Così Inc., the long-struggling fast-casual operator, has filed for bankruptcy, closed 40 percent of company-owned restaurants and is up for sale, the company said Wednesday.
“This was a difficult step, but it was necessary to address our liquidity issues,” Patrick Bennett, interim CEO of Così, said in a statement. “We believe this process will allow the company to right-size its balance sheet, reduce its debt, and focus on improving the business and stabilizing the brand.”
The Boston-based operator has a deal with one of its lenders, AB Opportunity Fund LLC, AB Value Partners, and the investment firm and large Così shareholder Milfam II LP, to buy the chain out of bankruptcy.
The group will act as a “stalking horse bidder” during the auction, meaning that any company that wants to buy Così will have to outbid the group to acquire the company. It’s uncertain how much the group has agreed to pay for the chain, which has a market cap of $7.75 million.
Così has received $4 million in financing to enable it to operate during the bankruptcy process.
“We worked very hard to avoid this step,” Mark Demilio, Così chairman, said in a statement. “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.”
Just before the filing, Così closed 29 of 74 company-owned locations. Così also has 31 franchisee-owned units that are unaffected by the action.
Così said it has a “fast-track process” that will enable it to emerge from the restructuring with new ownership and an improved financial position.
The move comes just one month after Così terminated CEO R.J. Dourney, following the company’s admission that it would not generate positive cash flow in the third quarter as it had anticipated.
Così has recorded operating losses of $15.5 million, $15.8 million and $11.5 million in the past three years, respectively. The constant losses have forced the company to change CEOs, explore sales processes and undertake complex stock transactions to stay afloat. It has also done reverse stock splits to avoid losing its Nasdaq Stock Exchange listing.
But Così is not alone in its financial misery. Weakening same-store sales industrywide have left several chains scrambling for answers. The owners of Fox & Hound, Logan’s Roadhouse, Zio’s Italian Kitchen, Black-eyed Pea, Johnny Carino’s and Quaker Steak & Lube, plus Buffets LLC, have all filed for bankruptcy since November.