Noodles cooks up Wall Street winner
Hungry investors of Noodles’ stock sent the fast-casual restaurant chain’s share price over the $40 mark just one trading day after it made its debut at $18 on June 28.
The Broomfield-based company (Nasdaq: NDLS) raised $96.4 million in the initial public offering, selling 5.4 million shares for $18 each, according to documents filed with the U.S. Securities and Exchange Commission . Underwriters may buy an additional 803,571 shares in overallotments in the next 30 days.
Shares rose to $40.67 in trading on July 1 before dropping slightly to close at $38.47 at the market’s close. Noodles & Co. executives have said they plan to grow the company’s number of restaurants to 2,500 in the next 15 to 20 years.
The soaring stock price right out of the gate is the latest and greatest in a line of successes for the Colorado-born company. The $40 trading price comes after Noodles originally planned its price per share in the IPO to be between $13 and $15.
As of May 28, Noodles & Co. had 343 restaurants, comprised of 291 company-owned and 52 franchised locations, across 26 states and the District of Columbia.
Kevin Reddy, Noodles' chief executive, and Keith Kinsey, its chief operating officer, both formerly worked for Chipotle Mexican Grill Inc., and some analysts compared Noodles’ successful IPO favorably with that of Chipotle in 2006. Reddy received a $1 million bonus for helping shepherd Noodles through the IPO process, according to SEC documents. Kinsey received $500,000.
Noodles is known for its wide range of noodle and pasta dishes, from its Japanese Pan Noodles and Pesto Cavatappi to Wisconsin Mac & Cheese. Customers are advised to leave plates and utensils on their tables when leaving, and that tips aren’t necessary.
One of the company’s most memorable promotions was the “Moodle Meter” it introduced at its restaurants in 2008 to measure a diner’s “food mood.”
“Simply put your hand on the Moodle Meter,” a company promotional piece said, “and it will analyze your mood and automatically tell you if you should try Noodles & Co.’s Asian, Mediterranean or American dishes.” As part of the campaign, Noodles’ sold mood rings – born as a color-changing pop-culture fad in the 1970s – in its restaurants for $1.25, and 59 cents for every ring sold went to benefit the Make-A-Wish Foundation.
Founder Aaron Kennedy dreamed up the Noodles concept in 1993 after eating in a neighborhood Asian noodle joint in New York’s Greenwich Village. Friends and family put in $250,000 to help Kennedy open the first restaurant in the Cherry Creek North shopping district in Denver in 1995. However, it wasn’t until Kennedy’s own credit card debt reached close to $45,000 and he took a second mortgage on his home for $25,000 that Noodles started to do well, he told the Boulder County Business Report in 2002. The first two restaurants started breaking even in early 1997, but they didn’t start turning a profit until 2000, Kennedy said.
Noodles & Co. won a Boulder County Business Report IQ Award in 2001, and Kennedy was named Entrepreneur of the Year in 2002 by the organization then known as the Boulder Chamber of Commerce. At the time, Kennedy pointed to the company’s 340 shareholders and its plan to expand rapidly as a good reason to consider raising money in the stock market.
Kennedy stepped down from the Noodles board in 2008 and now is Colorado’s first chief marketing officer, working with Gov. John Hickenlooper to brand the state as one attractive to new entrepreneur and business initiatives.
Noodles’ revenue grew to $300 million in 2012 from $170 million in 2008, a compound annual growth rate of 15.2 percent. Company income grew to $16 million in 2012 from $2 million in 2008, a 67.5 percent annual growth rate, according to documents.
When the first Noodles & Co. restaurant opened in 1995, the company was headquartered in Boulder before its move to Broomfield in 2006 to accommodate its growing base of employees who lived in Evergreen, Highlands Ranch, Lone Tree and Aurora as well as Boulder.
Connecticut private equity firm Catterton Partners is the majority owner of the company. Noodles has about 90 employees at its headquarters in Broomfield and about 6,500 nationwide.
Noodles is the most recent of 14 companies in the Boulder Valley to have its stock traded publically on national stock exchanges.
Morgan Stanley & Co. LLC and UBS Securities LLC, both in New York, were lead underwriters in the IPO.
Dallas Heltzell contributed to this report.
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