dine and enjoy the company of friends and family. To further drive guest visits at dinner, we have recently enhanced our beer and wine offerings and expanded our appetizer selection.

    Improve our per person spend.  While we have generally implemented modest price increases to offset rising costs, we also strive to increase the per person spend by offering additional items, including our expanded beverage selection and appetizers. Our passionate and innovative menu development team periodically creates LTOs, which sometimes become permanent menu items, such as our Spinach & Fresh Fruit Salad. This strategy allows us to offer our guests greater variety and entices them to "opt-up" to a premium menu offering.

    Grow sales outside of our restaurants.  We are taking steps to sell more food outside of our restaurants by marketing our larger Square Bowls to families and local businesses. We believe the convenience and attractive price point of our Square Bowls will drive take-out and catering sales. In addition, we believe our commitment to speed of service and freshly prepared food provides us with an opportunity to expand catering sales.

Our Equity Sponsors

        Catterton Partners ("Catterton") is one of the largest consumer focused private equity firms in the United States, with over $2.5 billion of equity capital under active management. Catterton's investment professionals bring complementary strategic and operating experience to their portfolio companies and support management teams in accelerating the value creation process after investment. Catterton invests in all major consumer segments, including food and beverage, retail and restaurants, consumer products and services, and media and marketing services. Collectively, the investment professionals at Catterton have over 300 years of relevant industry, investment and operating experience. Immediately prior to this offering, Catterton and its affiliates owned approximately 45% of our outstanding equity interests and will own approximately        % of our outstanding equity interests immediately following the consummation of this offering.

 

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        Argentia Private Investments Inc. ("Argentia") is a wholly owned subsidiary of the Public Sector Pension Investment Board ("PSPIB"), a Canadian Crown corporation established to invest the amounts transferred by the Canadian government equal to the proceeds of the net contributions since April 1, 2000, for the pension plans of the Public Service, the Canadian Forces and the Royal Canadian Mounted Police, and since March 1, 2007, for the Reserve Force Pension Plan. PSPIB is one of Canada's largest pension investment managers, with $64.5 billion of assets under management at March 31, 2012. Their skilled and dedicated team of approximately 400 employees manages a diversified global portfolio including stocks, bonds and other fixed-income securities, and investments in private equity, real estate, infrastructure and renewable resources. Immediately prior to this offering, Argentia owned approximately 45% of our outstanding equity interests and will own approximately        % of our outstanding equity interests immediately following the consummation of this offering.

Corporate Information

        We were incorporated in 2002 in Delaware and merged with The Noodles Shop Co., Inc., a Colorado corporation, in 2003. We opened the first Noodles & Company in 1995 in Denver, Colorado. In December 2010, Catterton, certain of its affiliated entities and Argentia collectively became our majority stockholders (the "2010 Equity Recapitalization") and, as of January 1, 2013, own approximately 90% of our outstanding equity interests. Our central support office is located at 520 Zang Street, Suite D, Broomfield, Colorado 80021, and our telephone number is (720) 214-1900. Our website is www.noodles.com. The information on, or that can be accessed through, our website is not part of this prospectus.


Risks Associated with Our Business

        Investing in our common stock involves significant risks. You should carefully consider the risks described in "Risk Factors" before making a decision to invest in our common stock. If any of these risks actually occur, our business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our common stock would likely decline, and you may lose all or part of your investment. Below is a summary of some of the principal risks we face.

    We may not be able to successfully implement our growth strategy if we are unable to identify appropriate sites for restaurant locations, obtain favorable lease terms, attract guests to our restaurants or hire and retain personnel.

    We may not be able to maintain or improve levels of our comparable restaurant sales.

    The restaurant industry is a highly competitive industry with many well-established competitors.

    We may be unable to protect our brand name, trademarks and other intellectual property rights.

    Challenging economic conditions may affect our business by adversely impacting numerous items that include, but are not limited to: consumer confidence and discretionary spending, the availability of credit presently arranged from our credit facility, the future cost and availability of credit and the operations of our third-party vendors and other service providers.

    Minimum wage increases and mandated employee benefits could cause a significant increase in our labor costs.

    We may face negative publicity or damage to our reputation, which could arise from concerns regarding food safety and foodborne illness or other matters.

    We may fail to secure guests' confidential or credit card information or other private data relating to our employees or us.

    We will face increased costs as a result of being a public company.

 

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THE OFFERING

Class A common stock offered by Noodles & Company                           shares
Class A common stock outstanding after this offering (assuming no exercise of the underwriters' over-allotment option)                           shares
Class B common stock outstanding after this offering(1)                           shares
Over-allotment option                           shares
Use of proceeds   We expect to use the net proceeds from this offering as follows:
   

approximately $            to repay borrowings under our Credit Agreement dated February 28, 2011 with Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and certain other financial institutions (our "credit facility"); and

   

the remainder for working capital and other general corporate purposes.

Risk Factors   See "Risk Factors" for a discussion of factors that you should consider carefully before deciding whether to purchase shares of our Class A common stock.
Proposed Nasdaq Global Select Market or New York Stock Exchange symbol   NDLS

        Except as otherwise indicated, all information in this prospectus:

    gives effect to (i) a reverse stock split of 1-for-            of our shares of Class A common stock, which we refer to in this prospectus as our "common stock," and our shares of Class B common stock, effective immediately prior to this offering and (ii) the redemption of the one share of our outstanding Class C common stock that will occur upon the closing of this offering;

    assumes the effectiveness of our amended and restated certificate of incorporation and amended and restated bylaws included as exhibits to the registration statement of which this prospectus forms a part, which we will adopt prior to the completion of this offering;

    excludes (i) 5,152,823 shares of common stock issuable on a pre-reverse split basis upon the exercise of stock options outstanding as of January 1, 2013 and (ii)                         shares of our common stock reserved for future grants under our stock option and stock incentive plans;

    assumes no exercise of the warrant to purchase up to 150,000 shares on a pre-reverse split basis of our Class B common stock held by Fahrenheit 212, LLC, and no change to the 10,905,789 shares of Class B common stock outstanding as of January 1, 2013 other than the reverse stock split described above; and

    assumes (i) no exercise by the underwriters of their option to purchase up to                        additional shares from us and (ii) an initial public offering price of $            per share, the midpoint of the price range set forth on the cover of this prospectus.

   


(1)
Following this offering, we will have two classes of outstanding common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except that our Class B common stock does not vote on the election or removal of directors unless converted on a share-for-share basis into Class A common stock.

 

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SUMMARY CONSOLIDATED FINANCIAL DATA

        The following table summarizes our consolidated historical financial and operating data. The statements of income data for the fiscal years ended January 1, 2013, January 3, 2012 and December 28, 2010 and the balance sheet data as of January 1, 2013 and January 3, 2012, have been derived from our audited consolidated financial statements included elsewhere in this prospectus and the balance sheet data as of December 28, 2010 have been derived from our audited consolidated financial statements not included in this prospectus. The financial data presented includes all normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and results of operations for such periods.

        The historical results presented below are not necessarily indicative of the results to be expected for any future period. This information should be read in conjunction with "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.

        We operate on a 52 or 53 week fiscal year ending on the Tuesday closest to December 31. Fiscal years 2012 and 2010, which ended on January 1, 2013 and December 28, 2010, respectively, each contained 52 weeks. Fiscal year 2011, which ended on January 3, 2012, contained 53 weeks. We refer to our fiscal years as 2012, 2011 and 2010.

 
  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
 
 
  (in thousands, except share and per share data)
 

Statements of Income Data:

                   

Revenue:

                   

Restaurant revenue

  $ 297,264   $ 253,467   $ 218,560  

Franchising royalties and fees

    3,146     2,599     2,272  
               

Total revenue

    300,410     256,066     220,832  

Costs and Expenses:

                   

Restaurant Operating Costs:

                   

Cost of sales

    78,997     66,419     56,869  

Labor

    89,435     75,472     64,942  

Occupancy

    29,323     25,208     21,650  

Other restaurant operating costs

    39,241     34,652     29,784  

General and administrative(1)

    26,220     23,842     24,921  

Depreciation and amortization

    16,719     14,501     13,932  

Pre-opening

    3,145     2,327     2,088  

Asset disposals, closure costs and restaurant impairments

    1,278     1,629     2,815  
               

Total costs and expenses

    284,358     244,050     217,001  
               

Income from operations

    16,052     12,016     3,831  

Debt extinguishment expense

    2,646     275      

Interest expense

    5,028     6,132     1,819  
               

Income before income taxes

    8,378     5,609     2,012  

Provision (benefit) for income taxes

    3,215     1,780     (366 )
               

Net income

  $ 5,163   $ 3,829   $ 2,378  
               

Earnings per Class A and Class B common share, combined:

                   

Basic

  $ 0.13   $ 0.10   $ 0.06  

Diluted

  $ 0.13   $ 0.10   $ 0.05  

Weighted average Class A and Class B common shares outstanding, combined:

                   

Basic

    40,275,536     40,273,306     42,263,534  

Diluted

    40,321,564     40,273,306     43,720,951  

 

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  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
 
 
  (in thousands, except share and per share data)
 

Selected Operating Data:

                   

Company-owned restaurants at end of period

    276     239     212  

Franchise-owned restaurants at end of period

    51     45     43  

Company-owned:

                   

Average unit volumes(2)

  $ 1,178   $ 1,147   $ 1,126  

Comparable restaurant sales(3)

    5.2 %   4.2 %   3.2 %

Restaurant contribution(4)

  $ 60,268   $ 51,716   $ 45,315  

as a percentage of restaurant revenue

    20.3 %   20.4 %   20.7 %

EBITDA(5)

  $ 34,049   $ 28,146   $ 20,578  

Adjusted EBITDA(5)

  $ 36,283   $ 30,488   $ 26,472  

as a percentage of revenue

    12.1 %   11.9 %   12.0 %

Adjusted net income(5)

  $ 9,187   $ 7,100   $ 4,681  

 

 
  As of  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
 
 
  (in thousands)
 

Balance Sheet Data(6):

                   

Total current assets

  $ 16,154   $ 12,879   $ 214,498  

Total assets

    156,995     126,325     311,148  

Total current liabilities

    23,760     20,557     213,664  

Total liabilities

    142,987     118,802     309,070  

Total stockholders' equity

    14,008     7,523     2,078  

(1)
2010 included $3.7 million of non-cash stock-based compensation expense and $0.3 million of expense for our portion of payroll taxes related to the 2010 Equity Recapitalization. See Note 2 of our consolidated financial statements, Equity Recapitalization. 2012 and 2011 each included $1.0 million of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock. The one share of Class C common stock will be redeemed upon the closing of this offering.

(2)
AUVs consist of average annualized sales of all company-owned restaurants over the trailing 12 periods in a typical operating year.

(3)
Comparable restaurant sales represent year-over-year sales for restaurants open for at least 18 full periods.

(4)
Restaurant contribution represents restaurant revenue less restaurant operating costs which are cost of sales, labor, occupancy and other restaurant operating costs.

(5)
EBITDA, adjusted EBITDA and adjusted net income are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined by U.S. generally accepted accounting principals ("US GAAP"), and our calculation thereof may not be comparable to that reported by other companies.

EBITDA is calculated as net income before interest expense, debt extinguishment expense, provision (benefit) for income taxes, asset disposals, closure costs and restaurant impairments and depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to reflect the additions and eliminations described in the table below.

Adjusted EBITDA is presented because: (i) we believe it is a useful measure for investors to assess the operating performance of our business without the effect of non-cash charges such as depreciation and amortization expenses and asset disposals, closure costs and restaurant impairments and (ii) we use adjusted EBITDA internally as a benchmark for certain of our cash incentive plans and to evaluate our operating performance or compare our performance to that of our competitors. The use of adjusted EBITDA as a performance measure permits a comparative assessment of our operating performance

 

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    relative to our performance based on our US GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. Companies within our industry exhibit significant variations with respect to capital structures and cost of capital (which affect interest expense and income tax rates) and differences in book depreciation of property, plant and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management believes that adjusted EBITDA facilitates company-to-company comparisons within our industry by eliminating some of these foregoing variations. Adjusted EBITDA as presented may not be comparable to other similarly-titled measures of other companies, and our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by excluded or unusual items.

    Adjusted net income is presented because we believe this measure provides additional information to facilitate the comparison of our past and present financial results. We use results that both include and exclude the identified items in evaluating our business performance. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will not be affected by certain excluded or unusual items.

    Because of these limitations, EBITDA, adjusted EBITDA and adjusted net income should not be considered in isolation or as a substitute for performance measures calculated in accordance with US GAAP. We compensated for these limitations by relying primarily on our US GAAP results and using EBITDA, adjusted EBITDA and adjusted net income only supplementally. Our management recognizes that adjusted EBITDA and adjusted net income have limitations as analytical financial measures, including the following:

    Adjusted EBITDA does not reflect our capital expenditures or future requirements for capital expenditures;

    Adjusted EBITDA and adjusted net income do not reflect the cost of stock-based compensation;

    Adjusted EBITDA and adjusted net income do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, associated with our indebtedness;

    Adjusted EBITDA does not reflect depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, and it does not reflect cash requirements for such replacements; and

    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs.

 

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    The following tables present a reconciliation of net income to EBITDA, adjusted EBITDA and adjusted net income:

 
  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
 
 
  (in thousands)
 

Net income

  $ 5,163   $ 3,829   $ 2,378  

Depreciation and amortization

    16,719     14,501     13,932  

Asset disposals, closure costs and restaurant impairments

    1,278     1,629     2,815  

Debt extinguishment expense

    2,646     275      

Interest expense

    5,028     6,132     1,819  

Provision (benefit) for income taxes

    3,215     1,780     (366 )
               

EBITDA

  $ 34,049   $ 28,146   $ 20,578  

Management fees(a)

    1,000     1,014      

Stock-based compensation expense(b)

    1,234     1,328     5,894  
               

Adjusted EBITDA

  $ 36,283   $ 30,488   $ 26,472  
               

Net income

 
$

5,163
 
$

3,829
 
$

2,378
 

Interest expense(c)

    7,306     6,038     1,450  

Management fees(a)

    1,000     1,014      

Stock-based compensation acceleration(d)

            3,989  

Incremental public company costs(e)

    (1,600 )   (1,600 )   (1,600 )

Tax effect on adjustments(f)

    (2,682 )   (2,181 )   (1,536 )
               

Adjusted net income

  $ 9,187   $ 7,100   $ 4,681  
               

(a)
2012 and 2011 each included $1.0 million of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock.

(b)
2010 included $3.7 million of non-cash stock-based compensation expense and $0.3 million of expense for our portion of payroll taxes related to the 2010 Equity Recapitalization. See Note 2 of our consolidated financial statements, Equity Recapitalization.

(c)
Reflects the net adjustment to interest expense resulting from the repayment of borrowings of $94.5 million of aggregate principal amount of outstanding loans with the net proceeds from this offering as if the transaction occurred on December 30, 2009 and assumes that the outstanding debt balance was zero for all periods presented. This interest adjustment was calculated by reversing the historical interest expense and debt extinguishment expense of $7.7 million, $6.4 million and $1.8 million for the years ended January 1, 2013, January 3, 2012 and December 28, 2010 respectively, and recalculating interest expense based upon the unused commitment fee and the amortization of loan origination fees in an amount of $0.4 million in each year.

(d)
Reflects the stock compensation acceleration charge related to the acceleration and conversion of outstanding options in the 2010 Equity Recapitalization.

(e)
Reflects the estimated additional annual costs related to being a publicly traded company.

(f)
Reflects adjustments to historical income tax expense to reflect adjustments to net income, assuming a statutory tax rate of 40% for each period.
(6)
As of December 28, 2010, the consolidated balance sheet included $189.4 million in restricted cash and current liabilities that were temporarily held due to timing of the 2010 Equity Recapitalization. See Note 2 of our consolidated financial statements, Equity Recapitalization.

 

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RISK FACTORS

        An investment in our Class A common stock, which we refer to in this prospectus as our "common stock," involves a high degree of risk. You should carefully consider the risks and uncertainties described below before deciding whether to purchase shares of our common stock. In assessing these risks, you should also refer to the other information contained in this prospectus, including our consolidated financial statements and related notes. If any of the risks described below actually occur, our business, financial conditions or results of operations could be materially adversely affected. In any such case, the trading price of our common stock could decline and you could lose all or part of your investment.

Risks Related to Our Business and Industry

Our sales growth rate depends primarily on our ability to open new restaurants and is subject to many unpredictable factors.

        One of the key means of achieving our growth strategy will be through opening new restaurants and operating those restaurants on a profitable basis. We expect this to be the case for the foreseeable future. In 2013, we plan to open between 38 and 42 company-owned restaurants and between six and eight franchise restaurants. We may not be able to open new restaurants as quickly as planned. In the past, we have experienced delays in opening some restaurants and that could happen again. Delays or failures in opening new restaurants could materially and adversely affect our growth strategy and our expected results. As we operate more restaurants, our rate of expansion relative to the size of our restaurant base will eventually decline.

        In addition, one of our biggest challenges is locating and securing an adequate supply of suitable new restaurant sites in our target markets. Competition for those sites is intense, and other restaurant and retail concepts that compete for those sites may have unit economic models that permit them to bid more aggressively for those sites than we can. There is no guarantee that a sufficient number of suitable sites will be available in desirable areas or on terms that are acceptable to us in order to achieve our growth plan. Our ability to open new restaurants also depends on other factors, including:

    negotiating leases with acceptable terms;

    identifying, hiring and training qualified employees in each local market;

    managing construction and development costs of new restaurants, particularly in competitive markets;

    obtaining construction materials and labor at acceptable costs, particularly in urban markets;

    securing required governmental approvals and permits (including construction and other permits) in a timely manner and responding effectively to any changes in local, state or federal laws and regulations that adversely affect our costs or ability to open new restaurants; and

    avoiding the impact of inclement weather, natural disasters and other calamities.

        Our progress in opening new restaurants from quarter to quarter may occur at an uneven rate. If we do not open new restaurants in the future according to our current plans, the delay could materially adversely affect our business, financial condition or results of operations.

Our long-term success is highly dependent on our ability to effectively identify and secure appropriate sites for new restaurants.

        We intend to develop new restaurants in our existing markets, expand our footprint into adjacent markets and selectively enter into new markets. In order to build new restaurants, we must first identify target markets where we can enter or expand our footprint, taking into account numerous factors, including the location of our current restaurants, local economic trends, population density, area

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demographics and geography. Then we must locate and secure appropriate sites, which is one of our biggest challenges. There are numerous factors involved in identifying and securing an appropriate site, including:

    identification and availability of locations with the appropriate size, traffic patterns, local retail and business attractions and infrastructure that will drive high levels of guest traffic and sales per unit;

    competition in new markets, including competition for restaurant sites;

    financial conditions affecting developers and potential landlords, such as the effects of macro-economic conditions and the credit market, which could lead to these parties delaying or canceling development projects (or renovations of existing projects), in turn reducing the number of appropriate locations available;

    developers and potential landlords obtaining licenses or permits for development projects on a timely basis;

    proximity of potential development sites to an existing location;

    anticipated commercial, residential and infrastructure development near our new restaurants; and

    availability of acceptable lease arrangements.

        We may not be able to successfully develop critical market presence for our brand in new geographical markets, as we may be unable to find and secure attractive locations, build name recognition or attract new guests. If we are unable to fully implement our development plan, our business, financial condition or results of operations could be materially adversely affected.

Our expansion into new markets may present increased risks.

        We plan to open restaurants in markets where we have little or no operating experience. Restaurants we open in new markets may take longer to reach expected sales and profit levels on a consistent basis and may have higher construction, occupancy or operating costs than restaurants we open in existing markets, thereby affecting our overall profitability. New markets may have competitive conditions, consumer tastes and discretionary spending patterns that are more difficult to predict or satisfy than our existing markets. We may need to make greater investments than we originally planned in advertising and promotional activity in new markets to build brand awareness. We may find it more difficult in new markets to hire, motivate and keep qualified employees who share our vision, passion and business culture. We may also incur higher costs from entering new markets, if, for example, we assign area managers to manage comparatively fewer restaurants than we assign in more developed markets. As a result, these new restaurants may be less successful or may achieve target AUVs at a slower rate. If we do not successfully execute our plans to enter new markets, our business, financial condition or results of operations could be materially adversely affected.

New restaurants, once opened, may not be profitable, and the increases in average restaurant sales and comparable restaurant sales that we have experienced in the past may not be indicative of future results.

        Our new restaurants typically open with above average volumes, which then decline after the initial sales surge that comes with interest in a restaurant's grand opening. Recent openings have stabilized in sales after approximately 32 to 36 weeks of operation, at which time the restaurant's sales typically begin to grow on a consistent basis. In new markets, the length of time before average sales for new restaurants stabilize is less predictable and can be longer as a result of our limited knowledge of these markets and consumers' limited awareness of our brand. New restaurants may not be profitable and their sales performance may not follow historical patterns. In addition, our average restaurant sales and comparable restaurant sales may not increase at the rates achieved over the past several years. Our ability to operate

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new restaurants profitably and increase average restaurant sales and comparable restaurant sales will depend on many factors, some of which are beyond our control, including:

    consumer awareness and understanding of our brand;

    general economic conditions, which can affect restaurant traffic, local labor costs and prices we pay for the food products and other supplies we use;

    changes in consumer preferences and discretionary spending;

    competition, either from our competitors in the restaurant industry or our own restaurants;

    temporary and permanent site characteristics of new restaurants; and

    changes in government regulation.

        If our new restaurants do not perform as planned, our business and future prospects could be harmed. In addition, if we are unable to achieve our expected average restaurant sales, our business, financial condition or results of operations could be adversely affected.

Our sales and profit growth could be adversely affected if comparable restaurant sales are less than we expect.

        The level of comparable restaurant sales, which represent the change in year-over-year sales for restaurants open for at least 18 full periods, will affect our sales growth and will continue to be a critical factor affecting profit growth because the profit margin on comparable restaurant sales is generally higher than the profit margin on new restaurant sales. Our ability to increase comparable restaurant sales depends in part on our ability to successfully implement our initiatives to build sales. It is possible such initiatives will not be successful, that we will not achieve our target comparable restaurant sales growth or that the change in comparable restaurant sales could be negative, which may cause a decrease in sales and profit growth that would materially adversely affect our business, financial condition or results of operations. See "Management's Discussion and Analysis of Financial Condition—Highlights and Trends."

Our failure to manage our growth effectively could harm our business and operating results.

        Our growth plan includes a significant number of new restaurants. Our existing restaurant management systems, financial and management controls and information systems may be inadequate to support our planned expansion. Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain managers and team members. We may not respond quickly enough to the changing demands that our expansion will impose on our management, restaurant teams and existing infrastructure which could harm our business, financial condition or results of operations.

        We believe our culture—from the restaurant level up through management—is an important contributor to our success. As we grow, however, we may have difficulty maintaining our culture or adapting it sufficiently to meet the needs of our operations. Among other important factors, our culture depends on our ability to attract, retain and motivate employees who share our enthusiasm and dedication to our concept. Our business, financial condition or results of operations could be materially adversely affected if we do not maintain our infrastructure and culture as we grow.

The planned rapid increase in the number of our restaurants may make our future results unpredictable.

        In 2013, we expect to open between 38 and 42 company-owned restaurants and between six and eight franchise restaurants, and we plan to continue to increase the number of our restaurants in the next several years. This growth strategy and the substantial investment associated with the development of each new restaurant may cause our operating results to fluctuate and be unpredictable or adversely affect our profits. Our future results depend on various factors, including successful selection of new markets and restaurant

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locations, local market acceptance of our restaurants, consumer recognition of the quality of our food and willingness to pay our prices, the quality of our operations and general economic conditions. In addition, as has happened when other restaurant concepts have tried to expand, we may find that our concept has limited appeal in new markets or we may experience a decline in the popularity of our concept in the markets in which we operate. Newly opened restaurants or our future markets and restaurants may not be successful or our system-wide average restaurant sales may not increase at historical rates, which could materially adversely affect our business, financial condition or results of operations.

Opening new restaurants in existing markets may negatively affect sales at our existing restaurants.

        The consumer target area of our restaurants varies by location, depending on a number of factors, including population density, other local retail and business attractions, area demographics and geography. As a result, the opening of a new restaurant in or near markets in which we already have restaurants could adversely affect the sales of these existing restaurants. Existing restaurants could also make it more difficult to build our consumer base for a new restaurant in the same market. Our core business strategy does not entail opening new restaurants that we believe will materially affect sales at our existing restaurants, but we may selectively open new restaurants in and around areas of existing restaurants that are operating at or near capacity to effectively serve our guests. Sales cannibalization between our restaurants may become significant in the future as we continue to expand our operations and could affect our sales growth, which could, in turn, materially adversely affect our business, financial condition or results of operations.

Competition from other restaurant companies could adversely affect us.

        We face competition from the casual dining, quick-service and fast casual segments of the restaurant industry. These segments are highly competitive with respect to, among other things, taste, price, food quality and presentation, service, location and the ambience and condition of each restaurant. Our competition includes a variety of locally owned restaurants and national and regional chains who offer dine-in, carry-out and delivery services. Many of our competitors have existed longer and have a more established market presence with substantially greater financial, marketing, personnel and other resources than we have. Among our competitors are a number of multi-unit, multi-market fast casual restaurant concepts, some of which are expanding nationally. As we expand, we will face competition from these concepts and new competitors that strive to compete with our market segments. For example, additional competitive pressures come from the deli sections and in-store cafés of grocery store chains, as well as from convenience stores and online meal preparation sites. These competitors may have, among other things, lower operating costs, better locations, better facilities, better management, more effective marketing and more efficient operations.

        Several of our competitors compete by offering menu items that are specifically identified as low in carbohydrates, gluten-free or healthier for consumers. In addition, many of our competitors emphasize lower-cost value options or meal packages or have loyalty programs, strategies we do not currently pursue. Any of these competitive factors may materially adversely affect our business, financial condition or results of operations.

Negative publicity relating to one of our restaurants, including our franchised restaurants, could reduce sales at some or all of our other restaurants.

