Cosi Casual-Dining Chain Files Chapter 11 Bankruptcy

by San Antonio Attorney

Boston-based Cosi Inc. sought for bankruptcy protection on Sept. 28 in the Massachusetts federal court after suffering major losses and a clash over a collateral deal.

The chain of restaurant, which has 1,100 workers, stated $19.8 million in debts and $31.2 million in assets, based on its bankruptcy petition.

The company said it had made a preliminary agreement to sell the business to an investment firm and its lenders through a “stalking horse” bid, which is an initial offer on the assets of the company from a potential buyer.

However, a disagreement with creditors concerning a collateral deal could possibly jeopardize the plan.

According to Cosi, it had already shuttered 29 locations owned by the company, laying off 450 workers.  The remaining 31 franchises continue to operate.

The company needs to seek the approval of the federal judge for its debt-reduction and sale plans.

In an official statement released by acting CEO Patrick Bennett, Sr., he said they are tackling the company’s liquidity problems through bankruptcy.  He also said that they hope to improve the business and stabilize the brand.

Cosi reported a net loss of $3.1 million on income of $22.3 million in the second quarter.  It lost $15.7 million last year on $89.9 million sales.

The fast-casual restaurant sector has drastically expanded these past few years, with new competitors like healthy fast food and boutique hamburgers.  Casual dining places like Ruby Tuesday and Logan’s Roadhouse have suffered.

However, there are certain fast-casual restaurants chains that are affected by the decrease of grocery prices.  According to reports, foot traffic in the fast-casual dining declined 2 percent in the second quarter.

Cosi admitted that it did not quickly take action on its own financial problems or the “macro” trends.  In August, CEO Robert Dourney was fired and eventually blamed for the major failures of the company.

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