Noodles & Co. is taking the necessary steps to boost its balance sheet after its financial results suffered due to the poor performance of some of its locations. As a result, the restaurant operator decided to shut down its 55 locations that consistently failed to deliver results.
The Denver Business Journal reported that the 55 locations had lost money, weighing on the company's overall financial results in the fourth quarter of 2016. Sales have been on the downward trend due to the poor performance of the 55 locations.
Noodles & Company claims that without the failing locations, its total restaurant margin would have been $7.3 million higher than the actual figure. The decision to shut down the locations would make the restaurant operator incur charges in the range of $30.5 million to $31.5 million.
Despite the millions of dollars of expected charges, the company believes that closing down the locations would be better for its operations in the long run. SAT PR News reported the poor performance of the locations was attributed to weak brand recognitions in the markets where they are located.
In order to pay for the charges that it will get in connection with the closure of the locations, Noodles & Company raised money by executing an $18.5 million private placement. The company also expanded its existing credit facility with some banks by up to $15 million in maximum credit commitment.
Noodles & Co. did not reveal any details as to what will happen to the employees in the locations. It also did not discuss whether it will try to consider re-entering the markets in the near future.
The closure of the locations is a stark contrast to Krispy Kreme's expansion efforts. Jobs & Hire previously reported that Krispy Kreme has huge expansion plans for the United States. The doughnut maker recently opened a new factory store in New Jersey and is planning to open five more stores in the state.