Executive Profile: Carin Stutz, CEO of Cosi Inc.

July 5, 2012

Her intent is to clean up chain’s image, one location at a time

June 04, 2012|By Emily Bryson York, Chicago Tribune reporter

On a morning visit to Cosi at Grand Avenue and Rush Street, CEO Carin Stutz checked out the prep area where salads and sandwiches are made, practiced her Spanish with the baker rolling out dough for afternoon flatbreads, and told the general manager to keep an eye on the amount of espresso coming out of the machines.

Stutz, who joined the company in January, also stepped from behind the counter to greet incoming patrons — and boast a little about the floor.

“I remember walking in here one time and thinking these floors were filthy — and now look at ’em, they’re spotless,” she said. “You’ve got to scrub floors.”

To underscore the point, Stutz, 55, flips through her iPhone for photographs of the floor at another Cosi before and after her scrubbing mandate.

“You can just see the difference in cleanliness in the restaurants,” she said.

As Stutz attempts a dramatic turnaround at the troubled Deerfield-based fast-casual chain known for its Signature Salad and Tuscan Pesto Chicken flatbread, the Aurora native is thinking large and small. After logging 34 years in the restaurant industry, she began her first CEO job in January and started examining her stores one by one.

On the broader level, Stutz is also wrestling with a perilously low stock price. On Friday, Cosi stock closed at 85 cents, and the company said it had received its third delisting notice in as many years. The chain has until Nov. 21 to get its stock price above $1 for 10 consecutive business days or be dropped from the Nasdaq.

Cosi’s 2002 initial public offering was priced at $7.

Under Stutz, company stock rose above $1 in March, only to drop in April after news of her plan to raise $15 million from shareholders to update restaurants and get the chain growing again. Analysts have complained the move would dilute shareholder value too much.

It has been a tumultuous year for Cosi, a 135-unit chain that went from hot commodity to has-been in less than a decade. In August, the last time Cosi was threatened with a Nasdaq delisting, CEO James Hyatt quickly resigned, and activist investor Brad Blum began lobbying for the job, offering a cash investment and promising to work for a $1 salary.

Stutz is no apologist for the restaurants, where she believes waits are too long, the menu is too complicated and operations need improvement. She’s trimming the menu, simplifying the ordering process and looking for a new chef to make the menu more innovative.

“A lot of times, somebody sits in this office and creates things for the restaurant and they don’t think about the implication that it has,” she said. “That’s why, when I got here, the first thing I did was, I came in, I met the team and I said I’ll see you in five weeks — because I wanted to go learn the business.”

Darren Tristano, executive vice president of Technomic, a Chicago-based restaurant industry consulting and research firm, described Cosi as “really far behind” competition like Panera Bread, Corner Bakery Cafe, Au Bon Pain and even Bruegger’s.

Growth in the fast-casual segment — where there is generally no table service but where prices are higher, food is prepared to order and decor is more upscale than at traditional fast-food restaurants — has been outpacing the overall restaurant industry. In 2011, the sales in fast casual increased 5.2 percent, to $17.5 billion, while total restaurant industry sales increased 2.5 percent, to $370 billion.

Tristano pointed to other “first-generation” fast-casual players that “continue to fail,” like Boston Market and Fuddruckers.

“You could consider those to be first-generation fast-causal concepts that peaked and then declined and lost relevance,” he said. “Cosi appears to be headed in that direction.”

Cosi reported first-quarter earnings last month, narrowing its net loss by nearly half, to $1.13 million from $2.14 million the year before.

“This is a great little company, and you know, yes, you always wish it was in different circumstances,” Stutz said. “But this is the hand I’ve been dealt, and we’re figuring it out.”

William Koziel, Cosi’s chief financial officer, who has been with the company since 2004, described his new boss as “a breath of fresh air.”

“What she’s brought for us has been a renewed focus on the business,” he said. “She clearly has a sense of urgency.”

RJ Dourney, Cosi’s Franchisee of the Year with 13 locations primarily in the Boston area, said the chain’s franchise community has a number of reasons to “feel very confident having Carin at the helm.”

“The first is, she’s an accomplished operator,” he said. “I appreciate people that have great ideas and philosophies; it’s a lot of fun, but at the end of the day, execution is critical.”

