Excellents points and my sentiment is on par with yours.
Regarding the franchise v company-owned profitability, well, I don't think that as much of a concern or difference as you. Depending on the buy-in and payouts, franchises can sometimes be more profitable. Too, franchise results often exceed company-owned restaurants.
Case in point is Applebees. Great company, menu, and management. Its franchise operate more efficiently than do its company-owned restaurants (see same store sales comps).
What's great about franchising is that the risk is shared with other investors. Called them 'direct' investors, if you will, as they are a source of capital. Cosi does not have the base to growth soley on its own; franchising provides that growth and the capital needed to grow. The majority of restaurants grow in this manner. And there even publicly traded companies that do nothing much franchise a portfolio of restaurant concepts.
What we have here is an established and working concept that was unfortunately managed poorly by its founders. Kudos to them for taking the risking and getting Cosi running, but like many entrepreneurs, they lack the management expertise to provide the consistent and predictable growth the public investing market demands. And Cosi's co-founders shot themselves in the foot right in the first quarter after its IPO. Talk about killing credibility.
Today's management is spot on, in my view. Maybe too too methodical and maybe too too cautious. That perhaps explains the initial slow rollout of franchise and company-owned stores. Investors, like me and you, are griping about that -- backend loaded growth in '05 rather than spread over the four quarters. That's leaving a cap between the turnaround and growth phases and is pause to the stock, in my opinion.
Wall Street analysts I've spoken to have been eyeing Cosi and have been waiting for management to establish the growth phase before they risk initiating coverage. With other restaurants in their emerging growth phases -- Panera, Buffalo Wild Wings, Red Robin Gourmet -- analyst can at least guage the growth matrices. Such is not the case for Cosi yet.
I'm sure management is well aware of this. Established store openings trend needs to be in place before the top investment houses pick up coverage. When this happens, and provided that Cosi is executing well, the stock might be in demand. In turn, that might result in a higher stock price. And since common stock and market valuation is another form of currency, and thus capital, Cosi would have even more wiggle room to seek additional capital to fuel company-owned store openings.