Cosi Investor Wants to Be CEO
By JULIE JARGON
Wall Street Journal
September 28, 2011
Brad Blum, a restaurant industry veteran, is calling for a new board of directors at fast-casual chain Cosi Inc., where he wants to be installed as chief executive.
Mr. Blum, who has acquired a roughly 7% stake in Cosi through his investment firm BLUM Growth Fund LLC, says he wants a shot at turning around Cosi, whose shares traded at $11.21 in March of 2006 and have fallen as low as 56 cents earlier this month.
In 4 p.m. trading Tuesday, Cosi's shares were up 1.3% to 68 cents on the Nasdaq Stock Market.
"Cosi is in a serious crisis now. We need to have a results driven, engaged board of directors," Mr. Blum said in an interview. "This is not a proxy fight. I simply want to highlight the facts of the current performance and have shareholders be aware of that. "
Last month Cosi was notified by Nasdaq that the company's stock is in danger of being delisted. Shortly thereafter, James Hyatt resigned as Cosi's CEO. Board chairman Mark Demilio is serving as interim CEO. The company has said it will conduct a search for Mr. Hyatt's replacement, but Mr. Blum says that will take too long and cost too much.
Cosi didn't return calls seeking comment.
Mr. Blum says many Cosi restaurants are outdated and offer a complicated menu and, at times, poor service.
The chain, based in Deerfield, Ill., offers a vast menu with everything from soups and salads to sandwiches and flatbread pizzas. Cosi had 145 company- and franchise-owned restaurants in 18 states, the District of Columbia and the United Arab Emirates as of Dec. 28, 2009, according to Cosi's latest annual report.
Sales at Cosi restaurants open for more than 15 months slipped 0.2% in the second quarter ended June 27, compared to the year-earlier period. Cosi posted a second-quarter net loss of $634,000, as revenue fell 9% to $26.9 million.
Many fast-casual chains suffered during the economic downturn as consumers cut back on spending. But some competitors in that category, such as Chipotle Mexican Grill Inc. and Panera Bread Co. have done well.
Mr. Blum, who led a turnaround of Olive Garden in the mid-1990s, served as CEO of Burger King Holdings Inc. from Dec. 2002 to July 2004. He later served as CEO of Romano's Macaroni Grill.
If he were to become CEO, Mr. Blum says he would pare down Cosi's menu, boost innovation and speed up service. He is also offering to work for $1 for the first year if shareholders support his bid to become CEO.
Write to Julie Jargon at julie.jargon@wsj.com
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