Why Cosi Just Filed for Bankruptcy

BOSTON, MA — Cosi, the fast-casual restaurant that brought you house-made flat-breads, roast-at-your-table s'mores and, of course, the squagel, landed in bankruptcy court this week.

Boston-based Cosi Inc. (NASDAQ:COSI) announced Wednesday that it and its subsidiaries have filed voluntary Chapter 11 petitions in the United States Bankruptcy Court for the District of Massachusetts.

The social media reaction to the Boston-based restaurant chain's news has been heartbroken, to say the least:

And along with that, there's news of 29 Cosi's 74 company-owned stores closing, ahead of the filing (its 31 franchise-run locations are staying open, at least for now):

Its position in the market is a challenging one, beset on multiple fronts.

As Forbes writes, "Cosi’s bankruptcy filing comes amid a long string of losses after the company over-expanded and saw poor results from multiple menu revamps."

A slight decline in grocery prices have also been pushing people back into buying their own food, and possibly dampening the allure of fast-casual chains, USA Today reports.

Then, there's the fast-casual competition itself. While Cosi was one of the forerunners of the movement, it's been overtaken by popular competitors such as Panera and Chipotle, in the crowded fast-casual field.

That puts even more pressure on pricing, where plenty of people had complaints:

In a statement, Cosi Chairman of the Board Mark Demilio said the company "worked hard to avoid this step."

“With the advice and support of outside advisors, we’ve explored multiple paths, including raising capital through equity and/or debt in either public or private transactions, selling the Company outside the bankruptcy process, selling certain assets of the Company, and other transactions to restructure the balance sheet or raise capital, while also focusing on attempting to improve sales, reduce costs, and exit underperforming locations. It’s become clear that, despite the extensive efforts by the Company, no such transactions are achievable at this time, that the Company cannot continue to operate in its current financial condition, and that the best alternative for the Company and its creditors would be to accomplish a sale through the bankruptcy process," he said.

According to a company press release, their petition Wednesday in bankruptcy court positions them for a "fast-track process" to "emerge from the restructuring under new ownership and with an improved financial position and stronger brand."

Margherita flatbread photo by viviandnguyen_, via Flickr/Creative Commons