Dourney, who worked with Stutz at Applebee’s about a decade ago, said he has seen what she is capable of and “she gets it.” He said she knows how to build teams and “focuses on the things that cause guests to come back.”

“In my family, we never had a new car,” she said, “and I kept thinking, ‘That must be the greatest job.'”

Stutz was less impressed with their methods, which included shouting, “Come on girls, come on, let’s go!”

“I kept thinking, ‘Seriously?'” she said. “He’s got a new car, and I know I could do that job better.”

She said she looked forward to being in a position of authority, when she could treat lower-level employees better, communicate with them directly and demonstrate some understanding of their career goals.

Looking back, Stutz thinks her future in restaurants was cemented while counting the drawer atMcDonald’s.

“I remember one Saturday night I called my dad and said, ‘You’re not going to believe this, but I have $10,000 in my hand right now!'” she said. “I always look back at that moment and think that was when I told Mom and Dad that I really wanted to be in the restaurant industry, and they were like, ‘I think that’s OK!'”

Stutz and her twin were the first members in the family to attend college. Her father, Don Horne, worked in sales, doing everything “from railroads to advertising.” Mother Gloria started work on the sly, Stutz said, walking from Aurora to Batavia after Don left for work and returning before he did.

Gloria eventually made her way to Farmers insurance, starting in the mailroom and retiring 30 years later as an underwriter. In addition to working and raising three children, Gloria ran what Stutz refers to as “Horne’s Hospitality House,” caring for family members and disabled friends.

Stutz earned a bachelor of science degree from Western Illinois University with an emphasis on food, nutrition and business. She later earned a master’s in business administration from MidAmerica Nazarene University in Kansas.

Stutz’s early career was an uphill climb. When working at Wendy’s in west suburban Westmont, she had been waiting for promotion to director of operations but watched six other people beat her to it over a five-year period.

One morning, her boss called her into his office, saying he had great news. He introduced her to Howard, a man she was expected to train so that he could be her new boss.

“That’s one of those key moments in your life when you’ve got that opportunity to make a great first impression on this person who’s going to be your boss in front of your boss’ boss,” she said. Instead, she said: “Are you kidding me? When is it going to be my turn?”

Apparently, no one in the company knew that the mother of two young boys was interested in advancing.

“That’s when it hit me that I had to be an advocate for myself,” she said. “I didn’t know that people talked to their bosses about the next job.”

Stutz was fortunate in finding mentors. Gayle Bartlett, a human resources executive at Wendy’s, took an interest in Stutz in 1984. Bartlett offered to review Stutz’s materials before presentations and even took her shopping to select appropriate office attire, things Stutz hadn’t learned working in restaurants.

“I realized how important it was for other women to reach down to other women and help pull them up in the organization,” Stutz said. She still has an orange Jones New York suit purchased during the mid-1980s shopping trip. She got her promotion to director of operations in 1985.

Stutz, her husband, and sons Rodger IV and David, left Aurora for Chesapeake, Va., in 1988. Rodger, who had worked as a police officer in Aurora focusing on gangs and burglaries, eventually took over day-to-day child-rearing.

Finding fifth gear

Stutz’s jobs in operations at Wendy’s took her to the areas of Philadelphia, Boston, Kansas City, Mo., and Portland, Ore. She ultimately became vice president of the chain’s Pacific division.

Stutz’s younger son, David, said that while moving around as a child, he developed an outgoing nature that has led him to a career in sales. David, a manager with the Golfsmith retail chain, recently completed his MBA at Avila University in Kansas City, Mo.

Of his mother’s success in business, he said: “She’s a real person,” and “she doesn’t sugarcoat anything.”

Luckily, he added, “she knows what she’s doing, so it doesn’t hurt, and so people usually listen to her because she’s got a proven track record.”

In late 1999, Stutz moved the family back to Kansas City, where she had been named executive vice president of operations for Applebee’s. She remembers being enticed not only by the opportunity to work at a company headquarters for the first time, but to move to “a job where people use you for your mind, not just your hands.”

And after decades of carrying out someone else’s plans, Stutz was eager to craft her own.

“At some point in your career, you sit there and look at a program and think, ‘Who thought of this? Did they ever work in a restaurant?'” she said. “(That’s) probably why I drive myself to spend as much time in the restaurants and get as much feedback as I can from our operators and ask, ‘Does this make sense?'”

