Miss Chipotle & Panera's IPO? Here's Another Chance

You know the old saying, Third time lucky, right? Well, this might be the very definition of that with Friday's IPO of Noodles. . NDLS

S-1 filed June 20, 2013

The company had initially priced its IPO in the range of $13 to $15 a share, but announced on Tuesday that the range would be lifted to $1 to $17, showing that investor demand is high. The company was originally to raise $75 million from the IPO, based on $14 per share, in the middle of the original range.

Assuming Noodles prices in the middle of the higher range at $16 per share, proceeds will likely be in the $85 million dollar ballpark. This should help combat investors' main worry going into the IPO: Growth versus debt.

Some investors didn't seem to like that Noodles was planning on using $66 million from the IPO to pay down debt. Retiring debt is usually a good thing, but in this case, it doesn't mature until 2017, making some question why the proceeds wouldn't be used for growth instead.

Still, when you think of restaurant growth stocks ,  Panera and Chipotle are likely the first that come to mind.

One of the first things investors might notice on inspection of each company's balance sheet, is that neither of them have any debt. Yep, zero long-term or short-term debt. So perhaps Noodles is making a good move by retiring debt now, even though it doesn't exactly have to.

Also, now that the given range has been raised, perhaps the company will be able to retire debt and focus on growth, something that would truly be dynamic for investors. After the debt is repaid, Noodles will have approximately $20 million in proceeds to put towards whatever it wants, again assuming it prices in the middle of the $15 to $17 range.

While young, the growth has been strong for Noodles, with earnings per share up 120% from 2010, where the company earned 10 cents a share, versus 22 cents in 2012. The company also increased its total store count from 255 to 327 in that time frame.

It started with just 57 stores in 2002. Of the 327 current stores, 276 are owned by the company and 51 are franchised. For 2013, the company plans to open between 38 and 42 stores of its own and only 6 to 8 franchises. This is good, since most of Noodles' revenues derive from its company-owned restaurants.

Based on the current growth pattern, the company plans on opening up approximately 2,500 restaurants in the next 15 to 20 years. Assuming Noodles can maintain some form of control over its margins, this should create substantial long-term growth similar to that of Panera , which also has a similar long-term growth plan.

But who are the people running the show at Noodles? After all, Cosi was a restaurant that was supposed to do as well as Panera, but has been completely left in the dust.

Luckily, there are a couple of big names at Noodles who have had strong success within the restaurant industry. Kevin Reddy is the CEO and Keith Kinsey is the president and COO. Both went from  McDonald's to Chipotle , before landing at Noodles in 2005.

These two have gone from a strong brand with McDonald's to a high-growth chain at Chipotle, where Reddy served as COO. Now they are launching their talents with Noodles .

Come Friday, we'll be able to judge the sentiment surrounding Noodles & Co. I think it will have a strong debut, but one question will remain: Will the company continue its solid pace of growth? Only time will tell.

I also think that Noodles could be a viable takeover target for multiple companies, but more specifically, by Panera, based on similar healthy menu selections. I often thought this when Noodles was a private company , but we will see if it ever happens down the road.

At the time of publication, the author was long shares of PNRA .