Così Taps Activist Investor As Consultant

Così Inc. said Thursday it signed an agreement with former activist investor and restaurant veteran Brad Blum to consult on branding, product development, merchandising and marketing for the struggling fast-casual bakery brand.

The pact signals an armistice in Così's months-long tussle with Blum and his Blum Growth Fund, which holds 3.5 million shares, or about 6.8 percent, of Così's outstanding stock. Blum said he was changing his status to "passive shareholder" from activist.

The open-ended consulting agreement came after Carin Stutz, who in December was named president and chief executive at the Deerfield, Ill.-based Cosi, which operates or franchises 136 locations, sought a meeting with Blum.

"I just wanted to see if I could make him an ally," Stutz said. "I didn't want the distraction for me or for Così. ... I really wanted to make sure our team was spending all of our energies and focus on turning Così into a profitable business."

The planned hour-long meeting expanded into three hours, Blum said.

"When we spent the three hours there at the Così in New York City and talked with people on her staff, I listened to what she thought could be done better. There really was an alignment particularly around the idea of simplifying and streamlining the guest experience."

In the fall, Blum and other investors had pressured Così to make leadership changes. Blum, a former top executive at Burger King, Olive Garden and Romano's Macaroni Grill, had even volunteered at one point to serve as Così CEO for a $1 annual salary.

Stutz said Blum's consulting agreement will focus on several key initiatives, including brand strategy, marketing and culinary.

"We have a little momentum coming out of the fourth quarter and into the beginning of the year," Stutz said. "My thought was about how could I accelerate the turnaround. The thinking was to surround myself with the best talent that I could find. I know that Brad has a lot of expertise in many aspects of the business, but this one specifically is focused around driving top-line profitable sales."

Last month, Così said sales in its fourth quarter, which ended Dec. 26, had swung slightly positive. The company, which will report full earnings on March 29, added that same-store sales in the fourth quarter rose 2.6 percent, with a 0.9-percent gain at company-operated locations and a 5.3-percent increase at franchised units. At corporate units, traffic rose 0.6 percent and average check increased 0.3 percent. Revenue for the fourth quarter rose 3.3 percent to $26.2 million, compared with $25.4 million in the fourth quarter of 2010, reflecting an extra operating week in 2011.

"Carin is moving quickly to utilize every resource available to the company to quickly turn Così into a profitable business," Stephen Edwards, Così's executive chairman, said in a statement. "I welcome the involvement of Mr. Blum as part of Carin's strategy."

The company operates 80 restaurants and franchises another 56 locations in 17 states, the District of Columbia and the United Arab Emirates.

Continued from page 1

Stutz and Blum discussed their new agreement with Nation's Restaurant News:

How did this agreement come about after you two had exchanged letters in December?

Stutz: I invited Brad to come meet me at a Cosi. He told me he had spent 15 to 16 months studying our brand, so I wanted to hear what his ideas were.

We really had a lot of common ground. We believe in the strong potential of the Così brand, the uniqueness of the food and that need to simplify and improve the guest experience.

He said, 'If there's anything I can do to help support you, Carin, you just let me know.' So I guess the message is to be careful what you ask for. I called him and I honestly just tossed out the idea about consulting for us. I thought he could be a great add to our Cosi team and be an active participant in our turn-around story. And the good news is he said yes.

Brad, how long have you been studying the brand and what led you to make the investments starting in April 2011?

Blum: I've been studying the brand as early as September of 2010. I would consider Così as an excellent concept to provide 'good food for the planet.' That's my way of saying food that really tastes good and people find really pleasurable while at the same time being good for them and that they can eat quite regularly. My view of the food at Così is that it's quite good today. We all think it can get better as well. The brand was ripe for innovation. That was one reason I was interested in it originally.

Così is in the most dynamic and high-growth segment of the industry with fast casual. It's really serving the needs of consumers, I think, in a good way.

This is a turn-around opportunity with strong upside. Carin and I talked about this when we first met. It's large enough with enough restaurants to be meaningful, but yet at the same time small enough for management to get its arms around it.

Carin, how are you defining the areas of this consulting agreement?

Stutz: It's safe to say it's heavily involved with crafting a brand strategy to define Così in the marketplace to our consumer and our team. In addition to that, what is the most prudent way to spend our marketing efforts to get the most efficient and effective communication out there about Così and our food and our brand. Obviously, Brad has a passion for food, so I've asked him to wrap his arms around our culinary team and see what we can do from an innovation and simplification standpoint to make it an easier guest experience.

Brad, how do you see your new role as a "passive" investor?

Blum: My so-called 'active' period was when Così didn't have a CEO. I was really thrilled to hear that Carin was appointed CEO. I think it's in really good hands. I have a lot of confidence in her, her leadership approach and her bias for action. I'm enthusiastic to work with her and her team to help achieve consistent profitability.

What about the culinary aspects of the brand?

Blum: I'm so hooked on the bread and the different ways the bread can be used on this menu. ... Carin said she wanted to focus more on the oven and the baker and things of that nature, and I had some of those same thoughts as well. And the sandwiches are so good because of the bread. It kind of gets back to this 'good food for the planet' philosophy that I've had: Food that really tastes great but is also good for you. You feel good after you eat it.

What will we see different from Così going forward?

Stutz: I want to give some credit to the team that was here. I think the guidance and the strategy might have been more defensive. It was really around cash conservation and a survival mode. What you'll see differently is we intend to play offense.

Contact Ron Ruggless at
Follow him on Twitter: @RonRuggless