Strategic Marketing Planrogs.weebly.com/uploads/6/4/9/7/649749/cosi_strategic_analysis.pdf · Motamedy, and Professor Hoelscher, we will create a report for the company that includes:

Strategic Marketing Plan

November 6, 2007

Contact: Kyle Rogowski 215 Grande Drive Minooka, IL. 60447 Telephone: (815) 600-3205 Email: [email protected]

Contact: Scott Robinson 121 Chatsworth Circle Schaumburg, IL 60194

Telephone: (815) 490-1233 Email: [email protected]

Contact: Derek Douin 25308 West Willow Drive

Plainfield, IL. 60544 Telephone: (815) 341-4019 Email: [email protected]

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11-6-07 Joe Motamedy 138 E. Beaufort Street Normal, IL 61761 Dear Mr. Motamedy, We were very excited to be involved with the growth and development of Cosi here in Normal, Illinois. After spending time this semester researching the company as well as the food industry, we feel that we have some helpful recommendations for future growth. Based on our proposal letter developed earlier this semester, we outlined what we believed were aspects vital to the growth of Cosi. The characteristics we felt were critical were as follows:

• Understand Cosi’s target market

• Identify and/or develop Cosi’s competitive advantage(s)

• Identify new and expand existing opportunities

• Incorporate previous three items into a complete marketing plan After completing the final project we feel we have accomplished:

1. External Analysis - This helped us recognize the current trends in the food industry as well as which ones Cosi currently has exploited and which ones Cosi can in the future.

2. Internal Analysis - The internal analysis helped us examine competitors in order to identify

and/or develop competitive advantages for Cosi to stay above the competition. It also allowed us to identify Cosi’s core/distinctive competencies.

3. Strategic Marketing Analysis – This analysis enabled us get into the minds of Cosi’s possible

customers. We did this through surveys which were later analyzed in hopes of discovering possible recommendations for Cosi.

4. Marketing Plan - Using these three analyses, we develop a complete marketing plan for Cosi to

succeed in the future.

5. Recommendations – We took all the knowledge we had gained and developed a list of recommendations for Cosi which included: Local advertising, emphasis on fresh bread, expanding catering options, and emphasis on lunch offerings.

Thank you for providing your time and use of your company model, which allowed us to complete this project. We hope that our recommendations and research help give insight for Cosi’s future endeavors. Sincerely, Kyle Rogowski Scott Robinson Derek Douin

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EXECUTIVE SUMMARY

Cosi is a dynamic fast growing restaurant chain that has locations across the country. We

were assigned this company and asked to complete a study for them. The particular Cosi we

were assigned is located in Normal, IL. After discussions with Cosi’s consultant, Mr.

Motamedy, and Professor Hoelscher, we will create a report for the company that includes: an

external analysis, internal analysis, strategic marketing analysis, marketing plan, and

recommendations.

With a smaller group of only three people, we are able to split each part into sections and

then act as a team to implement our ideas. We feel this allows each member to have individual

input in the final product. After the initial planning, we will develop a proposal letter that

outlines our project goals and turn it in to Mr. Motamedy for approval. Before diving into the

project it is important to aquatint ourselves with the restaurant and its environment. The external

analysis will be completed first to understand the current environment of the food industry. This

will give us plenty of information on current restaurant industry practices. Then, in order to

further understand the company itself, we will create an internal analysis. This gives us good

insight of the company’s goals and ways it attempts to separate itself from the competition. The

external and internal analysis must give us enough information to begin brainstorming

recommendations for Cosi to possibly implement. To assist in our research, carefully plotted

questions will be placed into surveys. This will help us better understand what students/faculty

and surrounding residents look for in the restaurant industry. Also it will give us insight into

residents’ current emotions toward construction in Uptown Normal. After designing our own

surveys, we will take them to the Small Business Development Center of Illinois State

University for revision. Two separate surveys will be distributed to customers in Cosi and to

students and faculty of ISU.

Lastly, with the information gathered, we will carefully analyze the surveys and provide

Cosi with a list of recommendations for possible implementation. These recommendations,

along with ways they can be executed, will be presented to Mr. Motamedy, Professor Hoelsher,

and Elizabeth Binning.

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Table of Contents

I. Letter of Transmittal………………………………………………………………...2

II. Executive Summary……………………………………………………………….....3

III. Situational Overview………………………………………………………………...6

A. Product Purpose B. Brief History of Cosi C. Research Methodology Description D. Summarized Situational Analysis

IV. External Analysis…………...………………………………………………………..8

A. The General Environment B. The Aging Population C. Changes in Ethnic Compositions D. Rising Affluence E. Greater Disparities in Income Levels F. More Women in the Workplace G. Increase in Temporary Workers H. Greater Concern for Fitness I. Greater Concern for Environment J. Postponement of Family Formation K. Strategic Groups within Industries L. Economic and Global Environment M. Porter Five Forces

V. Internal Analysis…………………………………………………………………..14

A. Strategic Issues for Cosi B. Competitive Approach C. Strategy D. Geographic Coverage E. Customer Base F. Cosi’s Prices and Cost G. SWOT Analysis H. Main Competitors I. Core Competencies J. Distinctive Competencies K. Cosi’s Main Marketing Opportunities

1. Best Prospects for Long Term Growth 2. Potential for Competitive Advantage

L. Identifying External Threats 1. Emergence of Cheaper/Better Technologies 2. Introduction of Better Products by Rivals 3. Intensifying Competitive Pressures