Stutz left Applebee’s in 2007 when the company was sold, and a noncompete agreement kept her on the sideline for a year. She traveled with her husband and volunteered full time with Women’s Foodservice Forum, a networking organization aimed at elevating more women to executive roles in the food industry.

In 2009, Stutz was named chief operating officer of global business development for Dallas-basedBrinker International, which owns Chili’s and Maggiano’s Little Italy, which was founded by Chicago-based Lettuce Entertain You Enterprises. She was later named president of global business development.

The Brinker job offered “a lot of opportunities to grow and learn in my career,” Stutz said. She enjoyed being part of a big, stable company and working on a growing area of the business.

Eventually, she started thinking it was time to try and land a CEO job. She began to look around and had two offers within eight weeks. She chose Cosi because she said she believed in the product and was excited by the opportunity.

“I’ve never run from anything thinking, ‘I’m never going to move up here,'” Stutz said. “It was always more like, ‘I’m giving it everything I have and there’s nothing else. I really want to try the next position.'”

A side benefit, she said, has been the healthier fare.

Whenever she starts a job, Stutz said, “I eat my way through the menu,” during which time she expects to gain 10 pounds. At Cosi, because of lower-calorie items and living downtown, where more walking is required, Stutz said she has lost 16 pounds.

Living a ‘dream’

Having worked her way up through operations, a traditionally male-dominated segment of the restaurant industry, Stutz believed she had arrived when she earned her first CEO job.

But news coverage at the time focused on Brad Blum, a restaurant industry veteran known as a turnaround specialist who had bought a sizable stake in the company and had been agitating for the CEO job. Blum has led Olive Garden Italian Restaurant, Burger King and Romano’s Macaroni Grill and Italian Restaurant.

Stutz said she was surprised at the level of media attention surrounding her arrival, until she discerned the most frequently asked question: “What are you going to do about Brad Blum?”

“I realized the story was more about him,” she said. “There were all kinds of comments out there, like, ‘Why in the world did they give it to Carin, who’s an operator, when her predecessor was an operator and you could have given it to Brad Blum, who’s been a CEO three times?'”

In an interview, Blum said Stutz was “a good choice” for the job. He is working for the company nearly full time on an open-ended consulting project focusing on marketing, branding and menu innovation.

In her first months on the job, he said, she has been “focused on positive change.”

“She’s interested in increasing guest satisfaction and increasing interest in the brand, and I think making good headway,” he said.

Stutz and her husband have been enjoying life back in the Chicago area, having purchased a condominium in the Loop that offers a view of the Art Institute and Lake Michigan.

Despite his wife’s newly elevated status, Rodger said she remains down to earth, avoiding the trappings afforded many highly paid executives, like car service to the airport.

Before Memorial Day weekend, Rodger said, he walked his wife to the Thompson Center before 4 a.m. so she could catch the Orange Line to Midway Airport for a trip to New York. He then walked to the Blue Line to catch a train toO’Hare International Airport. He was off to visit their sons in Kansas City, and his wife would be meeting them for the weekend.

“She’s tried to stay humble,” he said.

Stutz put it another way.

“I say I’m living the American dream,” she said. “Sometimes you’ve got to pinch yourself.”

BUMMER: Turns Out Froyo Can Make You Fat, Too

July 5, 2012

Rachel Pomerance, U.S. News & World Report, Jun. 6, 2012

It hardly seems possible that yet another funky frozen yogurt shop could open its doors.

Especially when it’s practically spitting distance from a fresh competitor drawing droves of devotees.

But the latest incarnation of the frozen yogurt trend seems to defy standard business logic. These shops, where the decor of bright, happy hues is matched only by the spray of toppings—kiwi! Fruity Pebbles! something random and chewy!—has whet consumers’ appetites for indulgent fun.

Especially when that fun is packaged in a way that promises to deliver a yummy, guiltless treat and, in some cases, health benefits like better immunity and digestion.

So, is the new yogurt healthy? Or are we all just lining up for candy like kids on Halloween? Well, that depends.

“I think there’s a health halo around frozen yogurt,” and that’s helping to market the trend, says Darren Tristano, executive vice president of the food research and consulting firm Technomic. “I think there’s some truth to it,” he says, but warned that excessive portions and toppings derail the benefit.

