Cosi plans to return to its original “heritage” store design which features soft lighting and comfort-able seating.

“I have seen no guest-count erosion,” says Dourney, a former Au Bon Pain executive who plans to open 12 more Cosi locations. “That's really saying something.”

The 4 percent figure wasn't guesswork. Dourney based it on reports that franchisor Cosi Inc. commissions from Revenue Management Services, a Tampa, Fla.-based consulting firm. The reports, done for each of the fast-casual sandwich concept's geographical markets, “tell you how much room you have in pricing before you start losing guests,” Dourney says. And that is how he was able to negotiate a price hike, necessary in this age of booming commodities costs, without sacrificing traffic counts.

Commissioning and sharing the price-elasticity reports is just one of the ways Deerfield, Ill.-based Cosi supports franchisees as they become a bigger part of the chain's growth strategy.

Traditionally, the Cosi system has comprised more company stores than franchised ones, but that balance began to shift in 2006, when the company began inking area-development agreements with businesspeople like Dourney. Cosi has signed multiple-store agreements with 27 franchisees; of those, 20 have at least one or more restaurants open.

Franchisees now operate approximately 30 percent of the restaurants in the 144-unit system; that figure will eventually rise to 75 percent. Analysts say it's a smart strategy for Cosi, which hasn't had a profitable year since it went public in 2002. “When you don't have any cash, what are you going to do?” says Nicole Miller Regan, an analyst with Piper Jaffray & Co. in Minneapolis.

The process, she adds, will be a lengthy one. “Franchise development takes a while to get up and running,” Regan says. Plus, she adds, competition for good-quality franchisees is tough, as more companies boost franchising to grow with a minimal amount of capital investment.

To support its growing roster of franchisees, Cosi has made several internal changes, says Chief Executive Officer James Hyatt, a former Burger King executive who joined Cosi last September.

Three new executives with franchisee-related responsibilities have joined the company in the past few months. Paul Bower, formerly a divisional real-estate manager for McDonald's Corp., joined Cosi in April as chief development officer. “I went after someone who knows how to interact and partner with franchisees and evaluate the quality of real estate, so we can say 'no' more than we say 'yes,'” Hyatt says. Only 20 percent of those who express interest in franchising “get to real conversations,” he says.

Cosi has also added two franchise business leaders. Kevin Marcks, who is based in Connecticut, handles the Northeast. Dwayne Skivve, who is based in the Midwest, oversees the Southeast, which is fairly new territory for Cosi. Marcks and Skivve, with Vice President of Franchise Operations Jean Grossman, CFO William Koziel, General Counsel Vicki Baue and Hyatt form “a support net,” Hyatt says. “We travel to their markets…I interact with them every month.”

The chain has established a franchisee advisory council, which Dourney heads. So far, the franchisor-franchisee relationship is a functional one. “We have a very cooperative group of franchisees, not like my Burger King years, when the family gets testy once in a while,” Hyatt says.

Smoky BBQ Chicken Flatbread Pizza ($7.39 to $7.59 individual, $12.99 large) topped pizza sales when it was an LTO; the offering has been extended through the summer. Cosi franchisee RJ Dourney says he’s “very happy” with Cosi’s menu development.

A series of limited-time offers including a sea-sonal Fruit & Mozzarella Salad ($6.29 to $7.59) helps generate interest at dinner, a daypart Cosi would like to expand

Other growth-oriented adjustments include perking up the menu. Cosi added a handful of seasonal salads, sandwiches and pizza. A barbecue-chicken pizza, run as a limited-time offer earlier this year, was the chain's No. 1-selling item during its stint on the menu; it will remain on the menu throughout the summer. Along similar lines, a fruit-and-mozzarella salad will be offered this summer.

The new menu items are meant to broaden the chain's appeal at dinner and “optimize” lunch variety, Hyatt says. The pizza and salad are examples of “the types of things we try to do to connect to the season,” he adds.

The store design, too, is getting a makeover, albeit a back-to-the-future one. Cosi is moving back to what Hyatt calls its “heritage” look, with muted colors, stone floors, warm woods and comfortable furniture. “It's a softer feel, an eclectic look, and we want to stay true to that,” he says. Some of the newer stores are more contemporary, with brighter colors and lighting.

Cosi's signature look has its roots in urban locations, where the chain continues to do best.

Cosi does, however, plan to expand into new markets beyond its Northeast stronghold. Hyatt calls the Southeast “the next logical progression,” and names Tampa, Fla.; Atlanta; Charlotte, N.C.; Dallas; San Antonio; and Phoenix as possible new markets. San Francisco, an urban market with a dense population, is also a possibility.

Franchisee Dourney purchased three Cosi stores from the company in December 2005 and has since opened 10 more. Seven of them are located in downtown Boston, four are at the city's Logan airport, one is in Cambridge, Mass., and one is in Mansfield, Mass.

Dourney says Cosi has worked with him to get better terms on a loan, and has also helped him trim the costs and time involved in opening his next two locations. He uses a Web-based learning center that enables operators to download up-to-the-minute training materials.

But that's not why Dourney chose to become a Cosi franchisee. “I can build these units for $800,000 to $900,000, and my unit volumes are north of $1.7 million,” he says. “The profitability, anyone would be very happy with.”

And that, in essence, is why Cosi is stepping up franchising: to have profitable stores in the system without spending capital to build them. The ploy just might return the company to profitability. “Cosi does have solid brand awareness in the markets they've penetrated,” Regan says. “They do have the opportunity to be No. 2 [after Panera] in the premium-sandwich market.”