BOSTON — Cosi, Inc. isn’t content to stand on the sidelines. In the first quarter ended March 30, the Boston-based fast casual restaurant chain sustained a loss of $4,315,000 and saw sales slide 3% to $17,908,000. Now, the company is gearing up for a series of moves that the company’s chief executive officer believes could be game changers.
Noting that “it’s all about the food,” R.J. Dourney, president and c.e.o. of Cosi, said during a May 14 conference call with analysts that the restaurant chain recently wrapped up a number of culinary initiatives in the first quarter and has more in store for the second quarter and beyond.
“The focus of cleaning up our food, making sure that we are clear with our guest that we put a tremendous product on the plate, is absolutely critical,” Mr. Dourney said. “Cleaning up our salad dressings has now been accomplished, adding this to a line of soups that are made with real stock and no additives; clean, handcrafted drinks. We recently introduced an organic oven-roasted tofu that is a game-changer in itself. This allows vegetarians to take the meat out of a product, replace it with tofu and have an outstanding offer before them. And just over the last two weeks, I’m proud to tell you that we’ve introduced a world-class coffee that is now systemwide, and I am very excited to have in our system.”
Mr. Dourney said Cosi spent a lot of time on the front end making sure that it partnered with the right roaster for its coffee line. In the end, Cosi decided on Coffee Bean International (CBI). Beginning in June, the two companies will launch a series of initiatives to make a statement to consumers, including a Cosi coffee challenge with two components.
“The first is, there are a number of things that we’re going to do to introduce the consumer to our coffee,” he said. “For instance, we’re going to give away coffee for one week and encourage everybody to give up their current brand to try what I think is, quite frankly, a world-class cup of coffee. We’ll also have people giving out free coffee on street corners — not an actual cup of coffee, but an empty cup with a lid on it that you can bring in and get filled for a cup of coffee.
“The second piece of the coffee challenge is that we will be giving 10c for every cup of coffee sold to a local food bank. And it’s really simple: We know that our consumer is environmentally friendly and they care about their communities.”
Cosi also is knee-deep in a major refresh of its restaurants. Mr. Dourney said the company expects the first major unveiling of the refresh to take place on June 1. In the meantime, he offered a brief preview of some of the changes that are taking place in the restaurant chain’s New York locations.
“There are three components to the refreshes in New York,” he said. “The first is cosmetics, where menu boards get moved and changed. There are aesthetic changes, tables and chairs, painting, lighting. Really it’s a great improvement in the physical plant.
“The second is specific to efficiencies, allowing us to move faster, operate faster.
“And the third is a further leveraging of that Hearthstone model. We’ve got one of our best and brightest down in the New York market here from Boston, and she is making a heck of an impact helping us develop the team down there.”
Mr. Dourney said Cosi is focused on refreshing the units that have the highest return opportunity, and 14 units fit into that criterion. Once those refreshes are complete, the company plans to go market by market, with the entire system refreshed by the first quarter of 2016.
Another key to a Cosi turnaround is expected to be a stronger leadership team. On May 11, Miguel Rossy-Donovan joined the company as chief financial officer, taking over for Richard Bagge, who had been serving as interim c.f.o. Mr. Bagge has moved into the role of vice-president of development.
Mr. Rossy-Donovan most recently was chief finance and administration officer for Teach For America since 2005.
“This guy is a game-changer,” Mr. Dourney said of Mr. Rossy-Donovan. “He understands what it means to be a driven c.f.o. He’s highly, highly competitive, and he has an outstanding strategic mind.”
Mr. Dourney wrapped up his comments by answering a question from an analyst about the amount of money being invested in new restaurant concepts, and how that competition is affecting Cosi.
“Here is the exciting thing — this industry is enormous, right?” he said. “It’s a multibillion-dollar industry that has been dominated for 30 years by two segments: Q.S.R. and casual dining. They have been the 800-lb gorillas.
“Now, quietly, until the last few years, fast casual has come along. Thank God for Chipotle. Thank God for other brands that got out there and created this category. But here is the reality: it’s still, relatively speaking, a tiny piece of the whole. So even though we are seeing all these brands come in, it’s still a very small piece of the entire pie.
“So you know what? I think competition is good. I want to play ball against better players. I am excited that there are better brands out there. The one thing I will confess that is a reality is it makes real estate a challenge. It’s the one piece of this that can get very difficult, where somebody that seems to have a blank checkbook can offer whatever they want. We can’t and won’t, so it can get interesting.”