        Our success is dependent in part upon our ability to maintain and enhance the value of our brand, consumers' connection to our brand and positive relationships with our franchisees. We may, from time to time, be faced with negative publicity relating to food quality, restaurant facilities, guest complaints or litigation alleging illness or injury, health inspection scores, integrity of our or our suppliers' food processing, employee relationships or other matters, regardless of whether the allegations are valid or whether we are held to be responsible. The negative impact of adverse publicity relating to one restaurant

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may extend far beyond the restaurant or franchise involved to affect some or all of our other restaurants. The risk of negative publicity is particularly great with respect to our franchised restaurants because we are limited in the manner in which we can regulate them, especially on a real-time basis. The considerable expansion in the use of social media over recent years can further amplify any negative publicity that could be generated by such incidents. A similar risk exists with respect to unrelated food service businesses, if consumers associate those businesses with our own operations.

        Additionally, employee claims against us based on, among other things, wage and hour violations, discrimination, harassment or wrongful termination may also create negative publicity that could adversely affect us and divert our financial and management resources that would otherwise be used to benefit the future performance of our operations. A significant increase in the number of these claims or an increase in the number of successful claims could materially adversely affect our business, financial condition or results of operations. Consumer demand for our products and our brand's value could diminish significantly if any such incidents or other matters create negative publicity or otherwise erode consumer confidence in us or our products, which would likely result in lower sales and could materially adversely affect our business, financial condition or results of operations.

Governmental regulation may adversely affect our ability to open new restaurants or otherwise adversely affect our business, financial condition or results of operations.

        We are subject to various federal, state and local regulations. Our restaurants are subject to state and local licensing and regulation by health, alcoholic beverage, sanitation, food and occupational safety and other agencies. We may experience material difficulties or failures in obtaining the necessary licenses, approvals or permits for our restaurants, which could delay planned restaurant openings or affect the operations at our existing restaurants. In addition, stringent and varied requirements of local regulators with respect to zoning, land use and environmental factors could delay or prevent development of new restaurants in particular locations.

        We are subject to the U.S. Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas, including our restaurants. We may in the future have to modify restaurants, for example, by adding access ramps or redesigning certain architectural fixtures, to provide service to or make reasonable accommodations for disabled persons. The expenses associated with these modifications could be material.

        Our operations are also subject to the U.S. Occupational Safety and Health Act, which governs worker health and safety, the U.S. Fair Labor Standards Act, which governs such matters as minimum wages and overtime, and a variety of similar federal, state and local laws that govern these and other employment law matters. In addition, federal, state and local proposals related to paid sick leave or similar matters could, if implemented, materially adversely affect our business, financial condition or results of operations.

Food safety and foodborne illness concerns could have an adverse effect on our business.

        We cannot guarantee that our internal controls and training will be fully effective in preventing all food safety issues at our restaurants, including any occurrences of foodborne illnesses such as salmonella, E. coli and hepatitis A. In addition, there is no guarantee that our franchise locations will maintain the high levels of internal controls and training we require at our company-owned restaurants. Furthermore, we and our franchisees rely on third-party vendors, making it difficult to monitor food safety compliance and increasing the risk that foodborne illness would affect multiple locations rather than a single restaurant. Some foodborne illness incidents could be caused by third-party vendors and transporters outside of our control. New illnesses resistant to our current precautions may develop in the future, or diseases with long incubation periods could arise, that could give rise to claims or allegations on a retroactive basis. One or more instances of foodborne illness in any of our restaurants or markets or

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related to food products we sell could negatively affect our restaurant sales nationwide if highly publicized on national media outlets or through social media. This risk exists even if it were later determined that the illness was wrongly attributed to us or one of our restaurants. A number of other restaurant chains have experienced incidents related to foodborne illnesses that have had a material adverse effect on their operations. The occurrence of a similar incident at one or more of our restaurants, or negative publicity or public speculation about an incident, could materially adversely affect our business, financial condition or results of operations.

Compliance with environmental laws may negatively affect our business.

        We are subject to federal, state and local laws and regulations concerning waste disposal, pollution, protection of the environment, and the presence, discharge, storage, handling, release and disposal of, and exposure to, hazardous or toxic substances. These environmental laws provide for significant fines and penalties for noncompliance and liabilities for remediation, sometimes without regard to whether the owner or operator of the property knew of, or was responsible for, the release or presence of hazardous toxic substances. Third parties may also make claims against owners or operators of properties for personal injuries and property damage associated with releases of, or actual or alleged exposure to, such hazardous or toxic substances at, on or from our restaurants. Environmental conditions relating to releases of hazardous substances at prior, existing or future restaurant sites could materially adversely affect our business, financial condition or results of operations. Further, environmental laws, and the administration, interpretation and enforcement thereof, are subject to change and may become more stringent in the future, each of which could materially adversely affect our business, financial condition or results of operations.

We rely heavily on certain vendors, suppliers and distributors, which could adversely affect our business.

        Our ability to maintain consistent price and quality throughout our restaurants depends in part upon our ability to acquire specified food products and supplies in sufficient quantities from third-party vendors, suppliers and distributors at a reasonable cost. In some cases, we may have only one supplier or a limited number of suppliers for a particular product. We do not control the businesses of our vendors, suppliers and distributors and our efforts to specify and monitor the standards under which they perform may not be successful. Furthermore, certain food items are perishable, and we have limited control over whether these items will be delivered to us in appropriate condition for use in our restaurants. If any of our vendors or other suppliers are unable to fulfill their obligations to our standards, or if we are unable to find replacement providers in the event of a supply or service disruption, we could encounter supply shortages and incur higher costs to secure adequate supplies, which could materially adversely affect our business, financial condition or results of operations.

        In addition, we use various third-party vendors to provide, support and maintain most of our management information systems. We also outsource certain accounting, payroll and human resource functions to business process service providers. The failure of such vendors to fulfill their obligations could disrupt our operations. Additionally, any changes we may make to the services we obtain from our vendors, or new vendors we employ, may disrupt our operations. These disruptions could materially adversely affect our business, financial condition or results of operations.

The effect of changes to healthcare laws in the United States may increase the number of employees who choose to participate in our healthcare plans, which may significantly increase our healthcare costs and negatively impact our financial results.

        In 2010, the Patient Protection and Affordable Care Act of 2010 (the "PPCA") was signed into law in the United States to require health care coverage for many uninsured individuals and expand coverage to those already insured. We currently offer and subsidize comprehensive healthcare coverage, primarily for our salaried employees. The healthcare reform law will require us to offer healthcare benefits to all

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full-time employees (including full-time hourly employees) that meet certain minimum requirements of coverage and affordability, or face penalties. If we elect to offer such benefits we may incur substantial additional expense. If we fail to offer such benefits, or the benefits we elect to offer do not meet the applicable requirements, we may incur penalties. The healthcare reform law also requires individuals to obtain coverage or face individual penalties, so employees who are currently eligible but elect not to participate in our healthcare plans may find it more advantageous to do so when such individual mandates take effect. It is also possible that by making changes or failing to make changes in the healthcare plans offered by us we will become less competitive in the market for our labor. Finally, implementing the requirements of healthcare reform is likely to impose additional administrative costs. The costs and other effects of these new healthcare requirements cannot be determined with certainty, but they may significantly increase our healthcare coverage costs and could materially adversely affect our, business, financial condition or results of operations.

Unionization activities or labor disputes may disrupt our operations and affect our profitability.

        Although none of our employees are currently covered under collective bargaining agreements, our employees may elect to be represented by labor unions in the future. If a significant number of our employees were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could adversely affect our business, financial condition or results of operations. In addition, a labor dispute involving some or all of our employees may harm our reputation, disrupt our operations and reduce our revenues, and resolution of disputes may increase our costs.

        As an employer, we may be subject to various employment-related claims, such as individual or class actions or government enforcement actions relating to alleged employment discrimination, employee classification and related withholding, wage-hour, labor standards or healthcare and benefit issues. Such actions, if brought against us and successful in whole or in part, may affect our ability to compete or could materially adversely affect our business, financial condition or results of operations.

Changes in employment laws may adversely affect our business.

        Various federal and state labor laws govern the relationship with our employees and affect operating costs. These laws include employee classification as exempt/non-exempt for overtime and other purposes, minimum wage requirements, unemployment tax rates, workers' compensation rates, immigration status and other wage and benefit requirements. Significant additional government-imposed increases in the following areas could materially affect our business, financial condition, operating results or cash flow:

    minimum wages;

    mandatory health benefits;

    vacation accruals;

    paid leaves of absence, including paid sick leave; and

    tax reporting.

        In addition, various states in which we operate are considering or have already adopted new immigration laws or enforcement programs, and the U.S. Congress and Department of Homeland Security from time to time consider and may implement changes to federal immigration laws, regulations or enforcement programs as well. Some of these changes may increase our obligations for compliance and oversight, which could subject us to additional costs and make our hiring process more cumbersome, or reduce the availability of potential employees. Although we require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. We currently participate in the "E-Verify" program, an

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Internet-based, free program run by the United States government to verify employment eligibility, in states in which participation is required, and we plan to introduce its use throughout our restaurants. However, use of the "E-Verify" program does not guarantee that we will properly identify all applicants who are ineligible for employment. Unauthorized workers are subject to deportation and may subject us to fines or penalties, and if any of our workers are found to be unauthorized we could experience adverse publicity that negatively impacts our brand and may make it more difficult to hire and keep qualified employees. Termination of a significant number of employees who were unauthorized employees may disrupt our operations, cause temporary increases in our labor costs as we train new employees and result in additional adverse publicity. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws. These factors could materially adversely affect our business, financial condition or results of operations.

We rely in part on our franchisees, and if our franchisees cannot develop or finance new restaurants, build them on suitable sites or open them on schedule, our growth and success may be affected.

        We rely in part on our franchisees and the manner in which they operate their locations to develop and promote our business. Although we have developed criteria to evaluate and screen prospective franchisees, we cannot be certain that our franchisees will have the business acumen or financial resources necessary to operate successful franchises in their franchise areas and state franchise laws may limit our ability to terminate or modify these franchise arrangements. Moreover, despite our training, support and monitoring, franchisees may not successfully operate restaurants in a manner consistent with our standards and requirements, or may not hire and train qualified managers and other restaurant personnel. The failure of our franchisees to operate their franchises successfully could have a material adverse effect on us, our reputation, our brand and our ability to attract prospective franchisees and could materially adversely affect our business, financial condition or results of operations.

        Franchisees may not have access to the financial or management resources that they need to open the restaurants contemplated by their agreements with us, or be able to find suitable sites on which to develop them, or they may elect to cease development for other reasons. Franchisees may not be able to negotiate acceptable lease or purchase terms for the sites, obtain the necessary permits and government approvals or meet construction schedules. Any of these problems could slow our growth and reduce our franchise revenues. Additionally, our franchisees typically depend on financing from banks and other financial institutions, which may not always be available to them, in order to construct and open new restaurants. The lack of adequate financing could adversely affect the number and rate of new restaurant openings by our franchisees and adversely affect our future franchise revenues.

        A franchisee bankruptcy could have a substantial negative impact on our ability to collect payments due under such franchisee's franchise arrangements. In a franchisee bankruptcy, the bankruptcy trustee may reject its franchise arrangements pursuant to Section 365 under the United States bankruptcy code, in which case there would be no further royalty payments from such franchisee, and there can be no assurance as to the proceeds, if any, that may ultimately be recovered in a bankruptcy proceeding of such franchisee in connection with a damage claim resulting from such rejection.

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Failure to support our expanding franchise system could have a material adverse effect on our business, financial condition or results of operations.

        Our growth strategy depends in part on expanding our franchise network, which will require the implementation of enhanced business support systems, management information systems, financial controls and other systems and procedures as well as additional management, franchise support and financial resources. We may not be able to manage our expanding franchise system effectively. Failure to provide our franchisees with adequate support and resources could materially adversely affect both our new and existing franchisees as well as cause disputes between us and our franchisees and potentially lead to material liabilities. Any of the foregoing could materially adversely affect our business, financial condition or results of operations.

We have limited control over our franchisees and our franchisees could take actions that could harm our business.

        Franchisees are independent contractors and are not our employees, and we do not exercise control over their day-to-day operations. We provide training and support to franchisees, but the quality of franchised restaurant operations may be diminished by any number of factors beyond our control. Consequently, franchisees may not successfully operate restaurants in a manner consistent with our standards and requirements, or may not hire and train qualified managers and other restaurant personnel. If franchisees do not meet our standards and requirements, our image and reputation, and the image and reputation of other franchisees, may suffer materially and system-wide sales could decline significantly.

        Franchisees, as independent business operators, may from time to time disagree with us and our strategies regarding the business or our interpretation of our, and their, rights and obligations under franchise and development agreements. This may lead to disputes with our franchisees in the future. These disputes may divert the attention of our management and our franchisees from operating our restaurants and affect our image and reputation and our ability to attract franchisees in the future, which could materially adversely affect our business, financial condition or results of operations.

If we or our franchisees face labor shortages or increased labor costs, our growth and operating results could be adversely affected.

        Labor is a primary component in the cost of operating our restaurants. If we or our franchisees face labor shortages or increased labor costs because of increased competition for employees, higher employee turnover rates, increases in the federal, state or local minimum wage or other employee benefits costs (including costs associated with health insurance coverage), our operating expenses could increase and our growth could be adversely affected. In addition, our success depends in part upon our and our franchisees' ability to attract, motivate and retain a sufficient number of well-qualified restaurant operators and management personnel, as well as a sufficient number of other qualified employees, including guest service and kitchen staff, to keep pace with our expansion schedule. Qualified individuals needed to fill these positions are in short supply in some geographic areas. In addition, restaurants have traditionally experienced relatively high employee turnover rates. Although we have not yet experienced significant problems in recruiting or retaining employees, our and our franchisees' ability to recruit and retain such individuals may delay the planned openings of new restaurants or result in higher employee turnover in existing restaurants, which could have a material adverse effect on our business, financial condition or results of operations.

        If we or our franchisees are unable to continue to recruit and retain sufficiently qualified individuals, our business and our growth could be adversely affected. Competition for these employees could require us or our franchisees to pay higher wages, which could result in higher labor costs. In addition increases in the minimum wage would increase our labor costs. Additionally, costs associated with workers' compensation are rising, and these costs may continue to rise in the future. We may be unable to increase our menu prices in order to pass these increased labor costs on to consumers, in which case our margins

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would be negatively affected, which could materially adversely affect our business, financial condition or results of operations.

We depend on the services of key executives, the loss of which could materially harm our business.

        Our senior executives have been instrumental in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, identifying expansion opportunities and arranging necessary financing. Losing the services of any of these individuals could materially adversely affect our business until a suitable replacement is found. We believe that these individuals cannot easily be replaced with executives of equal experience and capabilities. Although we have employment agreements with our Chief Executive Officer and our President and Chief Operating Officer, we cannot prevent them from terminating their employment with us.

Changes in economic conditions could materially affect our ability to maintain or increase sales at our restaurants or open new restaurants.

        The restaurant industry depends on consumer discretionary spending. The United States in general or the specific markets in which we operate may suffer from depressed economic activity, recessionary economic cycles, higher fuel or energy costs, low consumer confidence, high levels of unemployment, reduced home values, increases in home foreclosures, investment losses, personal bankruptcies, reduced access to credit or other economic factors that may affect consumers discretionary spending. Economic conditions may remain volatile and may continue to depress consumer confidence and discretionary spending for the near term. Traffic in our restaurants could decline if consumers choose to dine out less frequently or reduce the amount they spend on meals while dining out. Negative economic conditions might cause consumers to make long-term changes to their discretionary spending behavior, including dining out less frequently on a permanent basis. If restaurant sales decrease, our profitability could decline as we spread fixed costs across a lower level of sales. Reductions in staff levels, asset impairment charges and potential restaurant closures could result from prolonged negative restaurant sales, which could materially adversely affect our business, financial condition or results of operations.

Health concerns arising from outbreaks of viruses may have an adverse effect on our business.

        The United States and other countries have experienced, or may experience in the future, outbreaks of neurological diseases or other diseases or viruses, such as norovirus, influenza and H1N1. If a virus is transmitted by human contact, our employees or guests could become infected, or could choose, or be advised, to avoid gathering in public places, any one of which could materially adversely affect our business, financial condition or results of operations.

Changes in food and supply costs could adversely affect our results of operations.

        Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs. Shortages or interruptions in the availability of certain supplies caused by unanticipated demand, problems in production or distribution, food contamination, inclement weather or other conditions could adversely affect the availability, quality and cost of our ingredients, which could harm our operations. Any increase in the prices of the food products most critical to our menu, such as pasta, beef, chicken, wheat flour, cheese and other dairy products, tofu and vegetables, could adversely affect our operating results. Although we try to manage the impact that these fluctuations have on our operating results, we remain susceptible to increases in food costs as a result of factors beyond our control, such as general economic conditions, seasonal fluctuations, weather conditions, demand, food safety concerns, generalized infectious diseases, product recalls and government regulations. For example, higher diesel prices have in some cases resulted in the imposition of surcharges on the delivery of commodities to our distributors, which they have generally passed on to us to the extent permitted under our arrangements with them.

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        If any of our distributors or suppliers performs inadequately, or our distribution or supply relationships are disrupted for any reason, our business, financial condition, results of operations or cash flows could be adversely affected. Although we often enter into contracts for the purchase of food products and supplies, we do not have long-term contracts for the purchase of all of such food products and supplies. As a result, we may not be able to anticipate or react to changing food costs by adjusting our purchasing practices or menu prices, which could cause our operating results to deteriorate. If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause shortages of food and other items at our restaurants, which could cause a restaurant to remove items from its menu. If that were to happen, affected restaurants could experience significant reductions in sales during the shortage or thereafter, if guests change their dining habits as a result. Our focus on a limited menu would make the consequences of a shortage of a key ingredient more severe. In addition, because we provide moderately priced food, we may choose not to, or may be unable to, pass along commodity price increases to consumers. These potential changes in food and supply costs could materially adversely affect our business, financial condition or results of operations.

Failure to receive frequent deliveries of high quality food ingredients and other supplies could harm our operations.

        Our ability to maintain our menu depends in part on our ability to acquire ingredients that meet our specifications from reliable suppliers. We currently import ingredients from many different countries. Shortages or interruptions in the supply of ingredients caused by unanticipated demand, problems in production or distribution, food contamination, inclement weather or other conditions could adversely affect the availability, quality and cost of our ingredients, which could harm our operations. If any of our distributors or suppliers performs inadequately, or our distribution or supply relationships are disrupted for any reason, our business, financial condition or results of operations could be adversely affected. If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause shortages of food and other items at our restaurants, which could cause a restaurant to remove items from its menu. If that were to happen, affected restaurants could experience significant reductions in sales during the shortage or thereafter, if guests change their dining habits as a result. Our focus on a limited menu would make the consequences of a shortage of a key ingredient more severe. This reduction in sales could materially adversely affect our business, financial condition or results of operations.

New information or attitudes regarding diet and health could result in changes in regulations and consumer consumption habits that could adversely affect our results of operations.

        Regulations and consumer eating habits may change as a result of new information or attitudes regarding diet and health. Such changes may include federal, state and local regulations that impact the ingredients and nutritional content of the food and beverages we offer. The success of our restaurant operations is dependent, in part, upon our ability to effectively respond to changes in any consumer health regulations and our ability to adapt our menu offerings to trends in food consumption. If consumer health regulations or consumer eating habits change significantly, we may choose or be required to modify or delete certain menu items, which may adversely affect the attractiveness of our restaurants to new or returning guests. To the extent we are unwilling or unable to respond with appropriate changes to our menu offerings, it could materially affect consumer demand and have an adverse impact on our business, financial condition or results of operations.

        Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet and health or new information regarding the adverse health effects of consuming certain menu offerings. These changes have resulted in, and may continue to result in, laws and regulations requiring us to disclose the nutritional content of our food offerings, and they have resulted, and may continue to result in, laws and regulations affecting permissible ingredients and menu offerings. For example, a number of states, counties and cities have enacted menu labeling laws requiring multi-unit

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restaurant operators to disclose to consumers certain nutritional information, or have enacted legislation restricting the use of certain types of ingredients in restaurants. These requirements may be different or inconsistent with requirements under the PPACA, which establishes a uniform, federal requirement for certain restaurants to post nutritional information on their menus. Specifically, the PPACA requires chain restaurants with 20 or more locations operating under the same name and offering substantially the same menus to publish the total number of calories of standard menu items on menus and menu boards, along with a statement that puts this calorie information in the context of a total daily calorie intake. These inconsistencies could be challenging for us to comply with in an efficient manner. The PPACA also requires covered restaurants to provide to consumers, upon request, a written summary of detailed nutritional information for each standard menu item, and to provide a statement on menus and menu boards about the availability of this information upon request. An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our offerings.

        Compliance with current and future laws and regulations regarding the ingredients and nutritional content of our menu items may be costly and time-consuming. Additionally, if consumer health regulations or consumer eating habits change significantly, we may be required to modify or discontinue certain menu items, and we may experience higher costs associated with the implementation of those changes. We cannot predict the impact of the new nutrition labeling requirements under the PPACA until final regulations are promulgated. The risks and costs associated with nutritional disclosures on our menus could also impact our operations, particularly given differences among applicable legal requirements and practices within the restaurant industry with respect to testing and disclosure, ordinary variations in food preparation among our own restaurants, and the need to rely on the accuracy and completeness of nutritional information obtained from third-party suppliers.

        We may not be able to effectively respond to changes in consumer health perceptions or our ability to successfully implement the nutrient content disclosure requirements and to adapt our menu offerings to trends in eating habits. The imposition of menu labeling laws could materially adversely affect our business, financial condition or results of operations, as well as our position within the restaurant industry in general.

We expect to need capital in the future, and we may not be able to raise that capital on acceptable terms.

        Developing our business will require significant capital in the future. To meet our capital needs, we expect to rely on our cash flow from operations, the proceeds from this offering and other third-party financing. Third-party financing in the future may not, however, be available on terms favorable to us, or at all. Our ability to obtain additional funding will be subject to various factors, including market conditions, our operating performance, lender sentiment and our ability to incur additional debt in compliance with other contractual restrictions such as financial covenants under our credit facility or other debt documents. These factors may make the timing, amount, terms and conditions of additional financings unattractive. Our inability to raise capital could impede our growth and could materially adversely affect our business, financial condition or results of operations.

We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases.

        We do not own any real property. Payments under our operating leases account for a significant portion of our operating expenses and we expect the new restaurants we open in the future will similarly be leased. Our leases generally have an initial term of ten years and generally can be extended only in five-year increments (at increased rates). All of our leases require a fixed annual rent, although some require the payment of additional rent if restaurant sales exceed a negotiated amount. Generally, our leases are "net" leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases. Additional sites that we lease are likely to be subject to similar long-term non-cancelable leases. If an existing or future restaurant is not profitable, and we decide to close

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it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In addition, as each of our leases expires, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to pay increased occupancy costs or to close restaurants in desirable locations. These potential increased occupancy costs and closed restaurants could materially adversely affect our business, financial condition or results of operations.

We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.

        Our intellectual property is material to the conduct of our business. Our ability to implement our business plan successfully depends in part on our ability to further build brand recognition using our trademarks, service marks, trade dress and other proprietary intellectual property, including our name and logos and the unique ambience of our restaurants. While it is our policy to protect and defend vigorously our rights to our intellectual property, we cannot predict whether steps taken by us to protect our intellectual property rights will be adequate to prevent misappropriation of these rights or the use by others of restaurant features based upon, or otherwise similar to, our concept. It may be difficult for us to prevent others from copying elements of our concept and any litigation to enforce our rights will likely be costly and may not be successful. Although we believe that we have sufficient rights to all of our trademarks and service marks, we may face claims of infringement that could interfere with our ability to market our restaurants and promote our brand. Any such litigation may be costly and divert resources from our business. Moreover, if we are unable to successfully defend against such claims, we may be prevented from using our trademarks or service marks in the future and may be liable for damages, which in turn could materially adversely affect our business, financial condition or results of operations.

We may incur costs resulting from breaches of security of confidential consumer information related to our electronic processing of credit and debit card transactions.

        The majority of our restaurant sales are by credit or debit cards. Other restaurants and retailers have experienced security breaches in which credit and debit card information has been stolen. We may in the future become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and we may also be subject to lawsuits or other proceedings relating to these types of incidents. Any such claim or proceeding could cause us to incur significant unplanned expenses, which could have an adverse impact on our financial condition and results of operations. Further, adverse publicity resulting from these allegations may have a material adverse effect on us and our restaurants.

We rely heavily on information technology, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.

        We rely heavily on information systems, including point-of-sale processing in our restaurants, for management of our supply chain, payment of obligations, collection of cash, credit and debit card transactions and other processes and procedures. Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems could result in delays in guest service and reduce efficiency in our operations. Remediation of such problems could result in significant, unplanned capital investments.

We could be party to litigation that could adversely affect us by distracting management, increasing our expenses or subjecting us to material money damages and other remedies.

        Our guests occasionally file complaints or lawsuits against us alleging we caused an illness or injury they suffered at or after a visit to our restaurants, or that we have problems with food quality or operations.

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We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state law regarding workplace and employment matters, equal opportunity, discrimination and similar matters, and we could become subject to class action or other lawsuits related to these or different matters in the future. Regardless of whether any claims against us are valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time and money away from our operations and hurt our performance. A judgment in excess of our insurance coverage for any claims could materially and adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegations may also materially and adversely affect our reputation or prospects, which in turn could materially adversely affect our business, financial condition or results of operations.

        We are subject to state and local "dram shop" statutes, which may subject us to uninsured liabilities. These statutes generally allow a person injured by an intoxicated person to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Because a plaintiff may seek punitive damages, which may not be fully covered by insurance, this type of action could have an adverse impact on our financial condition or results of operations. A judgment in such an action significantly in excess of, or not covered by, our insurance coverage could adversely affect our business, financial condition or results of operations. Further, adverse publicity resulting from any such allegations may adversely affect us and our restaurants taken as a whole.

        In addition, the restaurant industry has been subject to a growing number of claims based on the nutritional content of food products sold and disclosure and advertising practices. We may also be subject to this type of proceeding in the future and, even if we are not, publicity about these matters (particularly directed at the quick-service or fast casual segments of the industry) may harm our reputation and could materially adversely affect our business, financial condition or results of operations.

Our current insurance may not provide adequate levels of coverage against claims.

        There are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Such losses could have a material adverse effect on our business and results of operations. In addition, we self-insure a significant portion of expected losses under our workers' compensation, general liability, employee health and property insurance programs. Unanticipated changes in the actuarial assumptions and management estimates underlying our reserves for these losses could result in materially different amounts of expense under these programs, which could have a material adverse effect on our financial condition, results of operations and liquidity. As a public company, we intend to enhance our existing directors' and officers' insurance. While we expect to obtain such coverage, we may not be able to obtain such coverage at all or at a reasonable cost now or in the future. Failure to obtain and maintain adequate directors' and officers' insurance would likely adversely affect our ability to attract and retain qualified officers and directors.

