SCHEDULE: Galloway Capital Boosts Noodles & Co Stake to 8.78%

Galloway Capital Partners has increased its stake in Noodles & Company to 8.78%, expressing confidence in the company's recovery and believing shares are undervalued.

Summary

• Galloway Capital Partners, LLC, Galloway Capital, LP, and Bruce Galloway (collectively, the "Reporting Persons") have filed a Schedule 13D, disclosing beneficial ownership of 512,800 shares of Noodles & Company common stock.
• This ownership represents approximately 8.78% of the Issuer's outstanding common stock, calculated after a 1:8 reverse stock split on February 18, 2026.
• The Reporting Persons acquired 161,600 shares in open market purchases between December 2025 and February 2026 at an approximate average price of $5.75 per share.
• The investment is for investment purposes, and the Reporting Persons intend to review their investment on a continuing basis, potentially acquiring more shares or selling existing ones.
• Galloway Capital intends to engage with Noodles & Company's Board and management regarding performance, operations, management, governance (including potential Board changes), conflicted party transactions, capital allocation policies, and strategy.
• A letter sent to Noodles & Company management dated February 24, 2026, highlights confidence in the company's recovery and improved operating performance, citing encouraging pre-announced fourth-quarter results.
• The letter states that shares are trading at an "irrational valuation" that does not adequately reflect operational progress and intrinsic value.
• Galloway Capital supports the management team's execution and focus on strengthening the operating framework, expanding margins, and improving overall profitability.
• The firm notes Noodles & Company's loyal customer base, average unit volumes exceeding $1.4 million, and over $500 million in systemwide sales.
• The value of the company's 320 company-owned restaurants is believed to materially exceed its outstanding debt.
• Galloway Capital looks forward to the outcome of the company's engagement with its investment banking advisor, believing it has the potential to enhance shareholder value.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this filing as highly positive, reflecting an activist investor's strong conviction in Noodles & Company's operational turnaround and significant undervaluation, which could catalyze shareholder value creation.

Positives

• Galloway Capital Partners increased its ownership stake from 6.01% to 8.78%, signaling strong conviction in Noodles & Company's prospects.
• The Reporting Persons express confidence that Noodles & Company is firmly on a path toward recovery and improved operating performance.
• Pre-announced fourth-quarter results showed encouraging comparable sales increases: over 7% at company-owned restaurants and over 6% at franchised locations.
• Galloway Capital supports the current management team's execution and their focus on strengthening operations, expanding margins, and improving profitability.
• The company benefits from a loyal customer base, average unit volumes exceeding $1.4 million, and systemwide sales over $500 million.
• The value of the company's 320 company-owned restaurants is assessed to materially exceed its outstanding debt, suggesting a strong asset base.
• Galloway Capital anticipates that the company's engagement with its investment banking advisor could further enhance shareholder value.

Negatives

• Galloway Capital believes the shares are trading at an "irrational valuation" that does not adequately reflect the company's operational progress and intrinsic value, implying current market undervaluation.

Risks

• The investment thesis relies on the company's continued recovery and improved operating performance, which may not materialize as expected.
• The perceived "irrational valuation" could persist or worsen if market sentiment or company performance does not align with Galloway Capital's expectations.
• Engagement with the Board and management, including potential proposals for governance or strategic changes, may not be successful or may face resistance.
• The outcome of the company's engagement with its investment banking advisor is uncertain and may not result in the anticipated enhancement of shareholder value.

Future Outlook

Galloway Capital Partners is confident in Noodles & Company's path toward recovery and improved operating performance, expecting continued strengthening of the operating framework, margin expansion, and improved profitability. They anticipate that the company's engagement with its investment banking advisor has the potential to further enhance shareholder value.

Management Comments

• "Our firm has increased its ownership position in Noodles & Company from 6.01% to 8.6%. Following additional analysis, we remain confident that the Company is firmly on a path toward recovery and improved operating performance."
• "The pre-announced fourth quarter results were particularly encouraging, with comparable sales at company-owned restaurants increasing more than 7% and franchised locations up more than 6%."
• "Despite these improvements, we believe the shares are trading at an irrational valuation that does not adequately reflect the Company's operational progress and intrinsic value."
• "We continue to support the management team's execution and its focus on strengthening the operating framework, expanding margins, and improving overall profitability."
• "Noodles & Company benefits from a loyal customer base, average unit volumes exceeding $1.4 million, and more than $500 million in systemwide sales."
• "In our view, the value of the Company's 320 company-owned restaurants materially exceeds its outstanding debt."
• "We look forward to the outcome of the Company's engagement with its investment banking advisor, which we believe has the potential to further enhance shareholder value."

Industry Context

StockSavvy.ai notes that this Schedule 13D filing indicates increasing activist investor interest in the fast-casual restaurant sector, particularly in companies perceived to be undervalued despite showing signs of operational recovery. Galloway Capital's increased stake and stated intentions to engage with management suggest a belief that Noodles & Company, like some peers, may be ripe for strategic changes or improved capital allocation to unlock value, especially given the positive comparable sales trends in a competitive dining environment.

Comparison to Industry Standards

• Noodles & Company's pre-announced Q4 comparable sales growth of over 7% for company-owned restaurants and over 6% for franchised locations compares favorably to some struggling casual dining chains, indicating a stronger recovery trajectory within its segment.
• Average unit volumes exceeding $1.4 million are competitive within the fast-casual segment, though top performers like Chipotle Mexican Grill often exceed $2.5 million, suggesting room for further growth and efficiency.
• The assessment that the value of 320 company-owned restaurants materially exceeds outstanding debt implies a healthier balance sheet and asset base compared to highly leveraged restaurant companies that might struggle with debt servicing amidst fluctuating consumer demand.

Stakeholder Impact

• Shareholders: Potential for increased shareholder value if Galloway Capital's engagement leads to strategic improvements or if the market re-rates the stock based on the activist's confidence.
• Management: Will likely face increased scrutiny and engagement from Galloway Capital regarding operational performance, governance, and strategy.
• Employees: Operational improvements and potential strategic changes could impact employees, though the specific nature is not detailed.
• Customers: Continued focus on strengthening operating framework and improving profitability could lead to better customer experience or offerings.
• Creditors: The statement that the value of company-owned restaurants materially exceeds outstanding debt suggests a favorable position for creditors.

Next Steps

• Galloway Capital Partners intends to review its investment in Noodles & Company on a continuing basis.
• The Reporting Persons may acquire additional securities, retain, or sell portions of their holdings.
• Galloway Capital plans to consider, explore, and/or develop plans and proposals regarding the Issuer's performance, operations, management, governance (including potential Board changes), conflicted party transactions, capital allocation policies, and strategy.
• Galloway Capital intends to engage with Noodles & Company's Board and management regarding these matters.
• The company is engaged with an investment banking advisor, and Galloway Capital looks forward to the outcome of this engagement.

Key Dates

Recommendation

The filing reveals an activist investor, Galloway Capital Partners, has significantly increased its stake to 8.78% in Noodles & Company, expressing strong confidence in the company's operational recovery and asserting that the shares are trading at an "irrational valuation." The investor's intent to engage with management and the Board on strategic initiatives, coupled with positive pre-announced Q4 comparable sales, suggests a catalyst for value creation. This active investment, combined with a belief in undervaluation, makes Noodles & Company a compelling 'buy' for investors seeking potential upside from an operational turnaround and activist engagement.

Keywords

Noodles & Company, NOOD, Galloway Capital Partners, Schedule 13D, Activist Investor, Restaurant Industry, Stock Undervaluation, Shareholder Value, Corporate Governance, Operational Improvement, Reverse Stock Split