Noodles & pany(NDLS) - 2024 Q4 - Annual Report

Financial Performance - Comparable restaurant sales experienced a decline in 2023, contributing to an increased loss from operations[55] - Total revenue for the year ended January 2, 2024, was $503.4 million, a decrease of 1.3$509.5 million in the previous year[243] - The company reported a net loss of $9.9 million for the year ended January 2, 2024, compared to a net loss of$3.3 million in the previous year[243] - The company’s total stockholders' equity decreased to $27.2 million as of January 2, 2024, down from$38.4 million a year earlier[239] - Noodles & Company reported a net loss of $9.856 million for the fiscal year ending January 2, 2024, compared to a net loss of$3.314 million in the previous year[249] - The company generated $27.495 million in net cash provided by operating activities, a significant increase from$9.557 million in the prior year[249] Operational Challenges - The company anticipates that economic conditions, including higher inflation and elevated interest rates, may reduce customer demand and increase operational costs[56] - The company faces significant competition from various segments of the restaurant industry, which may adversely affect its market position[60] - The company relies on consumer discretionary spending, and negative economic conditions could lead to decreased consumer confidence and spending[57] - The company faces challenges in recruiting and retaining qualified employees, which could impact financial performance and operational efficiency[84] - Labor turnover was high in 2022 due to the COVID-19 pandemic and competitive labor market, but turnover levels have improved since mid-2022[84] Cost Management - In 2022, the company implemented a temporary chicken-price surcharge of $1.00 due to inflationary pressures on food costs[58] - Menu price increases in 2022 and Q1 2023 were made in response to rising food and labor costs, which negatively affected guest traffic[70] - The company expects inflationary pressures to continue affecting its results in the near future, particularly in food, labor, and energy costs[232] - The company’s profitability is affected by its ability to manage food and supply costs, which can fluctuate due to various external factors[109] - The company plans to adjust menu pricing to manage commodity cost increases, although multiple price hikes may negatively impact customer behavior[231] Strategic Initiatives - The company’s operational strategies aim to improve restaurant revenue and profitability, but there is a risk of not achieving these goals[51] - The company is enhancing its operating model and researching a new prototype for smaller restaurants focused on off-premise dining opportunities[77] - The company introduced a product recommendation engine and digital menu boards in 2023, leveraging machine learning and customer data for strategic pricing[95] - The company has entered into temporary formula pricing contracts for chicken purchases to mitigate exposure to commodity market fluctuations[110] Franchise Operations - The company relies on effective management of its franchise system, as underperformance by franchisees could adversely affect overall business performance[89] - Franchisees' new unit growth is hindered by high financing costs and inflation, affecting their ability to develop new restaurants[90] - In 2023, the company opened 18 company-owned restaurants and closed 6, while franchisees closed 3 restaurants without opening any new ones, expecting an annual unit growth rate of approximately 1-3$80.2 million as of January 2, 2024, compared to $46.1 million in the previous year[239] - The company's credit facility has a variable interest rate that has increased due to amendments made in 2023, resulting in higher borrowing costs[142] - As of January 2, 2024, the Company had$82.2 million of indebtedness and $3.0 million of letters of credit outstanding[305] Marketing and Competition - The company’s marketing efforts may not yield the desired results, especially against competitors with greater marketing resources[63] - Digital orders accounted for over 50$5.0 million, repurchasing 1,731,952 shares at an average price of $2.86 per share during Q3 2023[332] - The 2023 Stock Incentive Plan was adopted, allowing for the grant of approximately 3.4 million share-based awards, with most awards vesting over four years[333]