Are Cosi and Jamba Juice Going Extinct?
Negative cash flow and a threadbare balance sheet makes survival challenging for some restaurant operators. As the recession deepens, cash flow tumbles and credit tightens, the restaurant industry is right-sizing excess capacity that was added to satiate shareholders’ thirst for growth. Virtually every operator has closed under-performing restaurants built in sub-par locations — as competition for the “A” spots intensified — while they dramatically scaled back expansion plans. Some restaurant chains — those that rapidly expanded despite sub-par profitability — face extinction. Cosi, Inc. (COSI) and Jamba, Inc. (JMBA) are 2 such examples. Years of operating losses have drained Cosi’s cash reserves, casting substantial doubt on its ability to survive the worst recession in decades. The bakery-café chain has generated negative free cash flow every year since going public in 2002, leaving few resources to fall back on. Although Cosi has made moderate strides in its plan to return to pr
