March 26, 2009 Fresh Performer

Volume 5 | Issue 1

Cosi has grown from a single restaurant in 1996 to a dynamic growth company offering more than 100 restaurants with fresh, healthy alternati

Whatever the state of the economy, people have to eat. People who work and live in cities as well as those in transit at airports and train stations seek a comfortable haven to grab a meal – and, these days, consumers are smart enough to know that just because you may not have a lot of time doesn’t mean you have to compromise on quality or nutrition. A restaurant that offers both a welcoming atmosphere combined with good food made from fresh and healthy ingredients has value built-in even before the consumer reads the menu prices.

“Cosi® restaurants offer good food, a variety of food, healthy options in a friendly environment where it is as easy to order something to go and get out quick as it is to catch up with a friend or hang out with your laptop and enjoy an inviting, relaxing atmosphere,” says Jim Hyatt, president and CEO of Così, Inc. (NASDAQ: COSÌ). “As the name implies, it’s a ‘cozy’ place to go have lunch.”

He adds, “I think the challenge for every restaurant, especially those concentrated in urban areas, is that when consumers are considering their choices, all they have to do is look down one block and then the other, and there’s an array of options. You have to offer some additional value in terms of menu, service and the physical environment.”

The first Cosi® was inspired by the notion of a Parisian cafe, a warm inviting spot to not only have a coffee and a sandwich, but to linger over food with friends and colleagues. Today, all Cosi® restaurants feature an open-flame, stone hearth oven in which its signature flatbreads are prepared. According to the Cosi® Web site, “There is an immediate connection with Cosi® that so many people feel when they first walk in the door. You’re surrounded by a sophisticated, modern and warm atmosphere complete with eclectic music inviting you to relax and enjoy an added personal touch…while savoring the innovative flavors of our menu.”

Hyatt points out, “We built our reputation on two primary ingredients: bread and coffee. Starting with that core, we built a menu that includes hand-tossed salads, soups, sandwiches featuring our flatbreads, bagels and even flatbread pizzas, as well as unique gourmet beverages and desserts.”

One additional distinctive menu feature is its new lighter menu that features healthier versions of some of Cosi’s most popular sandwich and salad selections. These include Signature Salad Light, Bombay Chicken Light Salad and T.B.M. Light Sandwich. “While it’s true that today’s consumers are much more conscious about diet and healthy food choices, what really got us working on this was the mandate by the New York City Board of Health that all restaurant chains must list caloric content directly on the menus,” Hyatt explains. “So we got to thinking, what could we do to offer reduced calories in some of our items and still offer the same great taste? The result is the lighter menu options. It’s been very successful with our customers and we’ve incorporated it in all our restaurants.”

Hyatt stresses the need for continual menu innovation. “We feel we’ve established a distinctive menu that differentiates Cosi® from other restaurants. But we’re constantly tinkering, trying out new things, seeing what our customers might like. We have four to five limited-time menu events every year; if the item really proves popular, we’ll integrate it into the regular menu. For example, we introduced a hearth-baked, fire-roasted veggie sandwich that was a home run. It’s a good sized sandwich that contains only 328 calories. It’s been so popular that now we’re thinking of offering a pizza version.”

EXPANDING OPPORTUNITIES
Hyatt notes that the company’s strength has been primarily within the lunch category, not only in the restaurants, but also in catering meetings and events for local businesses. “We’re concentrated in cities and airports in the Northeast, in 16 states including the District of Columbia. We also have one international licensee in the Middle East, which was the result of a real estate developer who approached us about a licensing agreement to develop Cosi® restaurants for some of its retail developments.

“Right now we have about 140 stores, about 70 percent of which are company-owned. Our plan is to look for opportunities to expand our franchises, both in our current areas but also west of the Mississippi. We feel that we’ve perfected our menu selections and the feel of the restaurant and we’re poised to expand the concept further.”

In addition to food variety and welcoming atmosphere, Hyatt stresses friendly and dedicated service. “Labor is always a challenge in our business. We’ve managed to reduce our turnover in half by making Cosi® a better place to work. We want our people to feel that they’re making a contribution to the success of the restaurants and that there are career opportunities for them. I present myself as an example; I started out in another restaurant concept as an hourly employee, worked up to be a manager and now here I am in executive management.”

Cosi® is also scrutinizing its supply chain, both to reduce costs and ensure food quality. “We have two prime distributors and we work closely with them to be as efficient as possible,” Hyatt notes. “Also, because nearly everything we do is prepared with fresh ingredients – we rarely use anything that’s frozen – we want to work with local markets to supply produce wherever possible. We have worked with our licensee in Dubai, for example, to develop a local supply chain. It just doesn’t make sense to be shipping overseas, both because of transportation expense and to ensure the freshest ingredients.”

SPECIAL VALUES
Whatever may be going on in the economy – indeed, maybe because of the economy – Hyatt feels that “there is a real opportunity in the fast casual dining space to offer something that’s a step above QSRs (quick service restaurants). It’s a value proposition where maybe you pay a little more than what you would in a typical QSR, but what you get is freshly braked bread, freshly prepared food, a variety of unique, flavorful menu items to choose from and a cool place to spend some time. That’s our niche and I think we do it extremely well.”

One part of the business that has felt some effect from the economic downturn is catering. According to Hyatt, “Catering has been a very successful part of our business, particularly for our locations in New York City. Lately, however, we have noticed a decline in catering sales as businesses these days have cut back on spending.” That said, the brand continues to be strong. “We’re looking to expand our franchises,” Hyatt says. “One area where we’re really seeing a growth trend is the 18-25 year-old segment. We have a number of restaurants located near college campuses, and today’s students are a lot more sophisticated in terms of food. It’s just not burger and fries, anymore. They’re looking for more healthy selections that offer good taste and good value. It’s a good segment to be strong in because today’s 18-25 year-old is tomorrow’s 30-45 year-old consumer. So we see signs of long-term growth there.”

He adds, “Overall, we think consumers see the value in Cosi® and that even when personal discretionary budgets are tight, we represent to consumers a good quality choice that is tastefully different from just the regular fare.”

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