Sticking to reasonable portions is, of course, critical to a healthy diet. And that reasoning clearly applies to the frozen yogurt trend as shops often feature self-serve machines and are accompanied by a smorgasbord of sugary toppings.

Here’s the strategy taken by David Katz, a nutrition expert and clinical instructor of medicine at Yale University, when visiting the Peachy Keen fro-yo shop where his daughter works: “I tend to take less yogurt (usually tart or fat-free fruit), and lots of fresh fruit,” Katz writes in an email to U.S. News. “If the dose is moderate, [it makes] a nice treat—but overindulgence could certainly come back to haunt you in the mirror!”

Still, the current trend in frozen yogurt, which features tart and so-called “natural” flavors and, now, the wildly popular Greek yogurt, offers some healthier dessert options.

In fact, today’s frozen yogurt trend is something of a reclamation. Rather than the sweet fro-yo of 20 years ago, which aimed to mimic ice cream, “what you’re seeing right now is more about the yogurt—a product that is focused on delivering that tart yogurt flavor, and it’s also about a product that’s healthier,” says Elise Cortina Fennig, spokesperson for the National Yogurt Association.

Whatever it is, it’s working. Between the fall of 2010 and the fall of 2011, the number of retail frozen yogurt shops in this country climbed from 3,624 to 4,765—a 31 percent spike. According to Tristano, sales reported by frozen dessert shops, in general, have hovered at $6 billion per year, but “consumers have just shifted from ice cream to frozen yogurt.” Frozen yogurt chains, in fact, have experienced some of the highest growth of any of the chains he tracks.

Novelty accounts for part of the frozen yogurt craze, says Michael Neuwirth, senior director of public relations for The Dannon Company, which now owns YoCream, a market leader. (Neuwirth, incidentally, says he passed two frozen yogurt shops within three blocks of New York’s Upper East Side while speaking with U.S. News.)

But another factor is economic. Times of high unemployment beget a rise in entrepreneurship, and frozen yogurt shops are largely a band of small businesses, he says.

The range of offerings available in these shops makes any blanket judgment hard to support, except for this one—that to be called yogurt, Fennig says it must contain two strains of beneficial bacteria, also known as probiotics: streptococcus thermophilus and lactobacillus bulgaricus, which produce lactase, easing digestion for those who are lactose intolerant.

Her group is pressing the Food and Drug Administration to codify a standard of identity for yogurt, but until then, it has created its own seal of approval, awarded to frozen yogurt with 10 million cultures per gram at the time of manufacturing, a threshold that offers digestive benefits, Fennig explains. However, she says that most of their approved frozen yogurt shops meet the association’s more rigorous requirements for more potent cup yogurt—at 100 million cultures per gram.

But the extent to which these bacteria support your health is another question.

“Probiotics are very strain-specific in their benefits,” says Lisa Brown, assistant professor of nutrition at Simmons College in Boston. “It’s really hard to say that [frozen yogurt] will translate the same way fermented foods do in terms of probiotic benefit.”

Still, Brown approves of many of the new frozen-yogurt options, noting that tart flavors slow down the release of sugar in the body, which stabilizes appetite and energy levels. Greek yogurts, in particular, are a good bet, she says, due to concentrated protein, which makes them creamy, yet they are low in fat and carbohydrates. (In fact, a lot of folks like to simply freeze their own cup of Greek yogurt for a healthy dessert.)

The key, of course, is to note the nutrition facts. Take, for example, a half-cup of Ben & Jerry’s Banana Peanut Butter Greek Frozen Yogurt, which has 210 calories and 8 grams of fat, when compared with Yocream’s nonfat Greek frozen yogurt, which has, at most, 100 calories per half-cup and, as mentioned, no fat. A half-cup of YoCream’s “cake batter,” the company’s No. 1 flavor—which it says has knocked vanilla out of first place for the first time in 25 years—has 130 calories and 3 grams of fat.

Whatever you choose, Brown says it’s “reasonable” for treats to account for 10 percent of your daily caloric intake. Assuming you follow a 2,000-calorie diet, you don’t want more than 200 calories taken up by fro-yo.

Bottom line: Watch your portions and take care with toppings.

And another tip from Brown: go with the sprinkles. They’re a happy, low-calorie way to round out your dessert, and not you. “Rainbow sprinkles make everything look fun.”