Failure to obtain and maintain required licenses and permits or to comply with alcoholic beverage or food control regulations could lead to the loss of our liquor and food service licenses and, thereby, harm our business.

        The restaurant industry is subject to various federal, state and local government regulations, including those relating to the sale of food and alcoholic beverages. Such regulations are subject to change from time to time. The failure to obtain and maintain these licenses, permits and approvals could adversely affect our operating results. Typically, licenses must be renewed annually and may be revoked, suspended or denied renewal for cause at any time if governmental authorities determine that our conduct violates applicable regulations. Difficulties or failure to maintain or obtain the required licenses and approvals could adversely affect our existing restaurants and delay or result in our decision to cancel the opening of new restaurants, which would adversely affect our business.

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        Alcoholic beverage control regulations generally require our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for a license that must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, trade practices, wholesale purchasing, other relationships with alcohol manufacturers, wholesalers and distributors, inventory control and handling, storage and dispensing of alcoholic beverages. Any future failure to comply with these regulations and obtain or retain liquor licenses could adversely affect our business, financial condition or results of operations.

Changes to accounting rules or regulations may adversely affect our results of operations.

        Changes to existing accounting rules or regulations may impact our future results of operations or cause the perception that we are more highly leveraged. Other new accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future. For instance, accounting regulatory authorities have indicated that they may begin to require lessees to capitalize operating leases in their financial statements in the next few years. If adopted, such change would require us to record significant capital lease obligations on our balance sheet and make other changes to our financial statements. This and other future changes to accounting rules or regulations could materially adversely affect our business, financial condition or results of operations.

We will incur increased costs as a result of being a public company.

        As a public company, we expect to incur significant legal, accounting and other expenses that we did not incur as a private company, particularly after we are no longer an "emerging growth company" as defined under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, as well as under the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), and the JOBS Act, have created uncertainty for public companies and increased costs and time that boards of directors and management must devote to complying with these rules and regulations. The Sarbanes-Oxley Act and related rules of the U.S. Securities and Exchange Commission, or SEC, and the Nasdaq Stock Market and the New York Stock Exchange regulate corporate governance practices of public companies. We expect compliance with these rules and regulations to increase our legal and financial compliance costs and lead to a diversion of management time and attention from revenue generating activities. For example, we will be required to adopt new internal controls and disclosure controls and procedures. In addition, we will incur additional expenses associated with our SEC reporting requirements.

        For as long as we remain an "emerging growth company" as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies." These exceptions provide for, but are not limited to, relief from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and an extended transition period for complying with new or revised accounting standards. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." We may remain an "emerging growth company" for up to five years. To the extent we use exemptions from various reporting requirements under the JOBS Act, we may be unable to realize our anticipated cost savings from those exemptions.

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Pursuant to the recently enacted JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are an "emerging growth company."

        Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we file with the SEC as a public company, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the recently enacted JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an "emerging growth company." We could be an "emerging growth company" for up to five years.

Risks Related to Ownership of Our Class A Common Stock

        In this prospectus, we refer to our Class A common stock as "common stock," unless the context otherwise requires.

There is no existing market for our common stock and we do not know if one will develop. Even if a market does develop, the stock prices in the market may not exceed the offering price.

        Prior to this offering, there has not been a public market for our common stock or any of our equity interests. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the Nasdaq Stock Market or the New York Stock Exchange, or how liquid that market may become. An active public market for our common stock may not develop or be sustained after the offering. If an active trading market does not develop or is not sustained, you may have difficulty selling any shares that you buy.

        The initial public offering price for the common stock will be determined by negotiations among us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our common stock at prices equal to or greater than the price you pay in this offering.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.

        Our quarterly operating results may fluctuate significantly because of several factors, including:

    the timing of new restaurant openings and related expense;

    restaurant operating costs for our newly-opened restaurants, which are often materially greater during the first several months of operation than thereafter;

    labor availability and costs for hourly and management personnel;

    profitability of our restaurants, especially in new markets;

    changes in interest rates;

    increases and decreases in AUVs and comparable restaurant sales;

    impairment of long-lived assets and any loss on restaurant closures;

    macroeconomic conditions, both nationally and locally;

    negative publicity relating to the consumption of seafood or other products we serve;

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    changes in consumer preferences and competitive conditions;

    expansion to new markets;

    increases in infrastructure costs; and

    fluctuations in commodity prices.

        Seasonal factors and the timing of holidays also cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced winter and holiday traffic and higher in the second and third quarters. As a result of these factors, our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable restaurant sales for any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors. In that event, the price of our common stock would likely decrease.

The price of our common stock may be volatile and you may lose all or part of your investment.

        The market price of our common stock could fluctuate significantly, and you may not be able to resell your shares at or above the offering price. Those fluctuations could be based on various factors in addition to those otherwise described in this prospectus, including those described under "—Risks Related to Our Business and Industry" and the following:

    our operating performance and the performance of our competitors or restaurant companies in general;

    the public's reaction to our press releases, our other public announcements and our filings with the SEC;

    changes in earnings estimates or recommendations by research analysts who follow us or other companies in our industry;

    global, national or local economic, legal and regulatory factors unrelated to our performance;

    the number of shares to be publicly traded after this offering;

    future sales of our common stock by our officers, directors and significant stockholders;

    the arrival or departure of key personnel; and

    other developments affecting us, our industry or our competitors.

        In addition, in recent years the stock market has experienced significant price and volume fluctuations. These fluctuations may be unrelated to the operating performance of particular companies. These broad market fluctuations may cause declines in the market price of our common stock. The price of our common stock could fluctuate based upon factors that have little or nothing to do with our business, financial condition or results of operations, and those fluctuations could materially reduce our common stock price.

Future sales of our common stock, or the perception that such sales may occur, could depress our common stock price.

        Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, following this offering could depress the market price of our common stock. Our sponsors, executive officers and directors and certain other equity holders have agreed with the underwriters not to offer, sell, dispose of or hedge any shares of common stock or securities convertible into or exchangeable for shares of common stock, subject to specified limited exceptions and extensions

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described elsewhere in this prospectus, during the period ending 180 days (subject to extension) after the date of the final prospectus, except with the prior written consent on behalf of the underwriters. Our amended and restated certificate of incorporation will authorize us to issue up to            shares of common stock, of which            shares will be outstanding and             shares will be issuable upon the exercise of outstanding stock options. Of the outstanding shares,            shares will be freely tradable after the expiration date of the lock-up agreements, excluding any acquired by persons who may be deemed to be our affiliates. Shares of our common stock held by our affiliates will continue to be subject to the volume and other restrictions of Rule 144 under the U.S. Securities Act of 1933, or the Securities Act. The underwriters may, in their sole discretion and at any time without notice, release all or any portion of the shares subject to the lock-up. See "Underwriting."

        In addition, immediately following this offering, we intend to file a registration statement registering under the Securities Act the shares of common stock reserved for issuance under our 2010 Stock Incentive Plan and our Employee Stock Purchase Plan. See the information under the heading "Shares Eligible for Future Sale" for a more detailed description of the shares that will be available for future sales upon completion of this offering.

If you purchase shares of our common stock sold in this offering, you will incur immediate and substantial dilution.

        If you purchase shares of our common stock in this offering, you will incur immediate and substantial dilution in the amount of $            per share because the initial public offering price of $            is substantially higher than the pro forma net tangible book value per share of our outstanding common stock. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares. In addition, you may also experience additional dilution upon future equity issuances or the exercise of stock options to purchase common stock granted to our employees, and directors under our stock option and equity incentive plans. See "Dilution."

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

        The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our common stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrades our common stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our stock prices and trading volume to decline.

Our principal stockholders and their affiliates own a substantial portion of our outstanding equity, and their interests may not always coincide with the interests of the other holders.

        As of January 1, 2013, Catterton, certain of its affiliates and Argentia beneficially owned in the aggregate shares representing approximately 86% of our outstanding voting power, assuming no conversion of Class B common stock into common stock. Persons associated with Catterton, Argentia and PSPIB currently serve and, following the offering, will continue to serve on our board of directors. After this offering, Catterton and certain of its affiliates will beneficially own, in the aggregate, shares representing approximately        % of our outstanding equity interests and approximately        % of our outstanding voting power, assuming no conversion of Class B common stock into common stock. If the underwriters exercise their over-allotment option in full, after this offering, Catterton and certain of its affiliates will beneficially own, in the aggregate, shares representing approximately        % of our outstanding equity interests and approximately        % of our outstanding voting power, assuming no

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conversion of Class B common stock into common stock. After this offering, Argentia will beneficially own, in the aggregate, shares representing approximately        % of our outstanding equity interests and approximately        % of our outstanding voting power, assuming no conversion of Class B common stock into common stock. If the underwriters exercise their over-allotment option in full, after this offering, Argentia will beneficially own, in the aggregate, shares representing approximately        % of our outstanding equity interests and approximately        % of our outstanding voting power, assuming no conversion of Class B common stock into common stock. As a result, Catterton, certain of its affiliates and Argentia could potentially have significant influence over all matters presented to our stockholders for approval, including election and removal of our directors and change in control transactions. The interests of Catterton, certain of its affiliates and Argentia may not always coincide with the interests of the other holders of our common stock.

We do not intend to pay dividends for the foreseeable future.

        We have never declared or paid any cash dividends on our common stock, except for the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. See "Dividend Policy" and "Certain Relationships and Related Transactions."

Provisions in our charter documents and Delaware law may delay or prevent our acquisition by a third party.

        Our amended and restated certificate of incorporation and bylaws, and Delaware law, contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. For example, we will have a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change membership of a majority of our board of directors. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding equity interests. These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock. See "Description of Capital Stock."

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are contained principally in "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." In some cases, you can identify forward-looking statements by terms such as "may," "might," "will," "objective," "intend," "should," "could," "can," "would," "expect," "believe," "design," "estimate," "predict," "potential," "plan" or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

    our ability to successfully maintain increases in our comparable restaurant sales and AUVs;

    our ability to successfully execute our growth strategy and open new restaurants that are profitable;

    current economic conditions and other economic factors;

    our ability to compete with many other restaurants;

    our reliance on vendors, suppliers and distributors;

    concerns regarding food safety and foodborne illness;

    changes in consumer preferences;

    minimum wage increases and mandated employee benefits that could cause a significant increase in our labor costs;

    failure to secure guests' confidential or credit card information or other private data relating to our employees or our company; and

    the impact of governmental laws and regulations.

        These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

        We discuss many of these risks in this prospectus in greater detail under the heading "Risk Factors." Also, these forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. Unless required by United States federal securities laws, we do not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made.

        The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, governmental publications, reports by market research firms or other independent sources. Some data are also based on our good faith estimates. Although we believe these third-party sources are reliable, we have not independently verified the information attributed to these third-party sources and cannot guarantee its accuracy and completeness. Similarly, our estimates have not been verified by any independent source.

        You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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USE OF PROCEEDS

        We estimate that the net proceeds we receive from this offering will be approximately $             million based on the assumed initial public offering price of $            per share, which is the midpoint of the range included on the cover page of this prospectus after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters' option to purchase additional shares in this offering from us is exercised, our estimated net proceeds will be approximately $             million after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase or decrease in the assumed initial public offering price of $            per share would increase or decrease the net proceeds we receive from this offering by approximately $             million, assuming the number of shares offered by us as set forth on the cover page of this prospectus remains the same and after deducting the estimated underwriter discounts and commissions and estimated offering expenses payable by us.

        We intend to use approximately $             million of the net proceeds we receive from this offering to repay borrowings under our credit facility, which has a maturity date of August 1, 2017 and had an outstanding balance of approximately $94.5 million as of January 1, 2013. As of January 1, 2013, the balance outstanding under our senior term loan was $73.7 million, which bore interest from 3.6% to 3.8% per year and the balance under our revolving line of credit was $20.8 million, which bore interest from 3.8% to 5.5% per year. We intend to use any remaining proceeds for working capital and other general corporate purposes.

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DIVIDEND POLICY

        No dividends have been declared or paid on our shares of equity interests, except for the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock. The one outstanding share of Class C common stock will be redeemed at the closing of this offering. We do not anticipate paying any cash dividends on shares of our Class A common stock, or any of our equity interests, in the foreseeable future. We currently intend to retain any earnings to finance the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will be dependent upon then-existing conditions, including our earnings, capital requirements, results of operations, financial condition, business prospects and other factors that our board of directors considers relevant. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Relationships and Related Transactions" for additional information regarding our financial condition.

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CAPITALIZATION

        The following table sets forth our capitalization as of January 1, 2013:

    on an actual basis, and

    on an as adjusted basis, giving effect to the following transactions as if they occurred on January 1, 2013:

    (i) a reverse stock split of 1-for-                    of our shares of Class A common stock, which we refer to in this prospectus as our "common stock," and our shares of Class B common stock, effective immediately prior to the completion of this offering and (ii) the redemption of the one share of our outstanding Class C common stock that will occur upon the closing of this offering;

    the effectiveness of our amended and restated certificate of incorporation and amended and restated bylaws included as exhibits to the registration statement of which this prospectus forms a part, which we will adopt prior to the completion of this offering;

    excludes (i) 5,152,823 shares of common stock issuable on a pre-reverse split basis upon the exercise of stock options outstanding as of January 1, 2013 and (ii)                         shares of our common stock reserved for future grants under our stock option and stock incentive plans;

    no exercise of the warrant to purchase up to 150,000 shares on a pre-reverse split basis of our Class B common stock held by Fahrenheit 212, LLC, and no change to the 10,905,789 shares of Class B common stock outstanding as of January 1, 2013 other than the reverse stock split described above; and

    (i) no exercise by the underwriters of their option to purchase up to                        additional shares from us and (ii) an initial public offering price of $                per share, the midpoint of the price range set forth on the cover of this prospectus.

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        You should read the following table in conjunction with the sections entitled "Use of Proceeds," "Selected Consolidated Financial and Other Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included in this prospectus.

 
  As of January 1, 2013  
 
  Actual   As Adjusted  
 
  (in thousands,
except share and per share data)

 

Cash and cash equivalents

  $ 581        
           

Debt, including current portion:

             

Credit facility(1)

    94,481        
           

Total long-term debt

    94,481        

Stockholders' Equity:

             

Preferred stock, $0.01 par value per share (5,000,000 and                shares authorized, zero and zero shares issued and outstanding, actual and as adjusted)

         

Class A common stock, $0.01 par value per share (47,000,000 and                shares authorized, 29,369,746 and                shares issued and outstanding, actual and as adjusted)

    294        

Class B common stock, $0.01 par value per share; (12,000,000 and                shares authorized, 10,905,789 and                shares issued and outstanding, actual and as adjusted)(2)

    109        

Class C common stock, $0.01 par value per share (one and zero shares authorized, one and zero shares issued and outstanding, actual and as adjusted)

         

Additional paid-in capital

    9,986      

Accumulated other comprehensive loss, net of tax

    (24 )      

Retained earnings

    3,643        
           

Total stockholders' equity

    14,008        
           

Total capitalization

  $ 109,070        
           

(1)
We intend to use approximately $         million of the net proceeds from this offering to repay a portion of the borrowings under our credit facility. See "Use of Proceeds."

(2)
The rights of the holders of our Class A common stock and our Class B common stock are identical in all respects, except that our Class B common stock does not vote on the election or removal of directors unless converted on a share-for-share basis into Class A common stock.

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DILUTION

        Currently we have, and upon completion of this offering we will have, two classes of equity interests issued and outstanding: Class A common stock, which is being sold in this offering and to which we refer in this prospectus as "common stock," and Class B common stock. Dilution is the amount by which the initial public offering price paid by purchasers of shares of our equity interests exceeds the net tangible book value per share of our equity interests immediately following the completion of the offering. Net tangible book value represents the amount of our total tangible assets reduced by our total liabilities. Net tangible book value per share represents our net tangible book value divided by the number of shares of our equity interests outstanding. As of January 1, 2013, prior to giving effect to the offering, our net tangible book value was $10.1 million and our net tangible book value per share was $0.25.

        After giving effect to the issuance and sale of the                        shares of common stock offered in this offering and the application of the proceeds of the offering received by us, as described in "Use of Proceeds," based upon an assumed initial public offering price of $            per share, the midpoint of the range set forth on the cover of this prospectus, our net tangible book value as of January 1, 2013 would have been approximately $             million, or $            per share of equity interest. This represents an immediate increase in net tangible book value to our existing stockholders of $            per share and an immediate dilution to new investors in this offering of $            per share. The following table illustrates this per share dilution net tangible book value to new investors after giving effect to this offering:

Assumed initial public offering price per share

        $    

Net tangible book value per share as of January 1, 2013

  $ 0.25        

Increase in net tangible book value per share attributable to new investors

  $          
             

Adjusted net tangible book value per share after this offering

        $    
             

Dilution per share to new investors

        $    
             

        A $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) our net tangible book value by $             million, the net tangible book value per share after this offering by $            and the dilution per share to new investors by $            , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
  Shares Purchased   Total Consideration    
 
 
  Average
Price
Per Share
 
 
  Number   Percent   Amount   Percent  

Existing stockholders

            % $         % $    

New investors

                               
                       

Total

          100.0 % $       100.0 %      
                       

        The foregoing table does not reflect options outstanding under our stock option plans or stock options to be granted after the offering. As of January 1, 2013, there were 5,152,823 options outstanding with a weighted average exercise price of $5.26 per share on a pre-reverse split basis.

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SELECTED CONSOLIDATED FINANCIAL DATA

        The following table summarizes the consolidated historical financial and operating data for the periods indicated. The statements of income data for the fiscal years ended January 1, 2013, January 3, 2012 and December 28, 2010 and the balance sheet data as of January 1, 2013 and January 3, 2012 have been derived from our audited consolidated financial statements included elsewhere in this prospectus, and the statements of income data from the fiscal years ended December 29, 2009 and December 30, 2008 and the balance sheet data as of December 28, 2010, December 29, 2009 and December 30, 2008 have been derived from our audited consolidated financial statements not included in this prospectus. The financial data presented includes all normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and results of operations for such periods.

        The historical results presented below are not necessarily indicative of the results to be expected for any future period. This information should be read in conjunction with "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and the related notes included elsewhere in this prospectus.

        We operate on a 52 or 53 week fiscal year ending on the Tuesday closest to December 31. Fiscal year 2011, which ended on January 3, 2012, contained 53 weeks, and all other fiscal years presented below contained 52 weeks. We refer to our fiscal years as 2012, 2011, 2010, 2009 and 2008.

 
  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
  December 29,
2009
  December 30,
2008
 
 
  (in thousands, except share and per share data)
 

Statements of Income Data:

                               

Revenue:

                               

Restaurant revenue

  $ 297,264   $ 253,467   $ 218,560   $ 190,175   $ 168,534  

Franchising royalties and fees

    3,146     2,599     2,272     2,293     1,908  
                       

Total revenue

    300,410     256,066     220,832     192,468     170,442  

Costs and Expenses:

                               

Restaurant Operating Costs:

                               

Cost of sales

    78,997     66,419     56,869     51,487     45,707  

Labor

    89,435     75,472     64,942     56,581     49,775  

Occupancy

    29,323     25,208     21,650     18,652     15,707  

Other restaurant operating costs

    39,241     34,652     29,784     26,074     23,518  

General and administrative(1)

    26,220     23,842     24,921     19,259     18,740  

Depreciation and amortization

    16,719     14,501     13,932     13,315     11,283  

Pre-opening

    3,145     2,327     2,088     1,780     2,401  

Asset disposals, closure costs and restaurant impairments            

    1,278     1,629     2,815     1,070     1,273  
                       

Total costs and expenses

    284,358     244,050     217,001     188,218     168,404  
                       

Income from operations

    16,052     12,016     3,831     4,250     2,038  

Debt extinguishment expense

    2,646     275              

Interest expense

    5,028     6,132     1,819     1,840     1,342  
                       

Income before income taxes

    8,378     5,609     2,012     2,410     696  

Provision (benefit) for income taxes

    3,215     1,780     (366 )   1,343     553  
                       

Net income

  $ 5,163   $ 3,829   $ 2,378   $ 1,067   $ 143  
                       

Earnings per Class A and Class B common share, combined:

                               

Basic

  $ 0.13   $ 0.10   $ 0.06   $ 0.03     *  

Diluted

  $ 0.13   $ 0.10   $ 0.05   $ 0.03     *  

Weighted average Class A and Class B common shares outstanding, combined:

                               

Basic

    40,275,536     40,273,306     42,263,534     42,219,853     42,032,607  

Diluted

    40,321,564     40,273,306     43,720,951     42,281,276     42,334,386  

                               

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  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
  December 29,
2009
  December 30,
2008
 
 
  (in thousands, except share and per share data)
 

Selected Operating Data:

                               

Company-owned restaurants at end of period

    276     239     212     186     166  

Franchise-owned restaurants at end of period

    51     45     43     43     37  

Company-owned:

                               

Average unit volumes(2)

  $ 1,178   $ 1,147   $ 1,126   $ 1,098   $ 1,125  

Comparable restaurant sales(3)

    5.2 %   4.2 %   3.2 %   0.4 %   5.6 %

Restaurant contribution(4)

  $ 60,268   $ 51,716   $ 45,315   $ 37,381   $ 33,827  

as a percentage of restaurant revenue

    20.3 %   20.4 %   20.7 %   19.7 %   20.1 %

EBITDA(5)

  $ 34,049   $ 28,146   $ 20,578   $ 18,635   $ 14,594  

Adjusted EBITDA(5)

  $ 36,283   $ 30,488   $ 26,472   $ 20,375   $ 16,681  

as a percentage of revenue

    12.1 %   11.9 %   12.0 %   10.6 %   9.8 %

 

 
  As of  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
  December 29,
2009
  December 30,
2008
 
 
  (in thousands)
 

Balance Sheet Data(6):

                               

Total current assets

  $ 16,154   $ 12,879   $ 214,498   $ 8,727   $ 11,174  

Total assets

    156,995     126,325     311,148     95,764     88,579  

Total current liabilities

    23,760     20,557     213,664     17,342     16,128  

Total liabilities

    142,987     118,802     309,070     67,214     64,931  

Total stockholders' equity

    14,008     7,523     2,078     28,550     23,648  

*
Not meaningful.

(1)
2010 included $3.7 million of non-cash stock-based compensation expense and $0.3 million of expense for our portion of payroll taxes related to the 2010 Equity Recapitalization. See Note 2 of our consolidated financial statements, Equity Recapitalization. 2012 and 2011 each included $1.0 million of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock. The one share of Class C common stock will be redeemed upon the closing of this offering.

(2)
AUVs consist of average annualized sales of all company-owned restaurants over the trailing 12 periods in a typical operating year.

(3)
Comparable restaurant sales represent year-over-year sales for restaurants open for at least 18 full periods.

(4)
Restaurant contribution represents restaurant revenue less restaurant operating costs which are cost of sales, labor, occupancy and other restaurant operating costs.

(5)
EBITDA and adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined by US GAAP, and our calculation thereof may not be comparable to that reported by other companies.

EBITDA is calculated as net income before interest expense, debt extinguishment expense, provision (benefit) for income taxes, asset disposals, closure costs and restaurant impairments and depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to reflect the additions and eliminations described in the table below.

Adjusted EBITDA is presented because: (i) we believe it is a useful measure for investors to assess the operating performance of our business without the effect of non-cash charges such as depreciation and amortization expenses and asset disposals, closure costs and restaurant impairments and (ii) we use adjusted EBITDA internally as a benchmark for certain of our cash incentive plans and to evaluate our operating performance or compare our performance to that of our competitors. The use of adjusted EBITDA as a performance measure permits a comparative assessment of our operating performance relative to our performance based on our US GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. Companies within our industry exhibit significant variations with respect to capital structures and cost of capital (which affect interest expense and income tax rates) and differences in book depreciation of property, plant and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management believes that adjusted EBITDA facilitates company-to-company comparisons within our industry by eliminating some of these foregoing variations. Adjusted EBITDA as presented may not be comparable to other similarly-titled measures of other companies, and

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    our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by excluded or unusual items.

    Because of these limitations, EBITDA and adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with US GAAP. We compensated for these limitations by relying primarily on our US GAAP results and using EBITDA and adjusted EBITDA only supplementally. Our management recognizes that adjusted EBITDA has limitations as an analytical financial measure, including the following:

    Adjusted EBITDA does not reflect our capital expenditures or future requirements for capital expenditures;

    Adjusted EBITDA does not reflect the cost of stock-based compensation;

    Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, associated with our indebtedness;

    Adjusted EBITDA does not reflect depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, and it does not reflect cash requirements for such replacements; and

    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs.

    A reconciliation of net income to EBITDA and adjusted EBITDA is provided below:

 
  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
  December 29,
2009
  December 30,
2008
 
 
  (in thousands)
 

Net income

  $ 5,163   $ 3,829   $ 2,378   $ 1,067   $ 143  

Depreciation and amortization

    16,719     14,501     13,932     13,315     11,283  

Asset disposals, closure costs and restaurant impairments

    1,278     1,629     2,815     1,070     1,273  

Debt extinguishment expense

    2,646     275              

Interest expense

    5,028     6,132     1,819     1,840     1,342  

Provision (benefit) for income taxes

    3,215     1,780     (366 )   1,343     553  
                       

EBITDA

  $ 34,049   $ 28,146   $ 20,578   $ 18,635   $ 14,594  

Management fees(a)

    1,000     1,014              

Stock-based compensation expense(b)

    1,234     1,328     5,894     1,740     2,087  
                       

Adjusted EBITDA

  $ 36,283   $ 30,488   $ 26,472   $ 20,375   $ 16,681  
                       

(a)
2012 and 2011 each included $1.0 million of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock.

(b)
2010 included $3.7 million of non-cash stock-based compensation expense and $0.3 million of expense for our portion of payroll taxes related to the 2010 Equity Recapitalization. See Note 2 of our consolidated financial statements, Equity Recapitalization.
(6)
As of December 28, 2010 the consolidated balance sheet included $189.4 million in restricted cash and current liabilities that were temporarily held due to timing of the 2010 Equity Recapitalization. See Note 2 of our consolidated financial statements, Equity Recapitalization.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected Consolidated Financial Data" and our consolidated financial statements and related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those discussed in "Special Note Regarding Forward-Looking Statements," "Risk Factors" and elsewhere in this prospectus.

