FDD Talk 2015: The Cosi Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

In this FDD Talk 2015 post, you’ll learn the following:

• Section I – Background information on the Cosi franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Cosi franchise, based on Item 7 of the company’s 2015 FDD

• Section III – Presentation and analysis of Cosi’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:

• 2014 average gross sales, cost of goods sold, hourly labor percentage, and management labor percentage for the top 10, bottom 10, and all 60 Cosi Restaurants that the company owns and operates and that were open during the company’s 2014 fiscal year

• 2014 median gross sales, cost of goods sold, hourly labor percentage, and management labor percentage for the 60 Cosi Restaurants that the company owns and operates and that were open during the company’s 2014 fiscal year

• 2014 average and median gross sales for the top 10, bottom 10, and all 45 Cosi Restaurants that are owned and operated by franchisees and that were open during all of the company’s fiscal year 2014

Section I – Background Information

Cosi founder Drew Harré said it best: “In order to find your passion, sometimes you have to create it. For me, it happened to be the quest for the perfect sandwich.” By all accounts it has worked well for him, which is why at the center of every Cosi bakery-café is a hearth where its centuries-old flatbread recipe is made every 20 minutes.

What he knew was that the key to any great sandwich begins with the bread. Originally from New Zealand but living in Paris at the time, he set off for Italy to learn the secrets of bread-making. In Rome he found a bakery operated by two brothers who used an ancient flatbread recipe that caught Harré’s attention. He became their apprentice.

After mastering the craft, he returned to Paris and in 1989 opened the first Cosi location, which quickly became a favorite among the locals.

RJ Dourney came to Cosi as a local franchisee in the Boston area, and his 13 stores were so successful that he recently took over as the company’s CEO. As of early 2015, there were 64 company-owned restaurants and 47 franchise restaurants spread among 16 states, Washington DC, the United Arab Emirates, and Costa Rica.

Here’s how Cosi continues to keep things fresh in the bakery-café segment:

Food-Forward Thinking

Using carefully-sourced, high-quality fresh ingredients, the Cosi menu features distinctive sauces and spreads that create edgy flavors customers love. The chain will always retain core favorites, but is also willing to constantly put together new and exciting items to maintain a culinary cutting-edge.

An Eye on Sustainability

Cosi prides itself on sourcing ingredients that meet a variety of sustainability criteria, including no trans fats or high-fructose corn syrup, fresh local produce where possible, chicken that’s naturally-raised without antibiotics added, line-caught dolphin-safe albacore tuna, wild-caught Alaskan salmon, 100% Arabica coffee sustainably roasted in small batches at a LEED-certified facility, and pasteurized dairy products.

Menu Variety

Although the original quest was for the perfect sandwich, Cosi has rounded out its menu offerings with salads (made to order), all-natural soups, bowls made from gluten-free rice, and a selection of fascinating beverages, including artisan coffees and espressos, all-natural sodas, and other hand-crafted drinks.

Health Conscious

As you can probably tell from its focus on sustainability, Cosi tries to keep up with the latest trends among health-conscious consumers who want to know more about their food, not only in terms of where it comes from, but how it’s produced.

The Panera Comparison

People can’t help but wonder why Cosi hasn’t done better given Panera’s meteoric rise. Both chains started around the same time and take similar approaches in their concepts.

In the end, it may be as simple an explanation as Panera having better and more experienced management at the helm and a more robust business model that made sense to franchisees. Cosi simply didn’t gain that critical early momentum upon which to build.

Section II – Estimated Costs

• Please click here for detailed estimates of Cosi franchise costs, based on Item 7 of the company’s 2015 FDD.

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis