Fast-Casual Chain Cosi Declares Bankruptcy, Shutters 29 Locations

Image courtesy of James Callan

If you happen to enjoy your lunch on a salty flatbread of an afternoon, or your breakfast on a square bagel of a morning, well, we’ve got some bad news for your morning: Cosi has declared Chapter 11 bankruptcy and shut more than a third of its company-owned stores.

The Boston-based chain filed for chapter 11 restructuring in bankruptcy court in Massachusetts, it announced last night.

The 20-year-old fast-casual eatery has been strapped for cash for years, the Wall Street Journal reports. The company attempted a turnaround in early 2015, and although it saw some short-term improvement, sales continued to deteriorate.

Company chairman Mark Demilio said bluntly, “The 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.”

Cosi began looking for lenders and investors, and considering selling off restaurant locations to franchisees, back in May, in an attempt to avoid bankruptcy, but it was not to be. The board ousted CEO R.J. Dourney — in the role since March, 2014 — in August, “based on the continued deterioration of operations and financial results and failed efforts to recapitalize the company.”

In other words, they tossed him because the company kept hemorrhaging money, which is basically the total opposite of what a business exists to do.

Cosi had over 100 locations as of 2015 but several of those are franchise-owned. The chain says the 31 franchised locations are unaffected by the bankruptcy, and the 29 “severely underperforming” locations that have already shuttered were among the 74 company-owned stores.

The restaurant chain is smaller than competitors like Panera Bread or Corner Bakery Cafe, but operates much in the same vein. Its first location opened in New York City in 1996 and its headquarters are in Boston; although it now operates in several states and internationally, the chain still has a heavy concentration of locations in the northeast corridor.

The company plans to sell itself to lenders and keep its remaining “core” locations open. It has a possible agreement with AB Opportunity Fund LLC, AB Value Partners, L.P., and “one or more entities affiliated with Milfam II L.P.” to serve as a stalking horse bidder in the sale process and purchase “substantially all” of Cosi’s assets.