        We operate on a 52 or 53 week fiscal year ending on the Tuesday closest to December 31. Fiscal years 2012 and 2010, which ended on January 1, 2013 and December 28, 2010, respectively, each contained 52 weeks. Fiscal year 2011, which ended on January 3, 2012, contained 53 weeks. We refer to our fiscal years as 2012, 2011 and 2010. Our fiscal quarters each contained 13 operating weeks, with the exception of the fourth quarter of 2011, which had 14 operating weeks.

NOODLES & COMPANY
A World of Flavors Under One Roof

Highlights and Trends

        Restaurant Development.    New restaurants have contributed substantially to our revenue growth, and in 2012 we opened 39 new company-owned restaurants and six franchise restaurants. We also had one restaurant relocation and one closure, resulting in a net increase of 43 restaurants. Our growth rate of 15.1% in 2012 continued a track record of over 10% annual restaurant growth for each of the past 10 years. In 2013, we anticipate opening between 38 and 42 company-owned restaurants and between six and eight franchise restaurants.

        Comparable Restaurant Sales.    Comparable restaurant sales increased by 5.4% system wide in 2012, which was comprised primarily of traffic growth and a 1.3% menu price increase. The restaurant industry is impacted significantly by trends in consumer spending, and due to the uncertain economic environment, combined with our own difficult year-over-year comparisons, we may not experience such robust comparable restaurant sales growth in 2013.

        Your World Kitchen.    In 2012, we began using "Your World Kitchen" to describe the breadth of our offering and our guests' dining experience. In our restaurants that have implemented Your World Kitchen merchandising, we have seen an increase in our AUVs. By the end of the first quarter of 2013, we expect to have this merchandising implemented in all of our company-owned restaurants.

Key Measures We Use to Evaluate Our Performance

        To evaluate the performance of our business, we utilize a variety of financial and performance measures. These key measures include revenue, AUVs, comparable restaurant sales, restaurant contribution, EBITDA and adjusted EBITDA.

Revenue

        Restaurant revenue represents sales of food and beverages in company-owned restaurants. Several factors affect our restaurant revenue in any period, including the number of restaurants in operation and per restaurant sales.

        Franchise royalties and fees represent royalty income and initial franchise fees. While we expect that the majority of our revenue and net income growth will be driven by company-owned restaurants, our franchise restaurants remain an important part of our financial success.

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Average Unit Volumes

        AUVs consist of the average annualized sales of all company-owned restaurants for the trailing 12 periods over a certain time frame. AUVs are calculated by dividing restaurant revenue by the number of operating days within each time period and multiplying by 361, which is equal to the number of operating days we have in a typical year. This measurement allows management to assess changes in consumer traffic and per person spending patterns at our restaurants.

Comparable Restaurant Sales

        Comparable restaurant sales refer to year-over-year sales comparisons for the comparable restaurant base. We define the comparable restaurant base to include restaurants open for at least 18 full periods. As of 2012, 2011 and 2010, there were 216, 192 and 174 restaurants, respectively, in our comparable restaurant base. This measure highlights performance of existing restaurants, as the impact of new restaurant openings is excluded. Comparable restaurant sales growth is generated by increases in traffic, which we calculate as the number of entrees sold, or changes in per person spend, calculated as sales divided by traffic. Per person spend can be influenced by changes in menu prices and the mix and number of items sold per person.

        While we believe most of our increases in restaurant revenue will come from opening new restaurants, we will continue to focus on ways to increase comparable restaurant sales. For additional information about how we intend to do that, see the discussion at "Business—Improving Our Performance."

        Measuring our comparable restaurant sales allows us to evaluate the performance of our existing restaurant base. Various factors impact comparable restaurant sales, including:

    consumer recognition of our brand and our ability to respond to changing consumer preferences;

    overall economic trends, particularly those related to consumer spending;

    our ability to operate restaurants effectively and efficiently to meet consumer expectations;

    pricing;

    per person spend and average check amount;

    marketing and promotional efforts;

    local competition;

    trade area dynamics;

    introduction of new and seasonal menu items and LTOs; and

    opening of new restaurants in the vicinity of existing locations.

        As a result of the 53-week fiscal year 2011, our fiscal year 2012 began one week later than our fiscal year 2011. Consistent with common industry practice, we present comparable restaurant sales on a calendar-adjusted basis that aligns current year sales weeks with comparable periods in the prior year, regardless of whether they belong to the same fiscal period or not. Since opening new company-owned and franchise restaurants is an important part of our growth strategy, and we anticipate new restaurants will be a significant component of our revenue growth, comparable restaurant sales are only one measure of how we evaluate our performance.

Restaurant Contribution

        Restaurant contribution is defined as restaurant revenue less restaurant operating costs which are cost of sales, labor, occupancy and other restaurant operating costs. We expect restaurant contribution to increase in proportion to the number of new restaurants we open and our comparable restaurant sales

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growth. Fluctuations in restaurant contribution margin can also be attributed to those factors discussed above for the components of restaurant operating costs.

EBITDA and Adjusted EBITDA

        We define EBITDA as net income before interest expense, debt extinguishment expense, provision (benefit) for income taxes, asset disposals, closure costs, restaurant impairments and depreciation and amortization. We define adjusted EBITDA as net income before interest expense, debt extinguishment expense, provision (benefit) for income taxes, asset disposals, closure costs and restaurant impairments, depreciation and amortization, stock-based compensation and management fees.

        Adjusted EBITDA provides a clear picture of our operating results by eliminating expenses that are not reflective of the underlying business performance. We use this metric to facilitate a comparison of our operating performance on a consistent basis from period to period and to analyze the factors and trends affecting our business.

        The following table presents a reconciliation of net income to EBITDA and adjusted EBITDA:

 
  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
  December 29,
2009
  December 30,
2008
 
 
  (in thousands)
 

Net income

  $ 5,163   $ 3,829   $ 2,378   $ 1,067   $ 143  

Depreciation and amortization

    16,719     14,501     13,932     13,315     11,283  

Asset disposals, closure costs and restaurant impairments

    1,278     1,629     2,815     1,070     1,273  

Debt extinguishment expense

    2,646     275              

Interest expense

    5,028     6,132     1,819     1,840     1,342  

Provision (benefit) for income taxes

    3,215     1,780     (366 )   1,343     553  
                       

EBITDA

  $ 34,049   $ 28,146   $ 20,578   $ 18,635   $ 14,594  

Management fees(a)

    1,000     1,014              

Stock-based compensation expense(b)

    1,234     1,328     5,894     1,740     2,087  
                       

Adjusted EBITDA

  $ 36,283   $ 30,488   $ 26,472   $ 20,375   $ 16,681  
                       

(a)
2012 and 2011 each included $1.0 million of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock.

(b)
2010 included $3.7 million of non-cash stock-based compensation expense and $0.3 million of expense for our portion of payroll taxes related to the 2010 Equity Recapitalization. See Note 2 of our consolidated financial statements, Equity Recapitalization.

Key Financial Definitions

Cost of Sales

        Cost of sales includes the direct costs associated with the food, beverage and packaging of our menu items. Cost of sales also includes any costs related to discounted menu items. Cost of sales is a substantial expense and can be expected to grow proportionally as our restaurant revenue grows. Fluctuations in cost of sales are caused primarily by volatility in the cost of commodity food items and related contracts for such items. Other important factors causing fluctuations in cost of sales include seasonality, discounting activity and restaurant level management of food waste.

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Labor Costs

        Labor costs include wages, payroll taxes, workers' compensation expense, benefits and bonuses paid to our management teams. Like other expense items, we expect labor costs to grow proportionally as our restaurant revenue grows. Factors that influence fluctuations in our labor costs include minimum wage and payroll tax legislation, the frequency and severity of workers' compensation claims, health care costs and the performance of our restaurants.

Occupancy Costs

        Occupancy costs include rent, common area maintenance and real estate tax expense related to our restaurants and is expected to grow proportionally as we open new restaurants.

Other Restaurant Operating Costs

        Other restaurant operating costs include the costs of utilities, restaurant-level marketing, credit card processing fees, restaurant supplies, repairs and maintenance and other restaurant operating costs. Like other costs, it is expected to grow proportionally as restaurant revenue grows.

General and Administrative Expense

        General and administrative expense is composed of payroll, other compensation, travel, marketing, accounting fees, legal fees and other expenses related to the infrastructure required to support our restaurants. General and administrative expense also includes the non-cash stock compensation expense related to our employee stock incentive plan. General and administrative expense can be expected to grow as we grow, including incremental legal, accounting, insurance and other expenses incurred as a public company.

Depreciation and Amortization

        Our principal depreciation and amortization charges relate to depreciation of fixed assets, including leasehold improvements and equipment, from restaurant construction and ongoing maintenance.

Pre-Opening Costs

        Pre-opening costs relate to the costs incurred prior to the opening of a restaurant. These include management labor costs, staff labor costs during training, food and supplies utilized during training, marketing costs and other related pre-opening costs. Pre-opening costs also include rent recorded between date of possession and opening date for our restaurants.

Asset Disposals, Closure Costs and Restaurant Impairments

        Asset disposals, closure costs and restaurant impairments include the loss on disposal of assets related to retirements and replacement of leasehold improvements or equipment, non-cash restaurant closure and impairment charges.

Debt Extinguishment

        In July 2012, we amended our credit facility to extend the maturity date and to reduce interest rates on borrowings. As a result of this amendment, a portion of the existing and new fees were treated as debt extinguishment. In 2011, we wrote off debt issuance costs related to our credit facility.

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Interest Expense

        Interest expense consists primarily of interest on our outstanding indebtedness. Debt issuance costs are amortized at cost over the life of the related debt.

Provision (Benefit) for Income Taxes

        Provision (benefit) for income taxes consists of federal, state and local taxes on our income.

Restaurant Openings, Closures and Relocations

        The following table shows restaurants opened, closed or relocated in the years indicated.

 
  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
 

Company-Owned Restaurant Activity

                   

Beginning of period

    239     212     186  

Openings

    39     28     28  

Closures and relocations(1)

    (2 )   (1 )   (2 )
               

Restaurants at end of period

    276     239     212  
               

Franchise Restaurant Activity

                   

Beginning of period

    45     43     43  

Openings

    6     2      

Closures and relocations(1)

             
               

Restaurants at end of period

    51     45     43  
               

Total restaurants

    327     284     255  
               

(1)
We account for relocated restaurants under both restaurant openings and closures and relocations. During both 2012 and 2010 we closed one restaurant and relocated another restaurant. In 2011, we closed one restaurant at the end of its lease term.

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Results of Operations

        The following table summarizes key components of our results of operations for the periods indicated as a percentage of our total revenue, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenue. Fiscal years 2012 and 2010 contained 52 operating weeks and fiscal year 2011 contained 53 operating weeks.

 
  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
 

Revenue:

                   

Restaurant revenue

    99.0 %   99.0 %   99.0 %

Franchising royalties and fees

    1.0     1.0     1.0  
               

Total revenue

    100.0     100.0     100.0  

Costs and Expenses:

                   

Restaurant Operating Costs:(1)

                   

Cost of sales

    26.6     26.2     26.0  

Labor

    30.1     29.8     29.7  

Occupancy

    9.9     9.9     9.9  

Other restaurant operating costs

    13.2     13.7     13.6  

General and administrative(2)

    8.7     9.3     11.3  

Depreciation and amortization

    5.6     5.7     6.3  

Pre-opening

    1.0     0.9     0.9  

Asset disposals, closure costs and restaurant impairments

    0.4     0.6     1.3  
               

Total costs and expenses

    94.7     95.3     98.3  
               

Income from operations

    5.3     4.7     1.7  

Debt extinguishment expense

    0.9     0.1     *  

Interest expense

    1.7     2.4     0.8  
               

Income before income taxes

    2.8     2.2     0.9  

Provision (benefit) for income taxes

    1.1     0.7     (0.2 )
               

Net income

    1.7 %   1.5 %   1.1 %
               

*
Not meaningful.

(1)
As a percentage of restaurant revenue.

(2)
2010 included $3.7 million of non-cash stock-based compensation expense and $0.3 million of our portion of payroll taxes related to the 2010 Equity Recapitalization. See Note 2 of our consolidated financial statements, Equity Recapitalization. 2012 and 2011 each included $1.0 million of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock.

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Fiscal Year Ended January 1, 2013 compared to Fiscal Year Ended January 3, 2012

        Fiscal year 2012 contained 52 operating weeks and fiscal year 2011 contained 53 operating weeks. The table below presents our operating results for 2012 and 2011, and the related year-over-year changes:

 
  Fiscal Year Ended    
   
 
 
  Increase / (Decrease)  
 
  January 1, 2013   January 3, 2012  
 
  $   %  
 
  (in thousands, except percentages)
 

Statements of Income Data:

                         

Revenue:

                         

Restaurant revenue

  $ 297,264   $ 253,467   $ 43,797     17.3 %

Franchising royalties and fees

    3,146     2,599     547     21.0  
                   

Total revenue

    300,410     256,066     44,344     17.3  

Costs and Expenses:

                         

Restaurant Operating Costs:

                         

Cost of sales

    78,997     66,419     12,578     18.9  

Labor

    89,435     75,472     13,963     18.5  

Occupancy

    29,323     25,208     4,115     16.3  

Other restaurant operating costs

    39,241     34,652     4,589     13.2  

General and administrative(1)

    26,220     23,842     2,378     10.0  

Depreciation and amortization

    16,719     14,501     2,218     15.3  

Pre-opening

    3,145     2,327     818     35.2  

Asset disposals, closure costs and restaurant impairments

    1,278     1,629     (351 )   (21.5 )
                   

Total costs and expenses

    284,358     244,050     40,308     16.5  
                   

Income from operations

    16,052     12,016     4,036     33.6  

Debt extinguishment expense

    2,646     275     2,371     *  

Interest expense

    5,028     6,132     (1,104 )   (18.0 )
                   

Income before income taxes

    8,378     5,609     2,769     49.4  

Provision for income taxes

    3,215     1,780     1,435     80.6  
                   

Net income

  $ 5,163   $ 3,829   $ 1,334     34.8 %
                   

*
Not meaningful.

(1)
2012 and 2011 each included $1.0 million of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock.

Revenue

        Restaurant revenue increased by $43.8 million in 2012 compared to 2011. Restaurants not in the comparable restaurant base accounted for $30.8 million of this increase, with the balance attributed to growth in comparable restaurant sales. Comparable restaurant sales increased by $13.0 million or 5.2% in 2012, composed primarily of increases in traffic at our comparable base restaurants.

        Franchise royalties and fees increased by $0.5 million due to six new restaurant openings and increased comparable restaurant sales of 6.2% during 2012.

        The impact of 2011 having an additional operating week was approximately $4.8 million in total revenue.

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Cost of Sales

        Cost of sales increased by $12.6 million in 2012 compared to 2011, due primarily to the increase in restaurant revenue in 2012. As a percentage of restaurant revenue, cost of sales increased to 26.6% in 2012 from 26.2% in 2011. This increase was primarily the result of food cost inflation, partially offset by a minimal increase in menu pricing.

Labor Costs

        Labor costs increased by $14.0 million in 2012 compared to 2011, due primarily to the increase in restaurant revenue in 2012. As a percentage of restaurant revenue, labor costs increased to 30.1% in 2012 from 29.8% in 2011. The increase in labor cost percentage was driven by increased workers' compensation expense and payroll tax rates, offset partially by increases in AUVs.

Occupancy Costs

        Occupancy costs increased by $4.1 million in 2012 compared to 2011, due primarily to new restaurants opened in each of these years. As a percentage of restaurant revenue, occupancy costs remained constant year-over-year at 9.9%. Increases in common area maintenance, real estate tax and new restaurant occupancy costs relative to comparable base restaurants were offset by leverage from increased AUVs.

Other Restaurant Operating Costs

        Other restaurant operating costs increased by $4.6 million in 2012 compared to 2011, due primarily to the increase in restaurant revenue in 2012. As a percentage of restaurant revenue, other restaurant operating costs declined to 13.2% in 2012 from 13.7% in 2011. The decrease in other restaurant operating cost percentage was the result of leverage on increased AUVs on partially fixed costs, as well as lower than typical utility costs due to a mild winter in early 2012.

General and Administrative Expense

        General and administrative expense increased by $2.4 million in 2012 compared to 2011, due primarily to costs associated with supporting an increased number of restaurants. As a percentage of revenue, general and administrative expense decreased to 8.7% in 2012 from 9.3% in 2011 due to increasing revenue without proportionate increases in general and administrative expense or administrative personnel. General and administrative expense includes $1.2 million and $1.3 million of stock-based compensation expense in 2012 and 2011, respectively, and $1.0 million of management fees in both 2012 and 2011.

Depreciation and Amortization

        Depreciation and amortization increased by $2.2 million in 2012 compared to 2011, due primarily to an increased number of restaurants. As a percentage of revenue, depreciation and amortization decreased to 5.6% in 2012 from 5.7% in 2011, due to leverage on increased AUVs.

Pre-Opening Costs

        Pre-opening costs increased by $0.8 million in 2012 compared to 2011, due to 39 restaurant openings in 2012, compared to 28 in 2011. As a percentage of revenue, pre-opening costs increased to 1.0% in 2012 compared to 0.9% in 2011 due to the increased rate of restaurant unit growth.

Asset Disposals, Closure Costs and Restaurant Impairments

        Asset disposals, closure costs and restaurant impairments decreased by $0.4 million in 2012 compared to 2011 due primarily to the impairment of one restaurant in 2011, resulting in $0.7 million of expense. The

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decrease was offset by the lease termination and other related closing costs of one restaurant closed in 2012.

Debt Extinguishment

        Debt extinguishment expense was $2.6 million in 2012, as a result of an amendment to our credit facility to extend the maturity date to July 2017 and reduced interest rates on borrowings. A portion of the existing and new fees were treated as debt extinguishment, which resulted in a non-cash write-off of $2.3 million. In 2011, we wrote off $0.3 million of debt issuance costs related to our credit facility.

Interest Expense

        Interest expense decreased by $1.1 million in 2012 compared to 2011. The decrease was primarily due to the favorable borrowing rates resulting from the 2012 amendment to our credit facility, partially offset by increased borrowings to fund our capital expenditures.

Provision for Income Taxes

        Provision for income taxes increased by $1.4 million in 2012 compared to 2011, due to the increase in pre-tax net income in 2012 and an increase to our effective income tax rate.

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Fiscal Year Ended January 3, 2012 compared to Fiscal Year Ended December 28, 2010

        Fiscal year 2011 contained 53 operating weeks and fiscal year 2010 contained 52 operating weeks. The table below presents our operating results for 2011 and 2010, and the related year-over-year changes:

 
  Fiscal Year Ended    
   
 
 
  Increase / (Decrease)  
 
  January 3, 2012   December 28, 2010  
 
  $   %  
 
  (in thousands, except percentages)
 

Statements of Income Data:

                         

Revenue:

                         

Restaurant revenue

  $ 253,467   $ 218,560   $ 34,907     16.0 %

Franchising royalties and fees

    2,599     2,272     327     14.4  
                   

Total revenue

    256,066     220,832     35,234     16.0  

Costs and Expenses:

                         

Restaurant Operating Costs:

                         

Cost of sales

    66,419     56,869     9,550     16.8  

Labor

    75,472     64,942     10,530     16.2  

Occupancy

    25,208     21,650     3,558     16.4  

Other restaurant operating costs

    34,652     29,784     4,868     16.3  

General and administrative(1)

    23,842     24,921     (1,079 )   (4.3 )

Depreciation and amortization

    14,501     13,932     569     4.1  

Pre-opening

    2,327     2,088     239     11.4  

Asset disposals, closure costs and restaurant impairments

    1,629     2,815     (1,186 )   (42.1 )
                   

Total costs and expenses

    244,050     217,001     27,049     12.5 %
                   

Income from operations

    12,016     3,831     8,185     *  

Debt extinguishment expense

    275         275     *  

Interest expense

    6,132     1,819     4,313     *  
                   

Income before income taxes

    5,609     2,012     3,597     *  

Provision (benefit) for income taxes

    1,780     (366 )   2,146     *  
                   

Net income

  $ 3,829   $ 2,378   $ 1,451     61.0 %
                   

*
Not meaningful.

(1)
2010 included $3.7 million of non-cash stock-based compensation expense and $0.3 million of expense for our portion of payroll taxes related to the 2010 Equity Recapitalization. See Note 2 of our consolidated financial statements, Equity Recapitalization. 2012 and 2011 each included $1.0 million of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock.

Revenue

        Restaurant revenue increased by $34.9 million in 2011 compared to 2010. Restaurants not in the comparable restaurant base accounted for $25.8 million of this increase, with the balance attributed to growth in comparable restaurant sales. Comparable restaurant sales increased by $9.1 million, or 4.2% in 2011, composed primarily of increases in traffic at our comparable base restaurants. The impact of fiscal 2011 having an additional operating week was approximately $4.8 million in total revenue.

        Franchise royalties and fees increased by $0.3 million due to two new restaurant openings and a 7.6% increase in comparable restaurant sales.

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Cost of Sales

        Cost of sales increased by $9.6 million in 2011 compared to 2010, due primarily to the increase in restaurant revenue in 2011. As a percentage of restaurant revenue, cost of sales increased to 26.2% in 2011 from 26.0% in 2010. This increase was primarily the result of food cost inflation, partially offset by a minimal increase in menu pricing.

Labor Costs

        Labor costs increased by $10.5 million in 2011 compared to 2010, due primarily to the increase in restaurant revenue in 2011. As a percentage of restaurant revenue, labor costs increased to 29.8% in 2011 from 29.7% in 2010. The increase in labor cost percentage of restaurant revenue was driven by increased workers' compensation expense and payroll tax rates, offset partially by increased AUVs.

Occupancy Costs

        Occupancy costs increased by $3.6 million in 2011 compared to 2010, due primarily to new restaurants opened in each year. As a percentage of restaurant revenue, occupancy costs remained constant year-over-year at 9.9%. Increases from common area maintenance, real estate tax and new restaurant occupancy costs relative to comparable base restaurants were offset by leverage from increased AUVs.

Other Restaurant Operating Costs

        Other restaurant operating costs increased by $4.9 million in 2011 compared to 2010, due primarily to increased restaurant revenue. As a percentage of restaurant revenue, other restaurant operating costs increased to 13.7% in 2011 from 13.6% in 2010, due primarily to increased credit card processing fees partially offset by increased AUVs.

General and Administrative Expense

        General and administrative expense decreased by $1.1 million in 2011 compared to 2010. The decrease is due primarily to $3.7 million in non-cash stock-based compensation charges which occurred in 2010 and did not repeat in 2011, offset by $1.0 million in management fee expense in 2011 which did not exist in 2010. Excluding these items, general and administrative expense increased by $1.6 million in 2011 compared to 2010, due primarily to costs associated with supporting an increased number of restaurants. As a percentage of revenue, general and administrative expense decreased to 9.3% in 2011 from 11.3% in 2010, primarily due to the decrease in stock-based compensation and increasing revenue without proportionate increases in general and administrative expense or administrative personnel.

Depreciation and Amortization

        Depreciation and amortization expense increased by $0.6 million in 2011 compared to 2010, due primarily to the increase in number of restaurants. As a percentage of revenue, depreciation and amortization decreased to 5.7% in 2011 from 6.3% in 2010, primarily due to leverage on increased AUVs and certain assets being fully depreciated.

Pre-Opening Costs

        Pre-opening costs increased by $0.2 million in 2011 compared to 2010. This increase was due to the recording of pre-opening rent in the fourth quarter of 2011 for those restaurants that opened in the first quarter of 2012. As a percentage of revenue, pre-opening costs were constant year-over-year at 0.9%.

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Asset Disposals, Closure Costs and Restaurant Impairments

        Asset disposals, closure costs and restaurant impairments decreased by $1.2 million in 2011 compared to 2010 due primarily to the impairment of three restaurants in 2010, compared to the impairment of one restaurant in 2011.

Debt Extinguishment Expense

        We wrote off $0.3 million of debt extinguishment expense related to our credit facility.

Interest Expense

        Interest expense increased by $4.3 million in 2011 compared to 2010. The increase was due to higher interest rates and higher average debt outstanding in 2011 compared to 2010. In February of 2011, we refinanced our credit facility, resulting in increased borrowing capacity and higher interest rates. We also received bridge financing in the 2010 Equity Recapitalization, resulting in non-cash paid-in-kind interest ("PIK") charges in 2011 of $0.9 million.

Provision (Benefit) for Income Taxes

        Provision (benefit) for income taxes increased by $2.1 million in 2011 compared to 2010 primarily due to the impact of the 2010 Equity Recapitalization on our income tax provision in 2010.

Quarterly Financial Data

        The following table presents select historical quarterly consolidated statements of operations data and other operations data through January 1, 2013. This quarterly information has been prepared using our unaudited consolidated financial statements and includes all adjustments consisting only of normal recurring adjustments necessary for a fair presentation of the results of the interim periods.

 
  Quarter Ended  
 
  Jan. 1,
2013
  Oct. 2,
2012
  July 3,
2012
  April 3,
2012
  Jan. 3,
2012
  Sept. 27,
2011
  June 28,
2011
  Mar. 29,
2011
 
 
  (in thousands)
 

Total revenue

  $ 77,929   $ 77,099   $ 75,494   $ 69,888   $ 70,491   $ 64,530   $ 62,992   $ 58,053  
                                   

Net income

    1,559     133     2,180     1,291     (66 )   1,995     1,720     180  
                                   

Selected Operating Data:

                                                 

Company-owned restaurants at end of period

    276     261     253     245     239     219     216     212  

Franchise-owned restaurants at end of period

    51     48     46     45     45     44     43     43  

Company-owned:

                                                 

Average unit volumes(1)

    1,178     1,175     1,170     1,161     1,147     1,137     1,130     1,129  

Comparable restaurant sales(2)

    4.2 %   3.4 %   6.8 %   6.8 %   5.4 %   5.2 %   2.0 %   3.9 %

Restaurant contribution as a percentage of restaurant revenue(3)

    20.2 %   20.0 %   20.9 %   19.8 %   19.9 %   21.2 %   21.6 %   18.9 %

(1)
AUVs consist of average annualized sales of all company-owned restaurants over the trailing 12 periods in a typical operating year.

(2)
Comparable restaurant sales represent year-over-year sales for restaurants open for at least 18 full periods.

