Discounted Crackly-Crust Flatbread...

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"All Sorrows Are Less With Bread" - Miguel de Cervantes Saavedra

If crackly-crust flatbread and Squagels (yes, this exists...and it is what it sounds like) are on your Christmas wish-list this year, you may be in luck: the once high-flying Cosi Inc. could be yours via bankruptcy sale.

For those familiar with Cosi In NYC, the downfall of the fast casual chain is particularly surprising. Once upon a time, blockbusting lunch lines for Cosi were a regular occurrence. As they waited, people jostled for access to the excess baked crackly-crust bread the bakers regularly dispensed. In certain locations, the competition for the excess was so fierce that the bakers resorted to placing the pieces in a small metal bowl on the counter - the fast casual equivalent of a home owner lazily putting a basket of Halloween candy on the doorstep for trick-or-treaters. Never mind hygiene: 126,292 other people put their hands into that bowl between the hours of 12 and 2. Yech.  

Here are the stats:

  • 107 stores in 3 countries (but most in the US).
  • 1555 employees (many of whom will now be losing their jobs)
  • $7.5mm of (gulp, maybe) secured debt (which will position the lenders to own the business)
  • $3mm in net losses in Q2 '16 (hence why we're talking about bankruptcy in the first place).

The court filings contain a choice quote: "The deteriorating sales are at least partially due to macro-economic issues as the restaurant industry as a whole and the fast casual sector in particular are experiencing decreasing sales trends." So much to unpack here. First, what happened to the notion that the "gasoline windfall" would lead to greater consumer spending? Second, aren't millennials spending more on food and experiences than on physical goods? Third, how does this purported trend affect the likes of Panera Bread, Chipotle, and a whole host of other fast casual upstarts? Sadly, the filings don't substantiate this statement. Curious.  

Winners:

  • the original founders who blew out after the I.P.O. (yes, this thing is publicly-traded).

Losers:

  • the senior secured lenders - they'll either get pennies on the dollar or 78 rubber-chicken-serving fast casual locations facing (unsubstantiated) headwinds; and
  • the former CEO - the (public) filings go out of their way to note that he failed miserably to acknowledge the decline in the business and effectively turn it around (ouch). 
  • employees - many are losing there jobs with little to no advanced notice.  
  • shareholders - unlikely to see any recovery for their position.  

Thoughts, comments or questions? Note the comment section below.