Cosi Files For Bankruptcy

Though bankruptcies have become part of the standard, perhaps the biggest out-of-left-field default is coming out of Cosi, the flatbread sandwich maker and QSR staple of the last decade. According to reports, the Boston-based chain has filed for bankruptcy as it looks to restructure its debt load and conduct a sale process. The filing comes after recent attempts at expansion have seen the company spread too thin, with too few diners following it through too many menu revamps. As of mid-2016, 74 company-owned restaurants and 31 franchised restaurants are up and running in 15 states.

The chain has gotten bigger, but its sales have not. Same-store sales were down 7 percent in Q2, and Cosi is looking to close down 29 stores. It has also severed its CEO, R.J. Dourney, and several upper-level managers.

Cosi has as obtained $4 million in debtor-in-possession financing from a consortium of investors who plan to buy the restaurant chain out of bankruptcy. That investor list reportedly includes AB Opportunity Fund, AB Value Partners and Milfam.

“We worked very hard to avoid this step,” said Mark Demilio, Cosi’s chairman. “[T]he company cannot continue to operate in its current financial condition, and that the best alternative for the company and its creditors would be to accomplish a sale through the bankruptcy process,” Demilio added, noting that Cosi had explored avenues such as asset sales or additional debt and equity capital raisings before deciding on restructuring.

“This was a difficult step, but it was necessary to address our liquidity issues,” Patrick Bennett, interim CEO of Cosi, said in a statement. “We believe this process will allow the company to right-size its balance sheet, reduce its debt and focus on improving the business and stabilizing the brand,” Bennett added.

Cosi has been traded on the Nasdaq since 2002 and saw its share price peak at around $40 per share in 2006. Share price has been in a consistent march down ever since, falling below $10 a share in 2010 and never getting back above it. As of Wednesday (Sept. 28), Cosi had drifted into penny stock range, with shares going at $.05.