(3)
Restaurant contribution represents restaurant revenue less restaurant operating costs which are cost of sales, labor, occupancy and other restaurant operating costs.

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        Seasonal factors cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced winter and holiday traffic and higher in the second and third quarters. As a result of these factors, our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly.

Liquidity and Capital Resources

Potential Impacts of Market Conditions on Capital Resources

        We have continued to experience positive trends in consumer traffic and increases in comparable restaurant sales, operating cash flows and restaurant contribution margin. However, the restaurant industry continues to be challenged and uncertainty exists as to the sustainability of these favorable trends. We have continued to implement various cost savings initiatives, including savings in our food costs through waste reduction and efficiency initiatives in our supply chain and labor costs. We have developed new menu items to appeal to consumers and used marketing campaigns to promote these items.

        We believe that expected cash flow from operations, proceeds from this offering and planned borrowing capacity are adequate to fund debt service requirements, operating lease obligations, capital expenditures and working capital obligations for the next 12 periods. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow and our ability to manage costs and working capital successfully.

Summary of Cash Flows

        Our primary sources of liquidity and cash flows are operating cash flows and borrowings on our revolving line of credit. We use this cash to fund capital expenditures for new restaurant openings, reinvest in our existing restaurants, invest in infrastructure and information technology and maintain working capital. Our working capital position benefits from the fact that we generally collect cash from sales to guests the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have at least 30 days to pay our vendors.

        Cash flows from operating, investing and financing activities are shown in the following table:

 
  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
 
 
  (in thousands)
 

Net cash provided by operating activities

  $ 32,069   $ 27,922   $ 24,605  

Net cash used in investing activities

    (47,384 )   (30,047 )   (26,933 )

Net cash provided by (used in) financing activities

    15,373     (10,654 )   15,215  
               

Cash and cash equivalents at the end of period(1)

  $ 581   $ 523   $ 13,302  
               

(1)
Cash and cash equivalents for the year ended December 28, 2010 reflected cash received and unpaid related to the 2010 Equity Recapitalization.

Operating Activities

        Net cash provided by operating activities increased in 2012 from 2011 primarily due to an increase in cash generated from restaurant operations as a result of comparable restaurant sales increases, a decrease in cash paid for interest, which was $4.4 million in 2012 compared to $5.2 million in 2011 and also higher non-cash costs, such as depreciation and amortization, provision for income taxes and write-off of debt issuance costs.

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        In 2011, net cash provided by operating activities also increased from 2010, primarily due to an increase in cash generated from restaurant operations as a result of comparable restaurant sales increases and normal increases in operating assets and liabilities, offset by an increase in cash paid for interest, which was $5.2 million in 2011 and $1.6 million in 2010.

Investing Activities

        Net cash used in investing activities was related almost entirely to new restaurant capital expenditures in 2012, 2011 and 2010, for the opening of 39, 28 and 28 restaurants, respectively. In addition to our standard refresh and remodel investments in 2012, we also invested additional funds in our existing restaurant base as we rolled out our "Your World Kitchen" merchandising.

        We estimate that our capital expenditures for 2013 will total between approximately $42 million and $47 million primarily related to the planned opening of between 38 and 42 company-owned restaurants.

Financing Activities

        Net cash provided by financing activities was $15.4 million in 2012, driven by increased borrowings on our credit facility to fund capital expenditures. In February 2011, we refinanced our credit facility to increase our borrowing capacity to $120.0 million, and in August 2012, we amended the credit facility to provide more favorable borrowing rates and extend borrowing capacity through July 2017.

        During 2011, net cash used in financing activities was $10.7 million due to cash payments made related to the 2010 Equity Recapitalization. In connection with our February 2011 refinancing, we repaid $46.0 million of bridge financing and PIK interest on borrowings from new investors in the 2010 transaction, as well as $4.2 million in refinancing fees. Additionally, $6.6 million of employee and employer payroll taxes related to the 2010 Equity Recapitalization were remitted in the first quarter of 2011.

Credit Facility

        In February 2011, we refinanced our credit facility to increase its borrowing capacity to $120.0 million, consisting of a $75.0 million senior term loan and a $45.0 million revolving line of credit. The revolving line of credit includes a swing line loan of $5.0 million used to fund everyday working capital requirements. In August 2012, we amended the credit facility to provide more favorable borrowing rates and extend borrowing capacity through July 2017. We had $94.5 million outstanding and $23.1 million available for borrowing under the credit facility as of January 1, 2013.

        Borrowings under the credit facility bear interest, at our option, at either (i) LIBOR plus 2.00 to 4.25%, based on the lease-adjusted leverage ratio or (ii) the highest of the following rates plus 1.00 to 3.25%: (a) the federal funds rate plus 0.50%; (b) the Bank of America prime rate or (c) the one month LIBOR plus 1.00%. Prior to the August 2012 amendment, borrowings under the credit facility bore interest, at our option, at either (i) LIBOR plus 4.00 to 5.00%, based on the lease-adjusted leverage ratio or (ii) at the highest of the following rates plus 3.00 to 4.00%: (a) the federal funds rate plus 0.50%; (b) the Bank of America prime rate or (c) the one month LIBOR plus 1.00%. The August 2012 amendment eliminated a 1.25% LIBOR floor on all borrowings. The facility includes a commitment fee of 0.50% per year on any unused portion of the facility. The term loan commitment requires quarterly principal payments of $187,500 through December 2015. We also maintain outstanding letters of credit to secure obligations under our workers' compensation program and certain lease obligations. The letters of credit and quarterly principal payments reduce the amount of future borrowings available under the agreement and aggregated $1.7 million and $750,000, respectively, as of January 1, 2013.

        Availability of borrowings under the revolving line of credit is conditioned on our compliance with specified covenants, including a maximum lease-adjusted leverage ratio, a maximum leverage ratio and a minimum consolidated fixed charge coverage ratio. We are subject to a number of other customary

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covenants, including limitations on additional borrowings, acquisitions, dividend payments and lease commitments. As of January 1, 2013, we were in compliance with all of our debt covenants.

        Our credit facility is secured by a pledge of stock of substantially all of our subsidiaries and a lien on substantially all of the personal property assets of us and our subsidiaries.

        We intend to use approximately $       million of the net proceeds from this offering to repay borrowings under our credit facility. See "Use of Proceeds."

        As required by our credit facility, we entered into two variable-to-fixed interest rate swap agreements covering a portion of its borrowings under the senior term loan in February 2011, see Note 5 of our consolidated financial statements, Derivative Instruments.

Bridge Financing

        In conjunction with the February 2011 debt refinancing, we repaid $45.0 million of bridge financing, as well as $977,000 of 12% PIK interest. Noncash PIK interest of $947,000 and $30,000 was accrued and reported as other noncash in the consolidated statements of cash flows in 2011 and 2010, respectively.

Contractual Obligations

        Our contractual obligations at January 1, 2013 were as follows:

 
   
  Payments Due by Period  
 
  Total   1 Year   2 - 3
Years
  4 - 5
Years
  After 5
Years
 
 
  (in thousands)
 

Lease obligations(1)

  $ 204,403   $ 29,528   $ 56,120   $ 48,361   $ 70,394  

Purchase commitments(2)

    7,734     4,046     3,688          

Credit facility(3)

    2,250     750     1,500          
                       

Total

  $ 214,387   $ 34,324   $ 61,308   $ 48,361   $ 70,394  
                       

(1)
We are obligated under non-cancelable leases for our restaurants, administrative offices and equipment. Some restaurant leases provide for contingent rental payments based on sales thresholds, which are excluded from this table.

(2)
We enter into various purchase obligations in the ordinary course of business. Those that are binding primarily relate to volume commitments for beverage products.

(3)
We are required to make quarterly principal payments on our credit facility of $187,500 through December 2015. We intend to use a portion of the net proceeds we receive from this offering to repay borrowings under our credit facility. See "Use of Proceeds."

Off-Balance Sheet Arrangements

        We had no off-balance sheet arrangements or obligations.

Quantitative and Qualitative Disclosure about Market Risk

Interest Rate Risk

        We are exposed to market risk from changes in interest rates on debt and changes in commodity prices. Our exposure to interest rate fluctuations is limited to our outstanding bank debt, which bears interest at variable rates. As of January 1, 2013, there was $94.5 million in outstanding borrowings under our credit facility. A plus or minus 1.0% in the effective interest rate applied on these loans would have resulted in a pre-tax interest expense fluctuation of $0.9 million on an annualized basis.

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        We manage our interest rate risk through normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments.

        As required by our credit facility and to mitigate exposure to fluctuations in interest rates we entered into two variable-to-fixed interest rate swap agreements covering a portion of the borrowings under our credit facility. The new interest rate swaps were effective April 4, 2011 and mature on April 4, 2013. The swaps were designated as cash flow hedges at inception and were expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during their respective term. In conjunction with the August 2012 amendment to our credit facility, we ceased the application of hedge accounting on both interest swaps. Fluctuations in market value now flow through interest expense rather than the balance sheet. We are required to make payments based on a fixed rate of 1.59% calculated on a notional amount of $20.0 million and 3.06% calculated on a notional amount of $17.5 million. The fair value of the $20.0 million swap was zero at designation, while the fair value of the $17.5 million swap was a liability of $466,000 at designation, which is reflective of the fair value of the previously terminated swap. In exchange, we receive interest on $20.0 million of notional at a variable rate based on the greater of 1.25% or one-month LIBOR and will receive interest on a notional amount of $17.5 million a variable rate based on the greater of 1.25% or one-month LIBOR. See Note 5 of our consolidated financial statements, Derivative Instruments.

        In 2008, we entered into two variable-to-fixed interest rate swap agreements which were subsequently terminated in 2011. A swap with a notional amount of $15.0 million matured at the end of the swap agreement in February 2011. A second interest rate swap on a notional amount of $14.0 million was terminated by us in March 2011. The fair value of the interest rate swap on the date of termination was $466,000 and is being settled through payments on a new interest rate swap with an effective date of April 4, 2011 and a notional amount of $17.5 million. The deferred loss accumulated in other comprehensive income as of the date of termination was amortized over the life of the terminated swap through November 2012, the original term of the terminated swap.

Commodity Price Risk

        We purchase certain products that are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions and other factors which are not considered predictable or within our control. Although these products are subject to changes in commodity prices, certain purchasing contracts or pricing arrangements contain risk management techniques designed to minimize price volatility. The purchasing contracts and pricing arrangements we use may result in unconditional purchase obligations, which are not reflected in our consolidated balance sheets. Typically, we use these types of purchasing techniques to control costs as an alternative to directly managing financial instruments to hedge commodity prices. In many cases, we believe we will be able to address material commodity cost increases by adjusting our menu pricing or changing our product delivery strategy. However, increases in commodity prices, without adjustments to our menu prices, could increase restaurant operating costs as a percentage of company-owned restaurant revenue.

Inflation

        The primary inflationary factors affecting our operations are food, labor costs, energy costs and materials used in the construction of new restaurants. Increases in the minimum wage directly affect our labor costs. Many of our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases. Finally, the cost of constructing our restaurants is subject to inflationary increases in the costs of labor and material. Over the past five years, inflation has not significantly affected our operating results.

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Controls and Procedures

        Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of January 1, 2013. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

        Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

        We have not engaged an independent registered accounting firm to perform an audit of our internal control over financial reporting as of any balance sheet date or for any period reported in our financial statements. Presently, we are not an accelerated filer, as such term is defined by Rule 12b-2 of the Exchange Act and therefore, our management is not presently required to perform an annual assessment of the effectiveness of our internal control over financial reporting. This requirement will first apply to our Annual Report on Form 10-K for the year ending December 30, 2014. Our independent public registered accounting firm will first be required to attest to the effectiveness of our internal control over financial reporting for our Annual Report on Form 10-K for the first year we are no longer an "emerging growth company."

Stock-Based Compensation Expense

        We account for stock-based compensation arrangements with our employees and non-employee directors using fair value measurement guidance for all share-based payments, including stock options and awards. All of our option awards are exercisable for common stock. For option awards, expense is recognized over the requisite service period in an amount equal to the fair value of the stock-based awards on the date of grant, determined using the Black-Scholes option-pricing model. Warrants are valued with reference to the fair value of the common stock as of the measurement date. The fair value is then recognized as stock-based compensation expense on a straight-line basis over the requisite service period.

        We estimate the fair market value of each option granted using the Black-Scholes option-pricing method, in addition to the estimated value of our equity interests at each reporting date. The Black-Scholes model requires various judgmental assumptions including fair value of the underlying stock, anticipated volatility and expected option life. We calculate expected volatility based on our historical volatility and future plans, as well as reported data for selected reasonably similar publicly traded companies within the restaurant industry for which the historical information is available. When selecting the public companies within the restaurant industry, we select companies with comparable characteristics to us, including enterprise value, financial leverage, business model, stage of growth and financial risk. The expected life of options granted is management's best estimate using recent and expected transactions.

        The assumed dividend yield is based on our expectation that we will not pay dividends in the foreseeable future, which is consistent with our history of not paying dividends. The risk-free interest rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those options that we expect to vest. We estimate the forfeiture rate based on our historical experience. To the extent our actual forfeiture rate is different from our estimated rate, our stock-based

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compensation expense is accordingly adjusted using the following weighted-average assumptions, in addition to the estimated value of our common stock for the periods presented in the table below.

 
  Fiscal Year  
 
  2012   2011   2010  

Risk-free interest

    0.4 %   1.1 %   1.9 %

Expected life (years)

    3.4     3.7     4.5  

Expected dividend yield

             

Volatility

    32.7 %   26.2 %   29.5 %

Weighted-average Black-Scholes fair value per share at date of grant

  $ 1.64   $ 1.09   $ 0.99  

        In 2012, 2011 and 2010, non-cash stock-based compensation expense of $1.2 million, $1.3 million and $5.6 million, respectively, is included in general and administrative expense. Stock-based compensation of $81,000, $75,000 and $83,000 is included in capitalized internal costs in 2012, 2011 and 2010, respectively. We recognized $3.7 million of non-cash stock-based compensation expense in 2010 related to the acceleration of unvested options in accordance with the terms of a merger with a newly organized Delaware subsidiary owned by affiliates of Catterton and PSPIB. In the merger, options covering a total of 8,560,466 shares of Class A common stock were settled for the right to receive cash consideration of $5.00 per share, net of exercise price and income taxes withheld, or equity interests in the surviving entity of equivalent value. The merger provided for acceleration of unvested options immediately prior to the transaction. Accordingly, options to purchase 4,148,571 shares were accelerated.

Determination of the Fair Value of Common Stock

        The following table sets forth all stock option grants since December 30, 2009 through the date of this prospectus:

Grant Date
  Number of
Options
Granted(1)
  Exercise Price(1)   Common Stock
Fair Value Per Share
at Grant Date(1)
 

February 23, 2010

    26,547   $ 3.35   $ 3.35  

March 22, 2010

    1,206,296     3.35     3.35  

May 11, 2010

    24,208     3.68     3.68  

August 10, 2010

    19,785     4.50     4.50  

December 27, 2010

    4,195,600     5.00     5.00  

January 21, 2011

    300,000     5.00     5.00  

June 21, 2011

    45,000     5.00     5.00  

September 7, 2011

    146,000     5.00     5.00  

April 10, 2012

    27,500     5.50     5.50  

May 14, 2012

    264,000     5.50     5.50  

September 20, 2012

    15,000     6.00     6.00  

December 6, 2012

    588,600     7.00     7.00  

(1)
Exercise price and common stock fair value per share at grant date data prior to December 27, 2010 are reflected as converted.

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        These estimates of the fair value of our common stock were made based on information from the following valuation dates:

Valuation Date(1)
  Fair Value
per Share(2)
 

February 23, 2010

  $ 3.35  

May 11, 2010

    3.68  

August 10, 2010

    4.50  

December 27, 2010

    5.00  

March 6, 2012

    5.50  

July 11, 2012

    6.00  

September 20, 2012

    6.00  

December 6, 2012

    7.00  

(1)
Each valuation date shown, other than December 27, 2010, was the date of action by our Board of Directors reflecting its valuation of our common stock as of such date.

(2)
Fair value of our common stock grants prior to December 27, 2010 are reflected as converted.

        Since our common stock is not publicly traded, we considered numerous objective and subjective factors in valuing our common stock at each valuation date in accordance with the guidance in the American Institute of Certified Public Accountants Practice Aid Valuation of Privately-Held-Company Equity Securities Issued as Compensation ("Practice Aid"). These objective and subjective factors included, but were not limited to:

    recent arm's-length sales of our common stock in privately negotiated transactions;

    our financial performance and financial position;

    our future financial projections;

    valuations of comparable public companies; and

    the likelihood of achieving a liquidity event for shares of our common stock at a specific time, such as an initial public offering of our common stock or sale of our company, given prevailing market conditions.

        Our management estimated our enterprise value as of the various valuation dates using the market approach, which is an acceptable valuation method in accordance with the Practice Aid. The market approach uses the comparable company methodology based on comparable public companies' equity pricing. Each valuation also reflects a marketability discount, resulting from the illiquidity of our common stock at the time the options were granted.

        We determined the fair value of our common stock as of February 23, 2010 to be $3.35 per share and as of May 11, 2010 to be $3.68 per share. We considered objective and subjective factors including a valuation performed by our audit committee in which the fair value of our common stock was determined using a market approach. The market approach considered multiples of financial metrics, consisting of revenue and EBITDA, based on trading prices of a peer group of companies that are publicly traded. These multiples were then applied to our financial metrics to derive an indication of value. The resulting fair value obtained by applying the market approach was then discounted for the lack of marketability of the common stock because we are a private company.

        On August 10, 2010, we determined the fair value of our common stock to be $4.50 per share. We considered objective and subjective factors including a valuation performed by our audit committee in which the fair value of our common stock was determined using a market approach, as used in the

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February 23, 2010 and May 11, 2010 valuations. The audit committee also took into account an expression of interest we had received from Catterton to acquire a controlling interest in us. The Practice Aid indicates that a third-party transaction between a willing buyer and a willing seller is the best indication of fair value of an enterprise.

        On December 27, 2010, we completed the 2010 Equity Recapitalization through a merger, in which shares of our common stock were converted into the right to receive cash consideration of $5.00 or equity of equivalent value in the surviving entity. On the grant date that was contemporaneous with the completion of the 2010 Equity Recapitalization, options were granted at the per share purchase price of $5.00. At each grant date thereafter until the valuation we performed on March 6, 2012, we considered objective and subjective factors and determined that the $5.00 value remained a reasonable approximation of fair value.

        For the grants made from April 10, 2012 until and including December 6, 2012, we considered objective and subjective factors, including valuations by our audit committee in which the fair market value of our stock was determined using the market approach described above.

        Based on the initial public offering price of $            , the midpoint of the range on the cover of this prospectus, the intrinsic value of the options outstanding at                         , 2013, was approximately $             million, of which approximately $             million related to the options that were vested and approximately $             million related to the options that were not vested.

Critical Accounting Policies and Estimates

        Our consolidated financial statements and accompanying notes are prepared in accordance with US GAAP. Preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in Note 1 to our consolidated financial statements. Critical accounting estimates are those that require application of management's most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions. It is possible that materially different amounts would be reported using different assumptions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:

Revenue Recognition

        We record revenue from the operation of company-owned restaurants when sales occur. In the case of gift card sales, we record revenue when: (i) the gift card is redeemed by the guest and (ii) we determine the likelihood of the gift card being redeemed by the guest is remote (gift card breakage). We record royalties from franchise restaurant sales based on a percentage of restaurant revenues in the period the related franchised restaurants' revenues are earned. Area development fees and franchise fees are recognized as income when all material services or conditions relating to the sale of the franchise have been substantially performed or satisfied by us. Both franchise fees and area development fees are generally recognized as income upon the opening of a franchise restaurant or upon termination of the agreement(s).

Property and Equipment

        We state the value of our property and equipment, including primarily leasehold improvements and restaurant equipment, furniture and fixtures at cost, minus accumulated depreciation and amortization. We calculate depreciation using the straight-line method of accounting over the estimated useful lives of the related assets. We amortize our leasehold improvements using the straight-line method of accounting over the shorter of the lease term (including reasonably assured renewal periods) or the estimated useful

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lives of the related assets. We expense repairs and maintenance as incurred, but capitalize major improvements and betterments. We make judgments and estimates related to the expected useful lives of these assets that are affected by factors such as changes in economic conditions and changes in operating performance. If we change those assumptions in the future, we may be required to record impairment charges for these assets.

Rent

        We record rent expense for our leases, which generally have escalating rentals over the term of the lease, on a straight-line basis over the lease term. The lease term includes renewal options that are reasonably assured. Rent expense begins when we have the right to control the use of the property, which is typically before rent payments are due under the lease. We record the difference between the rent expense and rent paid as deferred rent in the consolidated balance sheet. Rent expense for the period prior to the restaurant opening is reported as pre-opening rent expense in the consolidated statements of income. Tenant incentives used to fund leasehold improvements are recorded in deferred rent and amortized as reductions of rent expense over the term of the lease.

        Certain of our operating leases contain clauses that provide additional contingent rent based on a percentage of sales greater than certain specified target amounts. We recognize contingent rent expense when the achievement of specified targets is considered probable.

Recent Accounting Pronouncements

JOBS Act

        We qualify as an "emerging growth company" pursuant to the provisions of the JOBS Act. For as long as we are an "emerging growth company," we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory "say-on-pay" votes on executive compensation, shareholder advisory votes on golden parachute compensation and the extended transition period for complying with the new or revised accounting standards.

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BUSINESS


NOODLES & COMPANY
A World of Flavors Under One Roof

        Noodles & Company is a high growth, fast casual restaurant concept offering lunch and dinner at a compelling value within the fastest growing segment of the restaurant industry. Our Company was founded by Aaron Kennedy when we opened our first location in Denver, Colorado in 1995, offering noodle and pasta dishes, staples of many cuisines, with the goal of delivering fresh ingredients and flavors from around the world under one roof—from Pad Thai to Mac & Cheese. Today, our globally inspired menu includes a wide variety of high quality, cooked-to-order dishes, including noodles and pasta, soups, salads and sandwiches, which are served on china by our friendly team members. We have 331 restaurants, comprised of 280 company-owned and 51 franchised locations, across 25 states and the District of Columbia, as of March 15, 2013. Our revenue and income from operations have grown from $170 million and $2 million in 2008 to $300 million and $16 million in 2012, representing CAGRs of 15.2% and 67.5%.


YOUR WORLD KITCHEN
Our Differentiated Offering

        Your World Kitchen captures the breadth of our differentiated offering and defines our guests' experience. Our company was founded on the core principle that food can be served quickly and conveniently in an inviting environment without sacrificing quality, freshness or flavor.


GRAPHIC
  "Your" . . . On trend with our world today, where customization is commonplace, we put control into our guests' hands. Each dish is cooked-to-order and can be customized to each guest's personal tastes. Guests can add a protein, such as grilled chicken or organic tofu, or swap out a vegetable in their entrées. "Your" also represents the control our guests have over their dining experience, whether they want a meal to go, a quick sit-down lunch or a leisurely dinner with friends or family.

"World" . . . We offer globally inspired flavors with more than 25 Asian, Mediterranean and American dishes together in a single menu. We believe we will continue to benefit from trends in consumer preferences, wider availability of international cuisines and increasingly adventurous consumer tastes. At many restaurants, people are limited to a particular ethnic cuisine or type of dish, such as a sandwich, burrito or burger. At Noodles & Company, we aim to eliminate the "veto vote" by satisfying the preferences of a wide range of guests, whether a mother with kids, a group of coworkers, an individual or a large party.

"Kitchen" . . . Open kitchens are the focal point of our restaurants. Our guests can watch their food being cooked, which reinforces our commitment to quality and freshness. "Kitchen" says "cooking" and emphasizes that we cook each dish to order, unlike many of our competitors that only assemble-to-order.

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LEADING RESTAURANT GROWTH AND PERFORMANCE

        From 2004 to 2012, we increased the number of our total restaurants from 100 to 327, representing a CAGR of 16.0%. We believe we can grow to 2,500 restaurants across the United States.


Total Restaurants at End of Fiscal Year

GRAPHIC

        We have experienced steady growth in comparable restaurant sales (at restaurants open for at least 18 full periods) in 27 of the last 28 quarters, due primarily to an increase in guest traffic. System-wide comparable restaurant sales growth for 2010, 2011 and 2012 was 3.7%, 4.8% and 5.4%, respectively. Our company-owned restaurant AUVs grew from $1,098,000 at the beginning of 2010 to $1,178,000 at the end of 2012. In 2012, our company-owned restaurant contribution margin was 20.3% for all restaurants and 22.3% for restaurants in the comparable base, placing us in the top-tier of the restaurant industry.

        Our new restaurant investment model calls for a total cash investment of approximately $725,000, net of tenant allowance, and we target a cash-on-cash return in the third operating year above 30%. Our company-owned restaurants have generally exceeded that target.


OUR INDUSTRY
We Think of Ourselves as a "Category of One"

        We operate in the fast casual segment of the restaurant industry. According to Technomic, in 2011 the 150 largest fast casual concepts grew sales by 8.4% to $21.5 billion, compared with 3.5% for the 500 overall largest restaurant chains in the United States.

        We believe we are the only national fast casual restaurant concept offering a menu with a wide variety of noodle and pasta dishes, soups, salads and sandwiches inspired by global flavors. We believe our unique combination of attributes—global flavors and variety, fast service and upscale atmosphere—allows us to compete against multiple segments within and outside of the restaurant industry. Accordingly, we have a larger addressable market for lunch and dinner. We believe we provide a better overall experience than our casual dining competitors by quickly delivering superior quality food with friendly service at an attractive price point. Unlike quick-service and many fast casual competitors, you do not have to jostle your gear or schlep trays of food to or from your table. Grab a drink, have a seat and we will deliver your food to your table—all without the need to tip.

Our Strengths

        We believe the following strengths set us apart from our competitors:

Variety Makes Togetherness Possible

        We have purposefully chosen a range of healthy to indulgent dishes to satisfy carnivores and vegetarians. Our menu encourages guests to customize their meals to meet their tastes and nutritional preferences with our selection of 14 fresh vegetables and six proteins—beef, pork, chicken, meatballs,

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shrimp and organic tofu. We believe our variety ensures that even the pickiest of eaters can find something to crave, which eliminates the "veto vote" and encourages people with different tastes to enjoy a meal together.

