Dive Brief:

• Cosi announced Monday that it has filed for Chapter 11 bankruptcy protection. This marks the second time the fast casual sandwich concept has filed for bankruptcy, following its September 2016 filing. 
• The fast casual chain said it has begun restructuring its operations and increasing its emphasis on catering to "better align with current customer dining trends, further improve guest experiences and enhance its financial performance."
• Cosi has hired a chief restructuring officer, Jason F. Fensterstock, who is tasked with developing a turnaround plan and cost-cutting initiatives. 

Dive Insight:

Cosi's press release highlights some reasons for optimism, including increased sales so far in 2020. But there are plenty of hurdles to overcome to get to its intended point of emerging "from Chapter 11 as a stronger version of itself."

Cosi, which has been around since 1998, has had its fair share of struggles throughout the years that go beyond its 2016 bankruptcy. It was also delisted from Nasdaq in 2016 after 14 years on the market and fired CEO RJ Dourney the same year. Most recently, it closed 30 stores in December. Following those closures, the chain's footprint could number as few as 15 units or, as Restaurant Business reported in January, about one-tenth the number of restaurants it operated just over 10 years ago. 

It seems as though the chain has struggled to regain its grip after its 2016 woes, which had also been years in the making. According to Food Business News, quarterly net revenues fell by the double-digits in 2013, with then-CEO Stephen Edwards placing the blame on subpar customer service, for example. In 2014, The Motley Fool published a piece calling Cosi the "worst-run restaurant in the U.S.," with an "awful operating history." The publication pointed to the chain's complicated menu and an aggressive growth plan as particularly egregious issues. When Cosi filed for bankruptcy the first time around, the chain hadn't reported an annual profit since 1998, the year it was founded.  

Cosi, particularly with its sandwich-heavy menu, should find some footing in catering, which is a significantly growing channel. Catering outpaced overall industry growth by 50% in 2018, according to a Technomic and ezCater report. Cosi has opened more commissaries to support this channel, which makes up more than 25% of its sales, according to QSR Magazine.

But catering alone can't provide a silver bullet. The sandwich category is a hard segment to play in — as Quiznos, Subway and Potbelly have all learned — and Cosi will need more differentiators than that to stand out in a crowd. According to Technomic, the number of fast casual sandwich chains with more than $50 million in annual sales increased 70% to over 7,500 from 2013 to 2018. If Cosi can't figure out how to generate a profit, it will get lost in such a saturated category.