Così Inc. has struggled since the recession, and now a war of words between the company’s board of directors and shareholder investor Brad Blum is heating up.
On Sept. 27, Blum, who owns 6.8 percent of Così’s shares through his investment fund, BLUM Growth Fund LLC, sent a letter to shareholders calling for a new board of directors and offering his services as chief executive and chairman for an annual salary of $1. Blum, who ran Olive Garden in the ’90s and Burger King Holdings before its 2004 initial public offering, called on Così to improve service and cleanliness, as well as to pare down its menu and focus on food quality.
Interim Così chief executive Mark Demilio fired back in his own letter to employees and franchisees, writing that Blum “wants our board of directors to hand the company over to him for free — something the board cannot and would not ever do.” Demilio added that Blum’s “strategic and operational suggestions represent no new ideas.”
“In fact,” Demilio’s letter said, “in the course of the company’s strategic planning over the years, we had previously considered the actions outlined by Mr. Blum and are already undertaking those that, in our business judgment, are reasonable to pursue.”
Demilio also touted the current board’s progress in driving sales through catering, online ordering and restaurant remodels. And he added that Così Inc. has retained executive search firm The Elliot Group to find a replacement for former chief executive James Hyatt, who is now chief executive of Church’s Chicken.
Blum responded with a letter on Oct. 3, writing: “You must now cease and desist from making these types of inflammatory and grossly incorrect statements to mislead the very people who have suffered under your leadership. It appears you are trying to pacify people and buy time while you continue to turn out meager results.”
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While the winner of the fight to control Così has yet to emerge, Blum’s turnaround suggestions have merit, said Darren Tristano, executive vice president of market research firm Technomic, particularly limiting its menu. Much of Così’s success was based on the quality of its signature flatbread, which no bakery-café competitor has, Tristano said.
“You’re not really sure what a brand represents when the menu is so broad,” Tristano said. “You could differentiate by items that are top sellers and of great quality and finding ways to show customers who you really are. Being all things to all people really satisfies no one.”
Yet satisfying customers can’t happen without operational improvements, which Blum also suggested in his letters, including improving service and cleanliness, Tristano said.
“There are a lot of positive impacts that could be made at the unit level by just doing the things restaurants should be doing,” he said. “Service and cleanliness are all aspects that are extremely relevant to the customer and … need to happen.”
Despite its recent performance and internal conflicts, Tristano says Così still has a chance to turn the brand around.
“Così has the potential to be a growth organization if they have their unit economics shored up,” he said.
Deerfield, Ill.-based Così operates 80 restaurants and franchises another 58 locations in 17 states, the District of Columbia, and the United Arab Emirates.