        All of our dishes are cooked-to-order with fresh, high quality ingredients sourced from carefully selected suppliers. Our innovative, passionate and nutritionally-minded culinary team strives to develop new dishes and LTOs that incorporate seasonal ingredients to bring nature's best to our guests. For example, our Spinach & Fresh Fruit Salad rotates between fresh strawberries in the summer and Fuji apples in the winter. We recently introduced our award-winning slow-braised, naturally raised pork, serving it on our BBQ Mac & Cheese, our Peppery Pork Sandwich or as an add-on to any of our other dishes.

Value That Is Greater Than Our Attractive Price Point

        Our compelling value proposition, the quality of our food, the sophistication of our recipes and the warmth of our restaurants create an overall guest experience that we believe is second-to-none. Our 2012 per person spend of $7.80 is competitive not only within the fast casual segment, but also within the quick-service segment. We believe the speed of our service and the quality of our food contribute to a value proposition that enables us to take market share from casual dining restaurants. We deliver compelling value by combining a family-friendly dining environment with the opportunity to enjoy luxurious dishes, such as our Truffle Mac & Cheese, at an affordable price point.

Everything Is a Little Nicer Here

        We design each location individually, which we believe creates an inviting restaurant environment. The ambience is warm and welcoming, with muted lighting and colors, comfortable seating and our own custom music mix, which is intended to make our guests feel relaxed and at home. We also enhance the experience by featuring new Coca-Cola Freestyle machines in all our restaurants, offering our guests over 100 drink choices to complement their meal—again putting control in the guests' hands, so that they can match their drink to their meal.

        We deliver an exceptional overall dining experience. Our guests should expect not only great food from our restaurants, but also excellent service and warm hospitality. Whether you are a mother with kids or a businessperson with a BlackBerry, you simply order your food, grab a drink and take a seat. We cook each dish to order in approximately five minutes and bring the food right to your table. Our guests may enjoy a relaxed meal or just eat and run.

        Consistent with our culture of enhanced guest service, we seek to hire genuine individuals with unique personalities and train them to deliver prompt, attentive service by engaging guests the moment they enter our restaurants. Our training philosophy empowers both our restaurant managers and team members to add a personal touch when serving our guests, such as coming out from behind the counter to explain our menu and guide guests to the right dish. Our restaurant managers are critical to our success, as their entrepreneurial spirit and outreach efforts generate the warmth of our environment and build our brand in our communities. We call our cashiers "Noodle Ambassadors" to highlight their role in helping our guests explore our global menu.

        After our guests order at the counter, their food is served on china by our friendly team members. To further enhance our guests' dining experience, we check on them throughout their meal. We offer them drink refills, a glass of wine or dessert, so they do not have to leave their seats. No trash cans are visible to our guests in our restaurants: following the meal, our team quickly clears the table.

Desirable and Loyal Consumer Base

        Approximately 40% of our guests visit our restaurants at least once each month. Our guests skew slightly younger and more affluent than the general population, and according to a recent Gallup survey,

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this demographic spends more on dining than others. We believe the variety of our food and our ability to accomodate a guest's desire to eat quickly or to enjoy a longer meal enable us to draw sales almost equally between lunch and dinner. Our broad appeal and strong guest loyalty have led to industry and media recognition:

    Nation's Restaurant News, MenuMasters Award, 2013, Golden Chain Winner, 2010

    The International Foodservice Manufacturers Association, COEX Innovator Award, 2013

    DigitalCoco, Top 10 "Most Loved" food and beverage brands in social media, 2012

    Restaurant Social Media Index, Top Social Media Brands and Top Social Consumer Sentiment, 2012

    Parents Magazine, Parents Top 10 Family-Friendly Restaurant Chains, 2011 and 2009

    Health Magazine, America's Top 10 Healthiest Fast Food Restaurants, 2009, America's Healthiest Restaurants, 2008

Powerful Restaurant Economics and a Flexible Footprint

        We have a proven restaurant model that generates strong cash flow, consistent restaurant-level financial results and a high return on investment. Our restaurants have been successful in diverse geographic regions, with a broad range of population densities and real estate settings. We believe we are an attractive tenant to the owners and developers of a wide variety of real estate development types, which allows us to be highly selective in our evaluation of potential new sites. Our disciplined approach to site selection is grounded in an analytical data driven model with strict criteria including population density, demographics and traffic generators. We take pride in selecting excellent sites where we can design and construct a comfortable, warm environment for our guests.

Proven Leadership

        Our strategic vision and culture have been developed and nurtured by our senior management team under the stewardship of our Chairman and Chief Executive Officer, Kevin Reddy, and our President and Chief Operating Officer, Keith Kinsey. Kevin and Keith joined Noodles in 2005 after working at McDonald's and, more recently, Chipotle. At Chipotle, they were instrumental in growing the concept from a small number of restaurants to more than 400 across the country between 2000 and 2005 with the financial backing of McDonald's. They delivered a similar growth trajectory when they joined Noodles eight years ago, increasing the restaurant base from 100 to 327 between 2005 and 2012, a CAGR of 16.0%. Kevin and Keith have assembled a talented senior management team with significant restaurant experience across a broad range of disciplines, including menu innovation, marketing, restaurant operations, real estate, finance and accounting, supply chain management and information technology. We believe our management team is integral to our success and has positioned us well for long-term growth.

Steady, Reliable Financial Performance

        Our globally inspired flavors and differentiated dining experience have resonated with our guests and resulted in our strong financial performance and a track record of building profitable restaurants. Since 2008, our revenue and income from operations have grown at CAGRs of 15.2% and 67.5%, respectively. We achieved our sales growth through a combination of new restaurant openings and comparable restaurant sales increases. Our approach has resulted in stable gross margins despite minimal price increases and allows us to stay true to our principle of quality food at an attractive price. By design, our selection of dishes is comprised of a diverse collection of ingredients, mitigating exposure to commodity price inflation.

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A Clear Path Forward

        We believe we have significant growth potential because of our brand positioning, strong unit economics, proven track record of financial results and broad guest appeal. We believe there are significant opportunities to expand our business, strengthen our competitive position and enhance our brand through the continued implementation of the following strategies:

Continuing to Grow Our Restaurant Base

        We have more than doubled our restaurant base in the last six years to 331 locations in 25 states and the District of Columbia, as of March 15, 2013. In 2012, we opened 39 company-owned restaurants and six franchise restaurants. In 2013, we plan to open between 38 and 42 company-owned restaurants and between six and eight franchise restaurants. We believe we are at an early stage of nationwide expansion, and that we can grow to 2,500 restaurants across the United States based on our scalable infrastructure, broad appeal and flexible and portable real estate model. Our restaurants are typically 2,600 to 2,700 square feet and are located in end-cap, inline or free-standing locations across a variety of urban and suburban markets. Our near-term growth strategy will involve opening units in mature markets and expanding into new markets.

        Although we expect the majority of our expansion to continue to be from company-owned restaurants, we are strategically expanding our base of franchise restaurants. Our franchise program is a low cost and high return model that allows us to expand our footprint and build brand awareness in markets that we do not plan to enter in the short to medium term. As of March 15, 2013, we have 51 franchise units in 10 states operated by eight franchisees. We look for experienced, well-capitalized franchise partners who are able to leverage their existing infrastructure and local knowledge in a manner that benefits both our franchisees and ourselves. For example, in 2012, we entered into development agreements with large area developers in Boston, Long Island and New Jersey, which could lead to the opening of over 100 restaurants over the next 11 years in those markets. Each of these franchisees has prior experience operating other fast casual concepts in its market and will complement our growth in adjacent, non-competing geographies. As of March 15, 2013, a total of 11 area developers have signed development agreements providing for the opening of 146 additional restaurants in their respective territories. Our franchise partners plan to open between six and eight new restaurants in 2013.

Improving Our Performance

        We plan to build on our growth performance by increasing brand awareness, guest frequency, new guest visits, per person spend and sales outside our restaurants. The following is our plan to achieve these goals:

    Heighten brand awareness.  We believe that our food is our best currency and that once people try it they become loyal and repeat guests; however, before guests can try our food, they need to know about us. We differentiate Noodles & Company through an innovative, community-based marketing strategy at the corporate and restaurant level to build brand awareness and guest loyalty. We engage media outlets in our communities to execute locally tailored marketing programs. Our restaurant managers engage in local relationship marketing where they approach nearby businesses, groups and individuals for appreciation days, tastings and hero lunches to introduce our neighbors to our food. Through our website we offer our Noodlegram club, which provides the latest Company news and special offers to over 600,000 email addresses. We also use social media to promote brand awareness and were named among the Top 10 "Most Loved" food and restaurant brands in social media in a survey conducted by DigitalCoco.

    Increase existing guest frequency.  We recently refreshed the interior signage in all of our restaurants to encourage menu exploration, which we believe will increase guest frequency. Our new Welcome Wall menu board, placed at the entrance of each of our company-owned restaurants, shows pictures

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      of our dishes in an easily understandable layout so guests can fully grasp our world of flavors without feeling overwhelmed. We believe this merchandising enables our guests to peruse our offerings without feeling the pressure of holding up a line of hungry people. This new merchandising has already resulted in meaningful improvements to AUVs in the restaurants where it has been implemented, and we expect similar results in the rest of our restaurant base. Additionally, we think our menu variety allows guests to return more frequently to our restaurants than to our fast casual competitors. We encourage guests to explore their tastes and make adventurous selections of items that are either new to the menu or new to them by promising to serve them their favorite dish at no charge if they do not enjoy their adventurous selection.

    Increase new guest visits.  We would like to be top-of-mind for guests whenever they need to eat, drink or simply find a place where they feel welcome. Although we serve our food quickly, we would like guests to view our restaurants as places to dine and enjoy the company of friends and family. To further drive guest visits at dinner, we have recently enhanced our beer and wine offerings and expanded our appetizer selection.

    Improve our per person spend.  While we have generally implemented modest price increases to offset rising costs, we also strive to increase the per person spend by offering additional items, including our expanded beverage selection and appetizers. Our passionate and innovative menu development team periodically creates LTOs, which sometimes become permanent menu items, such as our Spinach & Fresh Fruit Salad. In October 2012, we successfully introduced slow-braised naturally raised pork included on our BBQ Mac & Cheese, Peppery Pork Sandwich and as an add on protein. This strategy allows us to offer our guests greater variety and entices them to "opt-up" to a premium menu offering.

    Grow sales outside of our restaurants.  We are taking steps to sell more food outside of our restaurants by marketing our larger Square Bowls to families and local businesses. We believe the convenience and attractive price point of our Square Bowls will drive take-out and catering sales. In addition, we believe our commitment to speed of service and freshly prepared food provides us with an opportunity to expand catering sales.

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Properties

        As of March 15, 2013, we and our franchisees operated 331 restaurants in 25 states and the District of Columbia. Our restaurants are typically 2,600 to 2,700 square feet and are located in a variety of suburban, urban and small markets. We lease the property for our central support office and all of the properties on which we operate restaurants.

        The map below shows the locations of our company-owned and franchised restaurants as of March 15, 2013.

GRAPHIC

        We are obligated under non-cancelable leases for our restaurants and our central support office. Our restaurant leases generally have initial terms of 10 years with two or more five-year extensions. Our restaurant leases generally have renewal options and generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges and other operating costs. Some restaurant leases provide for contingent rental payments based on sales thresholds, although we generally do not expect to pay significant contingent rent on these properties based on the thresholds in those leases.

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        In 2012, we opened 39 company-owned restaurants and six franchise restaurants. In 2013, we plan to open between 38 and 42 company-owned restaurants and between six and eight franchise restaurants. The following table shows the growth in our network of company-owned and franchise restaurants for 2012, 2011 and 2010:

 
  Fiscal Year Ended  
 
  January 1,
2013
  January 3,
2012
  December 28,
2010
 

Company-Owned Restaurant Activity

                   

Beginning of period

    239     212     186  

Openings

    39     28     28  

Closures and relocations(1)

    (2 )   (1 )   (2 )
               

Restaurants at end of period

    276     239     212  
               

Franchise Restaurant Activity

                   

Beginning of period

    45     43     43  

Openings

    6     2      

Closures and relocations(1)

             
               

Restaurants at end of period

    51     45     43  
               

Total restaurants

    327     284     255  
               

(1)
We account for relocated restaurants under both openings and closures and relocations. During both 2012 and 2010 we closed one restaurant and relocated another restaurant. In 2011, we closed one restaurant at the end of its lease term.

Site Development and Expansion

        We consider our site selection and development process critical to our long-term success. We use a combination of our own development team and outside real estate consultants to locate, evaluate and negotiate new sites using various criteria. Each member of our in-house real estate team has at least 15 years of experience with one or more high growth restaurant or retail concepts, such as Chipotle, Panera, Potbelly, Sonic, EB Games and Luxottica. In addition, because we are a category-of-one restaurant concept, we believe our restaurants are highly sought after by real estate owners and developers. We often are made aware of opportunities early in their development process, allowing us to secure optimal locations.

        In making site selection decisions, we also use several analytical tools designed to uncover the key site, demographic, business, retail, competitive and traffic characteristics that drive successful locations. These tools have been customized to leverage existing real estate information to project sales of a potential location and to assist in the development of local marketing plans.

        Our ability to succeed in several different kinds of trade areas and real estate types has allowed us flexibility in our market development strategy. While we typically target end cap or freestanding locations, we also have seen success in inline locations. Moreover, we perform well in various market sizes, from smaller markets to suburbs to central business districts. This flexibility also allows us to manage risk in our development portfolio by balancing higher cost locations—typically seen in urban areas—with those that are lower cost—typically seen in smaller markets.

        Once a location has been approved by our executive level selection committee, we begin a design process to match the characteristics and feel of the location to the trade area. For example, in a trade area with a high percentage of families we will utilize additional booth seating in the dining room, and in an urban location we will typically alter our kitchen design to enhance throughput for the busy lunch hours.

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Restaurant Management and Operations

        Surprisingly Friendly People.    We believe our genuine, nice people separate us from our competitors. We value the individuality of our team members, which we believe results in a management, operations and training philosophy distinct from that of our competitors. We make an effort to hire team members who share a passion for food, have a competitive spirit and will operate our restaurants in a way that is consistent with our high standards. We seek to hire engaging, genuine individuals with unique personalities who can deliver great service, consistent with our philosophy of enhanced guest service and culture. We empower our team members to enrich the experience of our guests and directly address any concerns that may arise in a manner that contributes to the success of our business.

        Restaurant Management and Employees.    Each restaurant typically has a restaurant manager, an assistant manager and as many as 15 to 25 team members. We cross-train our employees in an effort to create a depth of competency in our critical restaurant functions. Consistent with our emphasis on guest interaction, we encourage our restaurant managers and team members to welcome and interact with guests throughout the day. To lead our restaurant management teams, we have area managers (each of whom is responsible for between five and 12 restaurants), as well as market directors (each of whom is responsible for between 50 and 80 restaurants).

        Training and Career Development.    We believe that our training efforts create a culture of continuous learning and professional growth that allows our team members to continue their career development with us. Within each restaurant, two to four team members are designated to lead the training efforts and ensure a consistent approach to team member development. We produce training materials that encourage individual contributions and participation on the part of our team members, rather than providing rote, step-by-step scripts or rigid and extensively detailed policy manuals.

        Food Preparation and Quality.    Our teams use classic professional cooking methods, including hand-chopping, par boiling and sautéing many of our vegetables, in full kitchens resembling those of full service restaurants. All team members, including our restaurant managers, spend their first several days working solely with food and learning these techniques, and we spend a significant amount of time ensuring that each team member learns how to prepare and cook our food properly. Despite our more labor-intensive method of food preparation, we believe that we produce food with an efficiency that enables us to compete effectively.

        We use exhibition-style kitchens in our new restaurants whenever possible. This design demonstrates our commitment to cooking fresh food in an accessible manner. We provide each guest with individual attention and make every effort to respond to guest suggestions and concerns in a personal and hospitable way.

        We have designed our food safety and quality assurance programs to maintain high standards for our food and food preparation procedures. Our quality assurance manager oversees comprehensive restaurant and supplier audits based upon the potential food safety risk of each food. We also consider food safety and quality assurance when selecting our distributors and suppliers. Our suppliers are inspected by federal, state and local regulators or other reputable, qualified inspection services, which helps ensure their compliance with all federal food safety and quality guidelines. We regularly inspect our suppliers to ensure that the ingredients we buy conform to our quality standards and that the prices we pay are competitive. We also rely on our own recipes, specifications and protocols to ensure that our food is consistently the best quality possible when served, including a physical examination of ingredients when they arrive at our restaurants. We train our employees to pay detailed attention to food quality at every stage of the food preparation cycle and have developed a daily checklist that our employees use to assess the freshness and quality of food supplies. Finally, we encourage our guests to provide feedback regarding our food quality so that we can identify and resolve problems or concerns as quickly as possible.

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Restaurant Marketing

        Our marketing efforts seek to increase sales through a variety of channels and initiatives. Community-based restaurant marketing, as well as online, social and other media tools, highlights our competitive strengths, including our varied and healthy menu offerings and the value we offer our guests.

    Local Relationship Marketing.  We differentiate our business through an innovative, community-based approach to building brand awareness and guest loyalty. We use a wide range of local marketing initiatives to increase the frequency of and occasions for visits, and to encourage people to get know us better, try our food and bring their friends. We empower our local restaurant managers to selectively organize events to bring new guests into our restaurants. For example, our team members will invite a guest to bring a group of his or her friends for a "hero lunch," an exclusive menu tasting at their local Noodles location.

    Our Menu Offerings.  We focus some of our marketing efforts on new menu offerings to broaden our appeal to our guests. We offer LTOs and seasonal items such as our Garden Pesto Sauté featuring ingredients and flavors to maintain guest interest, which we promote through a variety of formats, including market-wide public relations events, direct mailings, social media marketing, radio promotions, tastings, billboard and bus board advertising and targeted print advertising. In addition to increasing brand awareness, these promotions also encourage prompt consumer action, resulting in more immediate increases in guest traffic.

    Creating New Meal Occasions.  We also focus on ways Noodles & Company can serve guests at different times and in new places. For example, guests who want to feed a large group can enjoy our Square Bowls, which are family-style take-out offerings of our noodles, pastas and salads that generally feed up to four people. We market this new offering in a variety of ways, including in-restaurant posters, as well as Noodlegrams, Facebook posts and other communications outside our restaurants.

    Making Noodles & Company Easier to Use.  Some of our marketing efforts focus on making our restaurants easier to use. We seek to deliver superior guest service at every opportunity, generating consumer awareness of menu offerings with in-restaurant communications by providing displays of our menu offerings and beer and wine selection visible upon entry, chalkboards featuring new menu offerings and fresh ingredients and table top cards that highlight healthy food offerings. By providing multiple points of access to our wide variety of menu offerings, we seek to optimize our guests' in-restaurant experience in order to increase the frequency of our guests' visits. Our efforts also make use of tools like online ordering.

    Online, Social and Other Media Tools.  We rely on our website, www.noodles.com, to promote our business and increase brand awareness. The information on or available through our website is not, and should not be considered, a part of this prospectus. Our guests are encouraged to sign up to receive email Noodlegrams updating them on new menu offerings, LTOs and promotional opportunities. As of March 15, 2013, 600,000 of our guests have signed up to receive Noodlegrams. We also communicate with our guests using social media, such as our Facebook page, our YouTube channel and our Twitter feed. Our media tools also include placements in local, regional and national print media.

Suppliers

        Maintaining a high degree of quality in our restaurants depends in part on our ability to acquire fresh ingredients and other necessary supplies that meet our specifications from reliable suppliers. We carefully select suppliers based on quality and their understanding of our brand, and we seek to develop mutually beneficial long-term relationships with them. We work closely with our suppliers and use a mix of forward, fixed and formula pricing protocols. We have tried to increase, in some cases, the number of suppliers for

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our ingredients, which we believe can help mitigate pricing volatility, and we monitor industry news, trade issues, weather, crises and other world events that may affect supply prices.

Seasonality

        Seasonal factors and the timing of holidays cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced winter and holiday traffic and higher in the second and third quarters.

Franchising

        We had eight franchise area developers who operated 51 franchise restaurants in 10 states as of March 15, 2013. A total of 11 area developers have signed area development agreements providing for the opening of 146 additional restaurants in their respective territories. We expect to continue to offer development rights in markets where we do not intend to build company-owned restaurants. We may offer such rights to larger developers who commit to open 10 or more units, or to smaller developers who may commit to open significantly fewer restaurants. We do not currently intend to offer single-unit franchises. We believe the strength and attractiveness of our brand and unit growth opportunities in attractive undeveloped markets will attract experienced and well-capitalized area developers.

Intellectual Property and Trademarks

        We own a number of trademarks and service marks registered or pending with the U.S. Patent and Trademark Office ("PTO"). We have registered the following marks with the PTO: Noodles & Company, the Noodles & Company logo, Square Bowl, Noodlegram, Crave Card and Wisconsin Mac & Cheese. We also have certain trademarks registered or pending in certain foreign countries. In addition, we have registered the Internet domain name www.noodles.com. The information on or available through our website is not, and should not be considered, a part of this prospectus.

        We believe that our trademarks, service marks and other intellectual property rights have significant value and are important to the marketing of our brand, and it is our policy to protect and defend vigorously our rights to such intellectual property. However, we cannot predict whether steps taken to protect such rights will be adequate. See "Risk Factors—Risks Related to Our Business and Industry—We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business."

Governmental Regulation and Environmental Matters

        We are subject to extensive and varied federal, state and local government regulation, including regulations relating to public and occupational health and safety, sanitation and fire prevention. We operate each of our restaurants in accordance with standards and procedures designed to comply with applicable codes and regulations. However, an inability to obtain or retain health department or other licenses would adversely affect our operations. Although we have not experienced, and do not anticipate, any significant difficulties, delays or failures in obtaining required licenses, permits or approvals, any such problem could delay or prevent the opening of, or adversely impact the viability of, a particular restaurant or group of restaurants.

        In addition, in order to develop and construct restaurants, we need to comply with applicable zoning, land use and environmental regulations. Federal and state environmental regulations have not had a material effect on our operations to date, but more stringent and varied requirements of local governmental bodies with respect to zoning, land use and environmental factors could delay or even prevent construction and increase development costs for new restaurants. We are also required to comply with the accessibility standards mandated by the U.S. Americans with Disabilities Act, which generally prohibits discrimination in accommodation or employment based on disability. We may in the future have

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to modify restaurants, for example by adding access ramps or redesigning certain architectural fixtures, to provide service to or make reasonable accommodations for disabled persons. While these expenses could be material, our current expectation is that any such actions will not require us to expend substantial funds.

        A small amount of our revenues is attributable to the sale of alcoholic beverages. Alcoholic beverage control regulations require each of our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for a license that must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, trade practices, wholesale purchasing, other relationships with alcohol manufacturers, wholesalers and distributors, inventory control and handling, storage and dispensing of alcoholic beverages. We are also subject in certain states to "dram shop" statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. We carry liquor liability coverage as part of our existing comprehensive general liability insurance. A small number of our restaurants do not have liquor licenses, typically because of the cost of a liquor license in jurisdictions having liquor license quotas.

        In addition, we are subject to the U.S. Fair Labor Standards Act, the U.S. Immigration Reform and Control Act of 1986, the Occupational Safety and Health Act and various other federal and state laws governing similar matters including minimum wages, overtime, workplace safety and other working conditions. We are also subject to various laws and regulations relating to our current and any future franchise operations. See "Risk Factors—Risks Related to Our Business and Industry—Governmental regulation may adversely affect our ability to open new restaurants or otherwise adversely affect our business, financial condition or results of operations."

        We are subject to federal, state and local environmental laws and regulations concerning waste disposal, pollution, protection of the environment, and the presence, discharge, storage, handling, release and disposal of, or exposure to, hazardous or toxic substances ("environmental laws"). These environmental laws can provide for significant fines and penalties for non-compliance and liabilities for remediation, sometimes without regard to whether the owner or operator of the property knew of, or was responsible for, the release or presence of the hazardous or toxic substances. Third parties may also make claims against owners or operators of properties for personal injuries and property damage associated with releases of, or actual or alleged exposure to, such substances. We are not aware of any environmental laws that will materially affect our earnings or competitive position, or result in material capital expenditures relating to our restaurants. However, we cannot predict what environmental laws will be enacted in the future, how existing or future environmental laws will be administered, interpreted or enforced, or the amount of future expenditures that we may need to make to comply with, or to satisfy claims relating to, environmental laws. It is possible that we will become subject to environmental liabilities at our properties, and any such liabilities could materially affect our business, financial condition or results of operations. See "Risk Factors—Risks Related to Our Business and Industry—Compliance with environmental laws may negatively affect our business."

Management Information Systems

        All of our restaurants use computerized management information systems, which we believe are scalable to support our future growth plans. We use point-of-sale computers designed specifically for the restaurant industry. The system provides a touch screen interface, a graphical order confirmation display and integrated, high-speed credit card and gift card processing. The point-of-sale system is used to collect daily transaction data, which generates information about daily sales, product mix and average check that we actively analyze. All products sold and prices at our company-owned restaurants are programmed into the system from our central support office.

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        Our in-restaurant back office computer system is designed to assist in the management of our restaurants and provide labor and food cost management tools. These tools provide corporate and restaurant operations management quick access to detailed business data and reduces restaurant managers' administrative time. The system provides our restaurant managers the ability to submit orders electronically with our distribution network. The system also supplies sales, bank deposit and variance data to our accounting department on a daily basis. We use this data to generate daily sales information and weekly consolidated reports regarding sales and other key measures, as well as preliminary weekly detailed profit and loss statements for each location with final reports following the end of each period.

        Franchisees use similar point of sale systems and are required to report sales on a daily basis through an on-line reporting network and submit their restaurant-level financial statements on a quarterly or annual basis.

Employees

        As of January 1, 2013, we had approximately 7,000 employees, including 700 salaried employees and 6,300 hourly employees. None of our employees are unionized or covered by a collective bargaining agreement, and we consider our current employee relations to be good.

Legal Proceedings

        We are currently involved in various claims and legal actions that arise in the ordinary course of business. We do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity or capital resources. However, a significant increase in the number of these claims or an increase in amounts owing under successful claims could materially and adversely affect our business, financial condition and results of operations.

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MANAGEMENT

Directors and Executive Officers

        The following table sets forth certain information regarding our board of directors and executive officers.

