Revenue Recognition
Gift Cards
As of December 30, 2025 and December 31, 2024, the current portion of the gift card liability, $2.2 million and $2.0 million, respectively, is included in accrued expenses and other current liabilities, and the long-term portion, $0.8 million and $1.0 million, respectively, is included in other long-term liabilities in the Consolidated Balance Sheets.
Revenue recognized in the Consolidated Statements of Operations for the redemption of gift cards was $2.3 million, $2.6 million and $2.8 million in 2025, 2024 and 2023, respectively. The Company recognized gift card breakage in restaurant revenue of approximately $0.3 million, $0.4 million and $0.3 million in 2025, 2024 and 2023, respectively.
Franchise Fees
Initial fees received from franchisees are recognized as revenue over the term of each respective franchise agreement, which is typically 20 years. The Company recognized revenue of $0.3 million, $0.3 million and $0.2 million in 2025, 2024 and 2023, respectively related to initial fees from franchisees that were included in the contract liability balance at the beginning of the year. The Company expects to recognize approximately $0.1 million each fiscal year through fiscal 2030 and approximately $0.5 million thereafter related to performance obligations that are unsatisfied as of December 30, 2025.
Loyalty Program
The Company operates the Noodles Rewards program, which is primarily a spend-based loyalty program. With each purchase, Noodles Rewards members earn loyalty points that can be redeemed for rewards, including free products. Using an estimate of the value of reward redemptions, we defer revenue associated with points earned, net of estimated points that will not be redeemed. Points generally expire after six months. Revenue is recognized in a future period when the reward points are redeemed. Deferred revenue related to the rewards was $1.1 million and $1.0 million as of December 30, 2025 and December 31, 2024, respectively, and was included in accrued expenses and other current liabilities in the Consolidated Balance Sheets.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.