My current restaurant reclamation project is
(COSI - Get Report), which actually got some press yesterday when Roth Capital put a buy rating and $2 target price on the stock. This company has been the epitome of a bad experience for investors. Cosi has been in the black (from operations) just one quarter in its 10-plus years as a publicly traded company. While the food has been very good (at least as long as I've been a patron) the operating costs have been extremely high, and the menu way too complicated.
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This was a name that I would not touch with a ten foot pole; that is until late 2011, when a major shareholder, Brad Blum of the Blum Growth Fund (7% stake) began making some waves as an activist. Blum, former CEO of Burger King (BKW), offered to step in as CEO to right the ship. He got a chilly response from the company's board of directors, but ultimately, Cosi brought in a new CEO Carin Stutz, and Blum ended up dropping his activist campaign, and came onboard as a consultant.
While it's still too early to say with certainty that Cosi can be saved, the company reported its first ever profit for the second quarter of 2012. It was a small profit at that, just $77,000, but it was a start. New management has taken steps to reduce the number of items on the menu, and shorten waiting times. More recently, Cosi has been experimenting with new menu items, and a new restaurant design.
It will be a tough road for Cosi, but the company ended last quarter with $16 million in cash, partially the results of a rights offering, and no debt. Cosi bought itself some time, but now has to demonstrate that it has a place in the extremely competitive restaurant landscape, and that it can be consistently profitable.A tall order, for sure. At the time of publication the author is long KKD, COSI. Follow @JonMHellerCFA This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.