Name
  Age(1)   Position

Kevin Reddy

  55   Chairman and Chief Executive Officer

Keith Kinsey

  58   President, Chief Operating Officer and Director

Dave Boennighausen

  35   Chief Financial Officer

Dan Fogarty

  51   Executive Vice President of Marketing

Phil Petrilli

  43   Executive Vice President of Operations

Paul Strasen

  56   Executive Vice President, General Counsel and Secretary

Kathy Lockhart

  48   Vice President and Controller

Scott Dahnke

  47   Director

Stuart Frenkiel

  33   Director

James Pittman

  49   Director

James Rand

  70   Director

Andrew Taub

  44   Director

(1)
As of March 15, 2013

        Kevin Reddy has served as our Chief Executive Officer since April 2006. He became a member of our board of directors in May 2006, and Chairman of the Board in May 2008. Mr. Reddy was our President and Chief Operating Officer from April 2005 to April 2006, continuing to serve as our President until July 2012. Prior to joining us, he was the Chief Operating Officer, Chief Operations Officer and Restaurant Support Officer for Chipotle Mexican Grill. Mr. Reddy began his professional career with McDonald's Corporation in 1983 as a regional controller and progressed into positions of escalating responsibility. Mr. Reddy has received a number of awards in connection with his role as our Chief Executive Officer, including being named "Entrepreneur of the Year" by Restaurant Business Magazine in 2009 and, most recently, a 2012 "All-Star CEO" by Restaurant Finance Monitor. He currently serves on the executive advisory board to the Daniels School of Business at the University of Denver. He received a BS in Accounting from Duquesne University.

        Keith Kinsey has served as our President since July 2012 and our Chief Operating Officer since November 2007. Mr. Kinsey also served as our Chief Financial Officer from July 2005 to July 2012. He became a member of our board of directors in November 2008. Prior to joining us, he was the Pacific Regional Director for Chipotle Mexican Grill. Prior to that time, he held various management roles at McDonald's Corporation, PepsiCo Restaurant Group and Checkers Drive-In Restaurants. He received a BS in Accounting from the University of Illinois, and is a Certified Public Accountant.

        Dave Boennighausen has served as our Chief Financial Officer since March 2012. Mr. Boennighausen has been with the Company since 2004, and served as our Vice President of Finance from October 2007 to March 2011, and as our Executive Vice President of Finance from April 2011 to February 2012. He began his career with May Department Stores. He received a BS in Finance and Marketing from Truman State University and holds an MBA from the Stanford Graduate School of Business.

        Dan Fogarty has served as our Executive Vice President of Marketing since October 2010. Prior to joining us, Mr. Fogarty has been with the Company since 2009, serving as Vice President of Marketing from June 2009 to October 2010. Mr. Fogarty was Vice President of Marketing for The Pump Energy Food from May 2008 until May 2009. Prior to that time, he worked at Potbelly Sandwich Works and Chipotle Mexican Grill. Mr. Fogarty began his career working for a number of advertising agencies and had his own

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brand consulting firm for five years. He received a BA in Journalism and Advertising from the University of Kansas.

        Phil Petrilli has served as our Executive Vice President of Operations since May 2012. Prior to joining us, he worked for Chipotle Mexican Grill in multiple operations positions from June 1999 to May 2012, most recently as Regional Director—Northeast Region from 2008 to 2012, where he led a region of 268 restaurants. He received a degree in Industrial Psychology from the University of Illinois-Chicago.

        Paul Strasen has served as our Executive Vice President, Secretary and General Counsel since January 2008. Prior to joining our company, Mr. Strasen was the Vice President, General Counsel and Secretary of Houlihan's Restaurants, Inc. and served as the General Counsel of Einstein/Noah Bagel Corp. He began his career at Bell Boyd & Lloyd, now part of K & L Gates. Mr. Strasen received a BA in Humanities and Political Science from Valparaiso University and received a JD from The University of Chicago Law School.

        Kathy Lockhart has served as our Vice President and Controller since August 2006. Prior to joining us, Ms. Lockhart served as the Vice President and Controller of several public and private restaurant and retail companies, including Einstein/Noah Bagel Corp, Boston Market, VICORP (parent company of Village Inn and Bakers Square restaurants) and Ultimate Electronics. She received a BA in Business Administration and Political Science from Western State College, and is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants.

        Scott Dahnke has been a member of our board of directors since September 2011. Mr. Dahnke has been a Managing Partner of Catterton for the last decade, and has a broad range of business experience in private equity, consulting, management and finance. Prior to joining Catterton, he was a Managing Director at Deutsche Bank Capital Partners and at AEA Investors, where he led AEA's consumer products investing efforts. Previously, Mr. Dahnke was the Chief Executive Officer of infoUSA, a leading publicly traded provider of business and consumer marketing products and services. Prior to joining infoUSA, Mr. Dahnke served clients on an array of strategic and operational issues as a Partner at McKinsey & Company. His early career also includes experience in the Merger Department of Goldman, Sachs & Co. and with General Motors. Mr. Dahnke received a BS, magna cum laude, in Mechanical Engineering from the University of Notre Dame. He also received academic honors while earning an MBA from the Harvard Business School.

        Stuart Frenkiel has been a member of our board of directors since December 2010. Mr. Frenkiel is a Senior Director at PSPIB, and serves on the board of directors of Ferrara Candy Company and the board of managers of QCE Finance LLC (Quiznos). Prior to joining PSPIB, he was an Associate Director in the mergers and acquisitions group of UBS Investment Bank. Earlier in his career, Mr. Frenkiel worked in the Office of Strategic Management at BMO Financial Group and held several finance roles at General Electric Company. Mr. Frenkiel received a Bachelor of Commerce degree from McGill University, holds an MBA from the Kellogg School of Management at Northwestern University and is a CFA charterholder.

        James Pittman has been a member of our board of directors since December 2010. Mr. Pittman is a Managing Director at PSPIB. From February 2005 until December 2012, he was Vice President Private Equity at PSPIB (the owner of Argentia) in Quebec, Canada. In this capacity, he has co-led the strategy and investment of the international private equity portfolio. From 2002 to 2005, he served as Executive Vice President and CFO of Provincial Aerospace. Mr. Pittman is also a director of Telesat Holdings, Inc., Herbal Magic Inc., Haymarket Financial, Centaur Guernsey L.P. Inc. and the Institutional Limited Partners Association, where he also served as the Vice Chairman.

        James Rand has been a member of our board of directors since May 2008. Mr. Rand has served as an independent executive consultant in the retail and restaurant industries since his retirement as Senior Vice President of Worldwide Development at McDonald's Corporation in 2005. Mr. Rand began his career at McDonald's Corporation in 1973, where he gained experience in marketing research, marketing and real

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estate development, including leading the team that launched the Extra Value Meal strategy. Mr. Rand is also a director of Homemade Pizza Company and Chicago Apartment Finders, Inc. He received a BA in Mathematics from Saint Mary's College.

        Andrew Taub has been a member of our board of directors since December 2010. Mr. Taub is a Partner at Catterton. He joined Catterton in 1996 and has previously served as a Vice President and Principal prior to becoming a Partner in the firm. Mr. Taub has helped capitalize and grow over a dozen consumer companies including restaurants, retail, food and beverage and marketing services. Prior to joining Catterton, he spent three years as Vice President of Nantucket Holding Company, a merchant bank specializing in the acquisition and management of troubled companies, as well as the consolidation of fragmented industries. Previously he worked in Mergers and Acquisitions at Dean Witter Reynolds and Coopers & Lybrand. Mr. Taub received a BA from the University of Michigan and an MBA from Columbia Business School.

Corporate Governance and Board Structure

        Our board of directors currently consists of seven members.

        In accordance with the amended and restated certificate of incorporation and the amended and restated bylaws that will become effective upon consummation of the offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual general meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. The authorized number of directors may be changed by resolution of the board of directors. Vacancies on the board of directors can be filled by resolution of the board of directors. Kevin Reddy serves as the chairman of our board of directors. We believe that                        of our directors are independent as required by the rules of the Nasdaq Stock Market or the New York Stock Exchange:                        ,                         and                         .

                                and                         are the Class I directors and their terms will expire in 2014.                        and                         are the Class II directors and their terms will expire in 2015.                        ,                         and                                                 are the Class III directors and their terms will expire in 2016. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

Corporate Governance

        We expect that our board of directors will fully implement our corporate governance initiatives at or prior to the closing of this offering. We believe these initiatives comply with the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC adopted thereunder. In addition, we believe our corporate governance initiatives comply with the rules of the Nasdaq Stock Market and the New York Stock Exchange. After this offering, our board of directors will continue to evaluate, and improve upon as appropriate, our corporate governance principles and policies.

        We expect our board of directors to adopt a code of business conduct, effective upon consummation of the offering, that applies to each of our directors, officers and employees. The code addresses various topics, including:

    compliance with laws, rules and regulations;

    conflicts of interest;

    insider trading;

    corporate opportunities;

    competition and fair dealing;

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    fair employment practices;

    record keeping;

    confidentiality;

    protection and proper use of company assets; and

    payments to government personnel.

Board Committees

        We have established an audit committee and a management development and compensation committee (the "compensation committee") and will establish a nominating and corporate governance committee. We believe that the composition of these committees will meet the criteria for independence under, and the functioning of these committees will comply with the requirements of, the Sarbanes-Oxley Act, the rules of the Nasdaq Stock Market, the New York Stock Exchange and SEC rules and regulations that will become applicable to us upon closing of the offering. We intend to comply with the requirements of the Nasdaq Stock Market and the New York Stock Exchange with respect to committee composition of independent directors as they become applicable to us. Each committee has the composition and responsibilities described below.

Audit Committee

        The audit committee provides assistance to the board of directors in fulfilling its oversight responsibilities regarding the integrity of financial statements, our compliance with applicable legal and regulatory requirements, the integrity of our financial reporting processes including its systems of internal accounting and financial controls, the performance of our internal audit function and independent auditor and our financial policy matters by approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal accounting controls. The audit committee also oversees the audit efforts of our independent accountants and takes those actions as it deems necessary to satisfy itself that the accountants are independent of management.

Management Development and Compensation Committee

        The compensation committee oversees our overall compensation structure, policies and programs, and assesses whether our compensation structure establishes appropriate incentives for officers and employees. The compensation committee reviews and approves corporate goals and objectives relevant to compensation of our chief executive officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, sets the compensation of these officers based on such evaluations and reviews and recommends to the board of directors any employment-related agreements, any proposed severance arrangements or change in control or similar agreements with these officers. The compensation committee also grants stock options and other awards under our stock plans. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members and the adequacy of the charter of the compensation committee.

Nominating and Corporate Governance Committee

        The nominating and corporate governance committee will be responsible for developing and recommending to the board of directors criteria for identifying and evaluating candidates for directorships and making recommendations to the board of directors regarding candidates for election or reelection to the board of directors at each annual stockholders' meeting. In addition, the nominating and corporate governance committee will be responsible for overseeing our corporate governance guidelines and reporting and making recommendations to the board of directors concerning corporate governance matters. The nominating and corporate governance committee will be also responsible for making

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recommendations to the board of directors concerning the structure, composition and function of the board of directors and its committees.

Compensation Committee Interlocks

        None of the members of our compensation committee is or has at any time during the past year been an officer or employee of ours. None of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board or compensation committee.

Director Compensation

        We did not provide any compensation to our non-employee directors in 2012. Directors who are also employees, such as Mr. Reddy and Mr. Kinsey, do not and will not receive any compensation for their services as directors. In addition, directors appointed by Catterton and Argentia have not received any compensation for their services as directors and will not in the future.

        Directors have been and will continue to be reimbursed for travel, food, lodging and other expenses directly related to their activities as directors. Directors are also entitled to the protection provided by their indemnification agreements and the indemnification provisions in our current certificate of incorporation and bylaws, as well as the certificate of incorporation and bylaws that will become effective immediately upon the completion of this offering.

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EXECUTIVE COMPENSATION

        Our named executive officers, or NEOs, for 2012, which consist of our principal executive officer and the next two most highly-compensated executives, are:

    Kevin Reddy, our Chairman and Chief Executive Officer;

    Keith Kinsey, our President and Chief Operating Officer; and

    Dan Fogarty, our Executive Vice President of Marketing.

2012 Summary Compensation Table

        The following table summarizes the compensation awarded to, earned by or paid to our NEOs for 2011 and 2012:

Name and Principal Position
  Year   Salary   Bonus(1)   Option
Awards(2)
  All other
Compensation
  Total  

Kevin Reddy

    2012   $ 546,154   $ 550,000   $   $ 13,905   $ 1,110,059  

Chairman and Chief Executive Officer

    2011     547,017     575,000         15,250     1,137,267  

Keith Kinsey

   
2012
   
422,308
   
322,500
   
20,898
   
7,439
   
773,145
 

President and Chief Operating Officer

    2011     400,963     350,000         7,519     758,482  

Dan Fogarty

   
2012
   
238,077
   
91,584
   
166,523
   
18,988
   
515,172
 

Executive Vice President of Marketing

    2011     234,038     85,000         10,769     329,807  

(1)
Amounts shown in this column represent cash bonus awards granted to our named executive officers for performance during 2012 and 2011. For each year, we maintained bonus plans that provided each NEO with the opportunity to earn a bonus based on achievement of adjusted EBITDA goals for the applicable year. The target bonuses were 100% of base salary for Mr. Reddy, 75% of base salary for Mr. Kinsey and 30% of base salary for Mr. Fogarty for 2012 and 2011. For both years, our actual performance equaled or exceeded target levels. The compensation committee reserves the right to exercise discretion to increase or decrease bonuses and did, in fact, pay higher bonuses for certain NEOs than the applicable plan formula provided for 2012 and 2011.

(2)
Amounts represent the aggregate grant date fair value of stock options awarded in 2012 and 2011. A description of the methodologies and assumptions we use to value options awards and the manner in which we recognize the related expense are described in Note 10 to our consolidated financial statements, Stock-Based Compensation. These amounts may not correspond to the actual value eventually realized by each NEO because the value depends on the market value of our common stock at the time the option is exercised.

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Outstanding Equity Awards at January 1, 2013

        The following table sets forth information regarding outstanding equity awards at the end of 2012 for each of the named executive officers.

Name
  Number of securities
underlying unexercised
options exercisable
  Number of securities
underlying unexercised
options unexercisable
  Option exercise
price
  Option expiration
date
 

Kevin Reddy

    799,000     799,000 (1) $ 5.00     12/27/2020  

Keith Kinsey

   
510,000
   
510,000

(1)

$

5.00
   
12/27/2020
 

        30,000 (2) $ 5.50     5/14/2022  

Dan Fogarty

   
127,500
   
127,500

(1)

$

5.00
   
12/27/2020
 

        75,000 (3) $ 7.00     12/6/2022  

(1)
One-half of such options vest and become exercisable on each of December 27, 2013 and December 27, 2014. The unvested options will fully vest and be exercisable upon the closing of this offering.

(2)
The options vest in 25% increments on each of May 14, 2013, 2014, 2015 and 2016. The unvested options will fully vest and be exercisable upon the closing of this offering.

(3)
These options vest on December 6, 2015.

Potential Payments and Acceleration of Equity upon Termination or Termination in Connection with a Change in Control

Employment and Severance Agreements

        We are a party to employment agreements with each of the Messrs. Reddy and Kinsey (the "Employment Agreements"). Each of the Employment Agreements has a three-year term that commenced on                                    , 2013 and continues for three years unless earlier terminated. The Employment Agreements automatically extend at the end of the initial term and annually thereafter in each case, for a one year term, unless either party provides at least ninety days' prior written notice of nonextension.

        Each Employment Agreement provides for the payment of base salary and bonus, as well as customary employee benefits. Under each of the Employment Agreements, if the executive's employment is terminated by the Company without "cause" or by the executive with "good reason," (as such terms are defined in the applicable Employment Agreement) the executive is entitled to receive compensation equal to 18 months of the executive's then-current base salary, payable in equal installments over 18 months, a pro rata bonus for the year of termination and reimbursement of "COBRA" premiums for up to 18 months for the executive and his dependents. The severance payments are conditioned upon the executive entering into a mutual release of claims with us.

        Each of the Employment Agreements also restricts the executive from engaging in a competitive business during his employment and for 18 months thereafter, or soliciting employees at or above the level of vice president or above during his employment and for 12 months thereafter. For this purpose, "competitive business" is defined as any business engaged in the fast casual restaurant business in North America that derives 20% or more of its revenues from the sale of noodle or pasta dishes.

        In addition, we are a party to a Severance Agreement with Mr. Fogarty dated January 24, 2011 (the "Severance Agreement"). Pursuant to the Severance Agreement, Mr. Fogarty is an "at-will" employee. If the Company terminates Mr. Fogarty's employment without "cause," (as such term is defined in the Severance Agreement) Mr. Fogarty is entitled to receive compensation equal to nine months of his

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then-current base salary, payable in equal installments over nine months, a pro rata bonus for the year of termination and reimbursement of "COBRA" premiums for up to nine months for Mr. Fogarty and his dependents. The severance payments are conditioned upon Mr. Fogarty entering into a mutual release of claims with us. The Severance Agreement also includes similar noncompetition and nonsolicitation covenants as the Employment Agreements, except that the duration of the covenants apply to Mr. Fogarty during his employment and for nine months thereafter.

Payments Upon Termination or Change in Control

        None of our NEOs is entitled to receive payments or other benefits upon termination of employment or a change in control, except as provided in the Employment Agreements and Severance Agreement described above, and the equity acceleration pursuant to the Equity Plans described below.

Employee Benefit Plans

        The principal features of our equity incentive plans and our 401(k) plan are summarized below. These summaries are qualified in their entirety by reference to the actual text of the plans, which, other than the 401(k) plan, are filed as exhibits to the registration statement of which this prospectus is a part.

Stock Incentive Plan

        The following is a summary of the material terms of our Noodles & Company Amended and Restated 2010 Stock Incentive Plan (the "Stock Incentive Plan"). The Stock Incentive Plan was initially adopted in December 2010 and was amended and restated on                  , 2013.

        General.    The Stock Incentive Plan authorizes the grant of nonqualified stock options, incentive stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs") and incentive bonuses to employees, officers, non-employee directors and other service providers. The number of shares of common stock issuable pursuant to all awards granted under the Stock Incentive Plan shall not exceed                        . Upon the pricing of this offering,                        shares of common stock will be issuable pursuant to outstanding awards which were issued in connection with this offering, including awards with respect to                                    shares of common stock granted in the aggregate to our named executive officers. The number of shares issued or reserved pursuant to the Stock Incentive Plan (or pursuant to outstanding awards) is subject to adjustment as a result of mergers, consolidations, reorganizations, stock splits, stock dividends and other changes in our common stock. Shares subject to awards that have been terminated, expired unexercised, forfeited or settled in cash do not count as shares issued under the Stock Incentive Plan. In addition, (i) shares subject to awards that have been retained or withheld by us in payment or satisfaction of the exercise price, purchase price or tax withholding obligation of an award and (ii) shares subject to awards that otherwise do not result in the issuance of shares in connection with payment or settlement thereof do not count as shares issued under the Stock Incentive Plan. Further, shares that have been delivered to us in payment or satisfaction of the exercise price, purchase price or tax withholding obligation of an award will be available for awards under the Stock Incentive Plan.

        Administration.    The Stock Incentive Plan is administered by the compensation committee of the board. The compensation committee has the discretion to determine the individuals to whom awards may be granted under the Stock Incentive Plan, the manner in which such awards will vest and the other conditions applicable to awards. Options, SARs, restricted stock, RSUs and incentive bonuses may be granted by the committee to participants in such numbers and at such times during the term of the Stock Incentive Plan as the committee shall determine. The compensation committee is authorized to interpret the Stock Incentive Plan, to establish, amend and rescind any rules and regulations relating to the Stock Incentive Plan and to make any other determinations that it deems necessary or desirable for the administration of the Stock Incentive Plan. All decisions, determinations and interpretations by the compensation committee, and any rules and regulations under the Stock Incentive Plan and the terms and

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conditions of or operation of any award, are final and binding on all participants, beneficiaries, heirs, assigns or other persons holding or claiming rights under the Stock Incentive Plan or any award.

        Options.    The compensation committee will determine the exercise price and other terms for each option and whether the options are nonqualified stock options or incentive stock options. Incentive stock options may be granted only to employees and are subject to certain other restrictions provided that such exercise price shall not be less than the fair market value of the underlying stock on the date of the grant. To the extent an option intended to be an incentive stock option does not so qualify, it will be treated as a nonqualified option. A participant may exercise an option by written notice and payment of the exercise price in common stock, cash or a combination thereof, as determined by the compensation committee, including an irrevocable commitment by a broker to pay over such amount from a sale of the shares issuable under an option, the delivery of previously owned shares and withholding of shares deliverable upon exercise.

        Stock Appreciation Rights.    The compensation committee may grant SARs independent of or in connection with an option. The exercise price per share of a SAR will be an amount determined by the committee, and the compensation committee will determine the other terms applicable to SARs. Generally, each SAR will entitle a participant upon exercise to an amount equal to: the excess of the fair market value on the exercise date of one share of common stock over the exercise price, times the number of shares of common stock covered by the SAR. Payment shall be made in common stock or in cash, or partly in common stock and partly in cash, all as shall be determined by the compensation committee.

        Restricted Stock and Restricted Stock Units.    The compensation committee may award restricted common stock and RSUs. Restricted stock awards consist of shares of stock that are transferred to the participant subject to restrictions that may result in forfeiture if specified conditions are not satisfied. RSUs result in the transfer of shares of common stock or cash to the participant only after specified conditions are satisfied. The compensation committee will determine the restrictions and conditions applicable to each award of restricted stock or RSUs, which may include performance vesting conditions.

        Incentive Bonuses.    An incentive bonus is an opportunity for a participant to earn a future payment tied to the level of achievement with respect to one or more performance criteria established for a performance period set by the compensation committee. The terms of any incentive bonus will be set forth in an award agreement that will include provisions regarding (i) the target and maximum amount payable to the participant, (ii) the performance criteria and level of achievement versus these criteria that shall determine the amount of such payment, (iii) the term of the performance period as to which performance shall be measured for determining the amount of any payment, (iv) the timing of any payment earned by virtue of performance, (v) restrictions on the alienation or transfer of the incentive bonus prior to actual payment, (vi) forfeiture provisions and (vii) such further terms and conditions as determined by the compensation committee. Payment of the amount due under an incentive bonus may be made in cash or in common stock, as determined by the compensation committee.

        Performance Criteria.    Vesting of awards granted under the Stock Incentive Plan may be subject to the satisfaction of one or more performance goals established by the compensation committee. The performance goals may vary from participant to participant, group to group and period to period.

        Adjustments.    In the event of any reorganizations, recapitalizations, stock splits, reverse stock splits, stock dividends, extraordinary dividends or distributions or similar events, the compensation committee will appropriately adjust the number of shares available under and subject to outstanding awards under the Stock Incentive Plan.

        Transferability.    Unless otherwise determined by the compensation committee, awards granted under the 2010 Stock Plan generally are not transferable other than by will or by the laws of descent and distribution.

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        Change in Control.    Unless otherwise expressly provided in the award agreement or another contract, including an employment agreement, the compensation committee may provide for the acceleration of the vesting and, if applicable, exercisability of any outstanding award, or portion thereof, or the lapsing of any conditions or restrictions on or the time for payment in respect of any outstanding award, or portion thereof upon a change in control or the termination of the participant's employment following a change in control. In addition, unless otherwise expressly provided in the award agreement or another contract, including an employment agreement, or under the terms of a transaction constituting a change in control, the committee may provide that any or all of the following shall occur in connection with a change in control: (a) the substitution for the common stock subject to any outstanding award, or portion thereof, stock or other securities of the surviving corporation or any successor corporation to us, or a parent or subsidiary thereof, in which event the aggregate purchase or exercise price, if any, of such award, or portion thereof, shall remain the same, (b) the conversion of any outstanding award, or portion thereof, into a right to receive cash or other property upon or following the consummation of the change in control in an amount equal to the value of the consideration to be received by holders of our common stock in connection with such transaction for one share, less the per share purchase or exercise price of such award, if any, multiplied by the number of shares subject to such award, or a portion thereof, (c) the acceleration of the vesting (and, as applicable, the exercisability) of any and/or all outstanding awards and/or (d) the cancellation of any outstanding and unexercised awards upon or following the consummation of the change in control.

        Effectiveness of the Stock Incentive Plan; Amendment and Termination.    The amendment and restatement of the Stock Incentive Plan will become effective when it is approved by our stockholders prior to the completion of the offering described herein at a meeting of our stockholders or by written consent in accordance with applicable law. The Stock Incentive Plan will remain available for the grant of awards until the tenth anniversary of the effective date of the amendment and restatement. The board may amend, alter or discontinue the Stock Incentive Plan in any respect at any time, but no amendment may diminish any of the rights of a participant under any awards previously granted, without his or her consent. In addition, stockholder approval is required for any amendment that would increase the maximum number of shares available for awards, reduce the price at which options may be granted, change the class of eligible participants, or otherwise when stockholder approval is required by law or under stock exchange listing requirements.

Employee Stock Purchase Plan

        On                                     , 2013, we adopted the Noodles & Company 2013 Employee Stock Purchase Plan (the "ESPP"). The purpose of the ESPP is to encourage and enable our eligible employees to acquire a proprietary interest in us through the ownership of our common shares. A maximum of                                    shares may be purchased under the ESPP. The ESPP, and the rights of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Internal Revenue Code of 1986, as amended (the "Code").

        Administration.    The ESPP is administered by the compensation committee. All questions of interpretation of the ESPP are determined by the compensation committee, whose decisions are final and binding upon all participants. The compensation committee may delegate its responsibilities under the ESPP to one or more other persons.

        Eligibility / Participation.    Each employee who has 30 days of continuous service as of the beginning of the applicable subscription period, is scheduled to work 20 or more hours per week, and whose customary employment is more than five months in a calendar year is eligible to participate in the ESPP, except that highly compensated employees (as determined pursuant to section 423 of the Code) are excluded. There are four subscription periods in each fiscal year. Each subscription period will run for a fiscal quarter, except that the first subscription period will commence upon the closing of this offering and end on the last

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day of the fiscal quarter in which it occurs (unless this offering occurs in the last 10 days of a fiscal quarter, in which case the subscription period will run through the end of the next-following fiscal quarter).

        An eligible employee may begin participating in the ESPP effective at the beginning of a subscription period. Once enrolled in the ESPP, a participant is able to purchase our common shares with payroll deductions at the end of the applicable subscription period. Once a subscription period is over, a participant is automatically enrolled in the next subscription period unless the participant chooses to withdraw from the ESPP.

        Purchase Price.    The price per share at which shares are purchased under the ESPP is determined by the compensation committee, but in no event will be less than 85% of the fair market value of the common stock on the first or the last day of the subscription period, whichever is lower. A participant may designate payroll deductions to be used to purchase shares equal to a percentage of the participant's compensation that is at least 1% and that does not exceed a maximum rate set by the committee (which rate may be changed from time to time, but in no event shall be greater than 15%). A participant may only change the percentage of compensation that is deducted to purchase shares under the ESPP (other than to withdraw entirely from the ESPP) effective at the beginning of a subscription period. At the end of each subscription period, unless the participant has withdrawn from the ESPP, payroll deductions are applied automatically to purchase common shares at the price described above. The number of shares purchased is determined by dividing the payroll deductions by the applicable purchase price.

        Adjustments.    In the event of any reorganizations, recapitalizations, stock splits, reverse stock splits, stock dividends, extraordinary dividends or distributions or similar events, the compensation committee will appropriately adjust the number of shares available under and subject to outstanding awards under the Stock Incentive Plan.

        Limitations on Participation.    A participant is not permitted to purchase shares under the ESPP if the participant would own common stock possessing 5% or more of the total combined voting power or value of equity interests. A participant is also not permitted to purchase common stock with a fair market value in excess of $25,000 in any one calendar year (or, if less,                                     shares). A participant does not have the rights of a shareholder until the shares are actually issued to the participant.

        Transferability.    Rights to purchase common stock under the ESPP may not be transferred by a participant and may be exercised during a participant's lifetime only by the participant.

        Amendment / Termination.    The ESPP will become effective when it is approved by our stockholders prior to the completion of the offering described herein at a meeting of our stockholders or by written consent in accordance with applicable law. The board may amend, alter or discontinue the ESPP in any respect at any time, but no amendment may diminish any of the rights of a participant under any awards previously granted, without his or her consent. In addition, stockholder approval is required for any amendment that would increase the number of shares reserved under the ESPP other than as otherwise provided in the ESPP or materially change the eligibility requirements to participate in the ESPP.

401(k) Plan

        We maintain a tax-qualified retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees are able to defer eligible compensation subject to applicable annual Code limits. No employer contributions were made to the 401(k) plan in 2012. Contributions are allocated to each participant's individual account and are then invested in selected investment alternatives according to the participants' directions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code.

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Pension Benefits

        Our NEOs did not participate in, or otherwise receive any benefits under, any pension or retirement plan we sponsored during 2012.

Nonqualified Deferred Compensation

        Our NEOs did not earn any nonqualified deferred compensation benefits from us during 2012.

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PRINCIPAL STOCKHOLDERS

        The following table presents information regarding beneficial ownership of our equity interests as of                        , 2013, and as adjusted to reflect our sale of common stock in this offering, by:

    each stockholder or group of stockholders known by us to be the beneficial owner of more than 5% of our outstanding equity interests;

    each of our directors;

    each of our named executive officers; and

    all of our directors and executive officers as a group.

        Beneficial ownership is determined in accordance with the rules of the SEC, and thus represents voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all equity interests beneficially owned, subject to community property laws where applicable.

        Percentage ownership of our equity interests before this offering is based on            shares of our common stock and            shares of our Class B common stock outstanding as of                        , 2013. Shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of                        are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each individual listed in this table is c/o Noodles & Company, 520 Zang Street, Suite D, Broomfield, Colorado 80021.

 
  Shares Beneficially
Owned Prior to
The Offering
  Shares Beneficially
Owned After
the Offering
 
Name and Address of Beneficial Owner
  Number   Percent   Number   Percent
(assuming no
exercise of
Underwriters'
Option)
  Percent
(assuming full
exercise of
Underwriters'
Option)
 

5% Stockholders

                               

Entities affiliated with Catterton Partners(1)

                               

Argentia Private Investments Inc.(2)

                               

Named Executive Officers and Directors

                               

Kevin Reddy(3)

                               

Keith Kinsey(4)

                               

Dave Boennighausen(5)

                               

Dan Fogarty(6)

                               

Phil Petrilli(7)

                               

Paul Strasen(8)

                               

Kathy Lockhart(9)

                               

Scott Dahnke

                               

Stuart Frenkiel

                               

James Pittman

                               

James Rand(10)

                               

Andrew Taub

                               

All Executive Officers and Directors as a Group (12 individuals)(11)

                               

*
Indicates ownership of less than one percent.

(1)
Consists of            shares of common stock held by Catterton-Noodles, LLC, an entity affiliated with Catterton. Scott Dahnke is a Managing Partner of Catterton and Andrew Taub is a Partner of Catterton, and

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    in such capacities they have voting and investment control over the securities. Mr. Dahnke and Mr. Taub disclaim beneficial ownership of such securities except to the extent of their pecuniary interest therein. The principal business address of Catterton Partners is 599 West Putnam Avenue, Greenwich, CT 06830.

(2)
Consists of            shares of common stock and Class B common stock held by Argentia Private Investments Inc., which is affiliated with PSPIB. Class B common stock has the same rights as the common stock except that holders of Class B common stock will not be entitled to vote in the election or removal of directors unless converted into common stock. Gordon J. Fyfe is President of Argentia and Derek Murphy is Vice President of Argentia, and in such capacities they have voting and investment control over such securities. Mr. Fyfe and Mr. Murphy disclaim beneficial ownership of such securities. The principal business address of Argentia is 1250 Réne Lévesque Boulevard West, Suite 900, Montreal, Quebec, Canada H3B 4W8.

(3)
Includes options to purchase            shares of our common stock exercisable within 60 days.

(4)
Includes options to purchase            shares of our common stock exercisable within 60 days.

(5)
Includes options to purchase            shares of our common stock exercisable within 60 days.

(6)
Includes options to purchase            shares of our common stock exercisable within 60 days.

(7)
Includes options to purchase            shares of our common stock exercisable within 60 days.

(8)
Includes options to purchase            shares of our common stock exercisable within 60 days.

(9)
Includes options to purchase            shares of our common stock exercisable within 60 days.

(10)
Includes options to purchase            shares of our common stock exercisable within 60 days.

(11)
Includes options to purchase            shares of our common stock exercisable within 60 days.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party Transactions

        The following is a description of each transaction since December 30, 2009 to which we have been a party, in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or beneficial holders of more than 5% of our capital stock had or will have a direct or indirect material interest.

        Merger Agreement.    As part of the 2010 Equity Recapitalization, we entered into an Agreement and Plan of Merger with Catterton-Noodles,  LLC, Red Isle Private Investments Inc., CP/PSP Merger Sub, Inc. and David R. Duncan. Pursuant to the agreement, at the effective time of the merger, the CP/PSP Merger Sub, Inc., an entity indirectly owned by Catterton and PSPIB was merged with and into the Company. As a result of the merger, Catterton, certain of its affiliated entities and Argentia, collectively, became our majority stockholders and own approximately 90% of the outstanding equity interests of the company.

        Stockholders Agreement.    Under the Stockholders Agreement, each of Catterton and Argentia have agreed to vote its respective shares of common stock to elect two directors selected by Argentia. Furthermore, if the Public Sector Pension Investment Board Act ceases to prohibit PSPIB from investing in securities of a corporation to which are attached more than 30% of the votes that may be cast to elect directors, each of Catterton and Argentia will vote its respective shares of common stock to elect two directors selected by Catterton. Additionally, Catterton will not vote its shares to elect any three of the five directors not designated by Argentia, unless any such director has been approved by Argentia. Catterton and Argentia have further agreed not to vote their shares in favor of any of certain actions without the mutual consent of the other.

        Management Services.    Catterton Management Company, LLC, an affiliate of Catterton, provides certain management services to the Company. In connection with such services Catterton Management Company, LLC receives an annual management fee of $500,000. Argentia holds the sole share of our Class C common stock, which entitles it to receive annual dividends of $500,000 payable at the same times and in the same amounts as the management fees payable to Catterton Management Company, LLC. This share of Class C common stock will be redeemed and the services arrangement with Catterton Management Company, LLC will be terminated upon the closing of this offering.

Registration Rights

        Pursuant to the terms of a Registration Rights Agreement between us and certain holders of our stock, including Catterton, certain of its affiliates and Argentia, certain holders of our stock are entitled to demand and piggyback rights. The stockholders who are a party to the Registration Rights Agreement will hold an aggregate of             shares, or        %, of our equity interests upon completion of this offering.

        Demand Registrations.    Under the Registration Rights Agreement, both Catterton and Argentia are able to require us to file a registration statement (a "Demand Registration") under the Securities Act, covering at least 10% of our equity interests, and we are required to notify holders of such securities in the event of such request (a "Demand Registration Request"). Each of Catterton and Argentia can issue unlimited Demand Registration Requests, unless we are ineligible to use Form S-3, in which case we will not be obligated to grant more than three Demand Registration Requests to each of Catterton and Argentia during such period of ineligibility. All eligible holders will be entitled to participate in any Demand Registration upon proper notice to the surviving company and we are required to use our commercially reasonable efforts to effect such registration in accordance with the terms of the Demand Registration Request, subject to certain rights we will have to delay or postpone such registration. We have the right to include authorized but unissued shares of our common stock in such registrations. A holder of our common stock will only be able to withdraw its eligible securities from a Demand Registration with our prior written consent or in the event that we exercise our right to delay or postpone a Demand Registration

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Request. If sufficient holders withdraw such that the number of securities eligible to be registered does not meet the applicable 10% threshold, we can cease its efforts to effect the Demand Registration.

        Piggyback Registrations.    Under the Registration Rights Agreement, if at any time we propose or are required to register any of our equity securities under the Securities Act (other than a Demand Registration or pursuant to an employee benefit or dividend reinvestment plan) (a "piggyback registration"), we will be required to notify each eligible holder of its right to participate in such registration. We will use commercially reasonable efforts to cause all eligible securities requested to be included in the registration to be so included. We have the right to withdraw or postpone a registration statement in which eligible holders have elected to exercise piggyback registration rights, and eligible holders are entitled to withdraw their registration requests prior to the execution of an underwriting agreement or custody agreement with respect to any such registration.

Procedures for Approval of Related Party Transactions

        We do not currently have a formal, written policy or procedure for the review and approval of related party transactions. However, all related party transactions are currently reviewed and approved by a disinterested majority of our board of directors.

        Our board of directors will adopt a written related person transaction policy, effective upon the closing of this offering, which sets forth the policies and procedures for the review and approval or ratification of related party transactions. This policy will be administrated by our audit committee. These policies will provide that, in determining whether or not to recommend the initial approval or ratification of a related party transaction, the relevant facts and circumstances available shall be considered, including, among other factors it deems appropriate, whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party's interest in the transaction.

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DESCRIPTION OF CAPITAL STOCK

General

        The following is a summary of our capital stock and provisions of our amended and restated certificate of incorporation and amended and restated bylaws, as each will be in effect upon the closing of this offering, and certain provisions of Delaware law. This summary does not purport to be complete and is qualified in its entirety by the provisions of our amended and restated certificate of incorporation and amended and restated bylaws, copies of which will be filed with the SEC as exhibits to the registration statement, of which this prospectus forms a part. References in this section to "the company," "we," "us" and "our" refer to Noodles & Company and not to any of its subsidiaries.

        Following the closing of this offering, we expect that our authorized capital stock will consist of            shares of Class A common stock, $0.01 par value per share, which we refer to in this prospectus as common stock,            shares of Class B common stock, $0.01 par value per share, and            shares of undesignated preferred stock, $0.01 par value per share. We sometimes refer to our common stock and Class B common stock as "equity interests" when described on an aggregate basis. The one share of Class C common stock outstanding as of January 1, 2013 will be redeemed upon the closing of this offering.

Class A Common Stock

        As of January 1, 2013, there were 29,369,746 shares of common stock outstanding on a pre-reverse split basis held by 108 stockholders of record.

        Following the closing of this offering, there will be            shares of our common stock authorized for issuance. Pursuant to our amended and restated certificate of incorporation, holders of our common stock will be entitled to one vote on all matters submitted to a vote of stockholders; provided, however, that, except as otherwise required by law, holders of common stock, as such, shall not be entitled to vote on any amendment to our amended and restated certificate of incorporation that relates solely to the terms of one or more outstanding series of preferred stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to our amended and restated certificate of incorporation. Pursuant to our amended and restated certificate of incorporation, holders of common stock will not be entitled to cumulative voting in the election of directors. This means that the holders of a majority of the common stock will be able to elect all of the directors then standing for election. Subject to the rights, if any, of the holders of any outstanding series of preferred stock, holders of our common stock shall be entitled to receive dividends out of any of our funds legally available when, as and if declared by the board of directors. Upon the dissolution, liquidation or winding up of the company, subject to the rights, if any, of the holders of our preferred stock, the holders of our equity interests shall be entitled to receive the assets of the company available for distribution to its stockholders ratably in proportion to the number of shares held by them. Holders of common stock will not have preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to our common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued in this offering, when paid for, will also be fully paid and nonassessable.

Class B Common Stock

        As of January 1, 2013, there were 10,905,789 shares of Class B common stock outstanding on a pre-reverse split basis held by one stockholder of record.

        Following the closing of this offering, there will be            shares of our Class B common stock authorized for issuance. Pursuant to our amended and restated certificate of incorporation, our Class B common stock has the same rights as our Class A common stock except that holders of our Class B common stock will not be entitled to vote in the election or removal of directors unless converted into

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Class A common stock. Shares of our Class B common stock are convertible on a share-for-share basis into shares of our Class A common stock at the election of the holder. Subject to the rights, if any, of the holders of any outstanding series of preferred stock, holders of our Class B common stock shall be entitled to receive dividends out of any of our funds legally available when, as and if declared by our Board of Directors. Upon our dissolution, liquidation or winding up, subject to the rights, if any, of the holders of our preferred stock, the holders of shares of our equity interests shall be entitled to receive the assets of the company available for distribution to its stockholders ratably in proportion to the number of shares held by them. Holders of Class B common stock will not have preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to our Class B common stock. All outstanding shares of Class B common stock are fully paid and nonassessable.

Preferred Stock

        As of January 1, 2013, there were no shares of preferred stock outstanding.

        Following the closing of this offering, our board of directors will be authorized to issue not more than an aggregate of            shares of preferred stock in one or more series, without stockholder approval. Our board of directors is authorized to issue not more than an aggregate of            shares of preferred stock in one or more series, without stockholder approval. Our board of directors is authorized to establish, from time to time, the number of shares to be included in each series of preferred stock and to fix the designation, powers, privileges, preferences and relative participating, optional or other rights, if any, of the shares of each series of preferred stock and any of its qualifications, limitations or restrictions. Our board of directors also is able to increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series of preferred stock then outstanding, without any further vote or action by the stockholders, without any vote or action by stockholders. In the future, our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could harm the voting power or other rights of the holders of our common stock, or that could decrease the amount of earnings and assets available for distribution to the holders of our common stock. The issuance of our preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other consequences, have the effect of delaying, deferring or preventing a change in our control and might harm the market price of our common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.

Registration Rights

        See "Certain Relationships and Related Transactions—Registration Rights."

Anti-Takeover Effects of Delaware Law, Our Amended and Restated Certificate of Incorporation and Our Amended and Restated Bylaws

        Certain provisions of Delaware law and our amended and restated certificate of incorporation and amended and restated bylaws that will be effective upon consummation of the offering could make the acquisition of the company more difficult. These provisions of the Delaware General Corporation Law could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us. These provisions, summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and are designed to encourage persons seeking to acquire control of us to negotiate with our board of directors.

        Delaware anti-takeover law.    We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years following the date the person became an interested stockholder, unless the "business combination" or the transaction in which the person became an interested stockholder is approved by our board of directors in

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a prescribed manner. Generally, a "business combination" includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an "interested stockholder" is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own, 15% or more of a corporation's common stock. The applicability of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

        Stockholder meetings.    Under our amended and restated certificate of incorporation, only the Board of Directors, or the chairman of the Board of Directors or the Chief Executive Officer with the concurrence of a majority of the Board of Directors may call special meetings of stockholders.

        Requirements for advance notification of stockholder nominations and proposals.    Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors.

        Elimination of stockholder action by written consent.    Our amended and restated certificate of incorporation eliminates the right of stockholders to act by written consent without a meeting. This provision will make it more difficult for stockholders to take action opposed by the board of directors.

        Election and removal of directors.    Our board of directors will be divided into three classes, each serving staggered three-year terms. As a result, only a portion of our board of directors will be elected each year. The board of directors will have the exclusive right to increase or decrease the size of the board and to fill vacancies on the board. This system of electing directors may discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes replacing a majority of directors more difficult for stockholders. Additionally, directors may be removed for cause only with the approval of the holders of a majority of our outstanding common stock. Directors may be removed without cause only with the approval of two-thirds of our outstanding common stock.

        Undesignated preferred stock.    The authorization of undesignated preferred stock makes it possible for the board of directors, without stockholder approval, to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to obtain control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of the company.

        Amendment of provisions in the certificate of incorporation.    Our amended and restated certificate of incorporation will require the affirmative vote of the holders of at least two-thirds of our outstanding common stock in order to amend any provision of our certificate of incorporation concerning:

    the required vote to amend or repeal the section of the certificate of incorporation providing for the right to amend or repeal provisions of the certificate of incorporation;

    absence of the authority of stockholders to act by written consent;

    authority to call a special meeting of stockholders;

    number of directors and structure of the board of directors;

    absence of the necessity of directors to be elected by written ballot; and

    personal liability of directors to us and our stockholders.

        Amendment of provisions in the bylaws.    Our amended and restated bylaws will require the affirmative vote of the holders of at least two-thirds of our outstanding common stock in order to amend any provision of our bylaws concerning:

    meetings of or actions taken by stockholders;

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    number of directors and their term of office;

    election of directors;

    removal of directors and the filling of vacancies on the board of directors;

    indemnification of our directors, officers, employees and agents; and

    amendment to our bylaws.

Transfer Agent and Registrar

                                is the transfer agent and registrar for our common stock.

Listing

        We will apply to list our common stock on either the Nasdaq Global Select Market or the New York Stock Exchange under the symbol NDLS.

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SHARES ELIGIBLE FOR FUTURE SALE

        Prior to this offering, there has not been a public market of our Class A common stock, which we refer to in this prospectus as our "common stock," or any of our equity securities. Future sales of our common stock, including shares issued upon the exercise of outstanding options or warrants, in the public market after this offering, or the perception that those sales may occur, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future. As described below, only a limited number of shares of our common stock will be available for sale in the public market for a period of several months after consummation of this offering due to contractual and legal restrictions on resale described below. Future sales of our common stock in the public market either before (to the extent permitted) or after restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price of our common stock at such time and our ability to raise equity capital at a time and price we deem appropriate.

Sale of Restricted Shares

        Based on the number of shares of our equity interests outstanding as of                        , upon the closing of this offering and assuming (a) no exercise of the underwriters' option to purchase additional shares of common stock to cover over-allotments and (b) no exercise of outstanding options or warrants, we will have outstanding an aggregate of approximately            shares of equity interests. Of these shares, all of the            shares of common stock to be sold in this offering, and any shares sold upon exercise of the underwriters' option to purchase additional shares to cover over-allotments, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless the shares are held by any of our "affiliates" as such term is defined in Rule 144 of the Securities Act. All remaining shares of equity securities held by existing stockholders immediately prior to the closing of this offering will be "restricted securities" as such term is defined in Rule 144. These restricted securities were issued and sold by us, or will be issued and sold by us, in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemptions provided by Rule 144 or Rule 701, which rules are summarized below.

Lock-Up Agreements

        In connection with this offering, we, our sponsors, our directors, our executive officers and holders of substantially all of our common stock, options and warrants have agreed, subject to certain exceptions, not to dispose of or hedge any shares of our equity interests or securities convertible into or exchangeable for our equity interests during the period from the date of the lock-up agreement continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Morgan Stanley & Co. LLC and UBS Securities LLC.

        Following the lock-up periods set forth in the agreements described above, and assuming that the representatives of the underwriters do not release any parties from these agreements, all of the our equity interests that are restricted securities or are held by our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance with Rule 144 under the Securities Act.

Rule 144

        In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, a person (or persons whose shares are required to be aggregated) who is not deemed to have been one of our "affiliates" for purposes of Rule 144 at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than one of our "affiliates," is entitled to sell those shares in the public market (subject to the

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lock-up agreement referred to above, if applicable) without complying with the manner of sale, volume limitations or notice provisions of Rule 144, but subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than "affiliates," then such person is entitled to sell such shares in the public market without complying with any of the requirements of Rule 144 (subject to the lock-up agreement referred to above, if applicable). In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, our "affiliates," as defined in Rule 144, who have beneficially owned the shares proposed to be sold for at least six months are entitled to sell in the public market, upon expiration of any applicable lock-up agreements and within any three-month period, a number of those shares of our equity interests that does not exceed the greater of:

    1% of the number of equity interests then outstanding, which will equal approximately                        shares of equity interests immediately after this offering (calculated on the basis of the assumptions described above and assuming no exercise of the underwriter's option to purchase additional shares and no exercise of outstanding options or warrants); or

    the average weekly trading volume of our common stock on the Nasdaq Global Market or New York Stock Exchange during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Such sales under Rule 144 by our "affiliates" or persons selling shares on behalf of our "affiliates" are also subject to certain manner of sale provisions, notice requirements and to the availability of current public information about us. Notwithstanding the availability of Rule 144, the holders of substantially all of our restricted securities have entered into lock-up agreements as referenced above and their restricted securities will become eligible for sale (subject to the above limitations under Rule 144) upon the expiration of the restrictions set forth in those agreements.

Rule 701

        In general, under Rule 701 as currently in effect, any of our employees, directors, officers, consultants or advisors who acquired common stock from us in connection with a written compensatory stock or option plan or other written agreement in compliance with Rule 701 under the Securities Act before the effective date of the registration statement of which this prospectus is a part (to the extent such common stock is not subject to a lock-up agreement) is entitled to rely on Rule 701 to resell such shares beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act in reliance on Rule 144, but without compliance with the holding period requirements contained in Rule 144. Accordingly, subject to any applicable lock-up agreements, beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act, under Rule 701 persons who are not our "affiliates," as defined in Rule 144, may resell those shares without complying with the minimum holding period or public information requirements of Rule 144, and persons who are our "affiliates" may resell those shares without compliance with Rule 144's minimum holding period requirements (subject to the terms of the lock-up agreements referred to below, if applicable).

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

        The following discussion describes certain material U.S. federal income tax consequences associated with the purchase, ownership and disposition of shares of our Class A common stock, which we refer to in this prospectus as our "common stock." This discussion deals only with beneficial owners of shares of our common stock that purchase the shares in this offering and will hold shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code") (generally, property held for investment). Because this section is a general summary, it does not address all aspects of taxation that may be relevant to particular shareholders in light of their personal investment or tax circumstances, or to certain types of shareholders that are subject to special treatment under the U.S. federal income tax laws, including, but not limited to, brokers or dealers in securities, banks or other financial institutions, regulated investment companies, real estate investment trusts, insurance companies, tax-exempt entities, persons holding common stock as a part of a hedging, integrated, conversion or constructive sale transaction or a straddle, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, persons liable for alternative minimum tax, U.S. Holders (as defined below) whose "functional currency" is not the U.S. dollar, entities or arrangements treated as partnerships for U.S. federal income tax purposes or investors in such entities, persons who acquired our common stock through the exercise of employee stock options or otherwise as compensation for services, U.S. expatriates, "controlled foreign corporations," "passive foreign investment companies," and persons deemed to sell our common stock under the constructive sale provisions of the Code.

        This discussion is based upon the provisions of the Code, the existing and proposed U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date hereof, and such authorities may be repealed, revoked, modified or subject to differing interpretations, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below. This discussion does not address any state, local or foreign tax consequences, or any U.S. federal tax consequences other than U.S. federal income tax consequences.

        If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. Partners in a partnership purchasing our common stock, are urged to consult their own tax advisors.

        THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK. PROSPECTIVE HOLDERS OF OUR COMMON STOCK ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS) OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.

Consequences to U.S. Holders

        The following is a summary of the U.S. federal income tax consequences that will apply to a U.S. Holder of shares of our common stock. A "U.S. Holder" of shares of our common stock means a beneficial owner of shares of common stock that is for U.S. federal income tax purposes:

    an individual citizen or resident of the United States;

    a corporation (or other entity taxable as a corporation) created or organized in the United States or under the laws of the United States or any state thereof or the District of Columbia;

    an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

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    a trust if it is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

        Dividends.    If a U.S. Holder receives a distribution in respect of shares of our common stock, it generally will be treated as a dividend to the extent that it is paid from current or accumulated earnings and profits as determined under U.S. federal income tax principles. A distribution that exceeds current and accumulated earnings and profits will be treated as a nontaxable return of capital reducing a U.S. Holder's tax basis in the common stock and any remaining excess will be treated as capital gain.

        Under current law, dividend income may be taxed to an individual U.S. Holder at rates applicable to long term capital gains, provided that a minimum holding period and other limitations and requirements are satisfied. Any dividends that we pay to a U.S. Holder that is a U.S. corporation will qualify for a deduction allowed to U.S. corporations in respect of dividends received from other U.S. corporations equal to a portion of any dividends received, subject to generally applicable limitations on that deduction. In general, a dividend distribution to a corporate U.S. Holder may qualify for the 70% dividends received deduction if the U.S. Holder owns less than 20% of the voting power and value of our stock. U.S. Holders should consult their own tax advisors regarding the holding period and other requirements that must be satisfied in order to qualify for the reduced tax rate on dividends and the dividends-received deduction.

        Sale, Exchange, or Other Disposition of Common Stock.    A U.S. Holder will generally recognize capital gain or loss on the sale, exchange or other disposition of our common stock. The amount of gain or loss will equal the difference between the amount realized on the sale and the tax basis of such U.S. Holder in the disposed common stock. The amount realized will include the amount of any cash and the fair market value of any other property received in exchange for the stock. The gain or loss recognized on a sale will be long-term capital gain or loss if the common stock had been held for more than one year. Long-term capital gains of non-corporate U.S. Holders are generally taxed at lower rates than those applicable to ordinary income. The deductibility of capital losses is subject to certain limitations.

        Medicare Co