M. Sales Growth N. Cost of Sales

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O. General and Administrative Cost Comparison P. Asset Management Q. Strength of Company’s Competitive Position R. Key Success Factors S. Key Success Factor Results T. Strengths within Industry U. Weaknesses within Industry

VI. Strategic Marketing Analysis………………………………………………………25

A. On-Campus Survey Results and Analysis

VII. Marketing Plan………………………………………………………………….......27

A. Company Analysis and Goals B. Customer Analysis C. Company Risks D. Industry Risks E. Competitor Analysis F. Joint Ventures

VIII. Recommendations…………………………………………………………………..30

A. Decision Making Criteria for Selection Alternatives B. Recommendations and Implementation Processes

1. Local Advertising 2. Emphasis on Fresh Bread vs. Competitors’ Alternative Frozen Bread 3. Expand Catering Options throughout Bloomington/Normal Area 4. Emphasis on Lunch Offerings

IX. Appendices…………………………………………………………………………..33

A. Time logs 1. September 2. October

B. Surveys 1. On Campus Survey 2. In Store Survey

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SITUATION OVERVIEW Project Purpose:

3. Identifying Cosi’s target market

4. Identify and/or develop Cosi’s competitive advantage(s)

5. Identify new and expand existing opportunities

6. Incorporate previous three items into a complete marketing plan

Brief History of Cosi:

Cosi is an American restaurant chain founded in 1996. They focus on building

restaurants catering to breakfast, lunch, afternoon coffee, dinner and desert. These restaurants

are located throughout the United States and focus on urban areas. The company selects their

sites based on strong foot traffic and visibility. The restaurant prides itself in creating products

that are unique, healthy, and fresh. To ensure freshness, all bread products are produced on the

premise separating them from restaurants such as Panera which receive their bread frozen. Cosi

also offers a cozy interior atmosphere with Wi-Fi connect ability that attracts people looking for

a relaxing place to sit down.

Research Methodology Description:

After meeting with the client from Cosi, our professor, and team members as a group, we

developed a research methodology for conducting our project in the most efficient way. A brief

history and background check on Cosi was done to become familiarized with the company and

their purpose. A plan was then developed to fully research the company, its purpose, advantages

and disadvantages, and overall competitive position within the food industry. An external

analysis was first conducted to research the overall position of Cosi in their industry among

competitors. An internal analysis was then completed in order to fully research Cosi and its

internal advantages and disadvantages within the company as well as against competitors. The

internal analysis combined with the external analysis predicated our final method of analysis,

which was our strategic marketing plan. The strategic marketing plan consisted of a thorough

investigation of what Cosi is doing, what needs to be done, and how it should be implemented.

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Summarized Situational Analysis:

After consulting with the client from Cosi, we discovered two situations that needed to be

addressed in researching Cosi. The client and team members agreed upon developing

information through surveys as well as methods and ideas for local advertising to better serve

Cosi as a whole. Through developing surveys, we gathered information regarding age, price

sensitivity, effect of construction, as well as overall opinion about Cosi. These surveys and our

research helped us develop ideas for local advertising and methods for achieving it. The

situations facing the client were addressed using our surveys and research.

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EXTERNAL ANALYSIS

The general environment:

The food industry has changed dramatically in the past 20 years. Restaurants are now

becoming very cautious with the food they offer. Instead of just providing a large variety of

unhealthy food, they are beginning to understand Americans are more interested in staying

healthy. In a society where people understand the link between diseases and diet, it is safe to say

the general environment in the American food industry has a tendency to offer healthier food.

Many Americans are overweight and therefore conscious of what they eat. Cosi responds to

these complex issues by providing foods that are fresh and healthy.

The aging population:

Baby Boomers are health conscious and physically active and are a primary target for a

food company's product development endeavors. The Census Bureau projects the current 65+

population to double over the next three decades to nearly 70 million or 20% of the population.

“The biggest challenge for Baby Boomers is that their nutritional requirements remain the same

or increase as they age, while their calorie needs to decrease, resulting in an increased emphasis

on nutrient-dense foods,” states Kelly Streit, MS, RD, LD, state media representative for the

Oregon Dietetic Assoc. Although Cosi tends to cater toward a younger crowd, its healthier food

and high quality attract the middle-income baby boomer generation. There is no doubt the baby

boomers provide an excellent target market. With their wealth and need for healthy foods, Cosi

must cater toward their nutritional needs.

http://findarticles.com/p/articles/mi_m3289/is_7_169/ai_64781416

Changes in ethnic composition:

Changes in Ethnic Composition across the US, ethnic minority consumers are forming

increasingly lucrative markets, especially within the food industry. Restaurants have identified

this trend and are attempting to capitalize on it by offering ethnically diverse options in their

menus. This drives volume sales by appealing to this growing demographic.

http://www.investor.reuters.com/business/IndustryDmDescr.aspx?industry=EATING&target=%

2fbusiness%2fbussecindustry%2fbussecindfake%2fbussecindoverview&page=dmdescr

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Consequently, Cosi’s wide variety menu should cater toward many different ethnicities, this will

help them gain considerable market share with Americans diverse ethnic composition.

Rising Affluence:

Affluence of women is increasing: ‘Women’ and ‘wealth’ are two words being heard together

more frequently and the commercial world is sitting up and taking notice of women’s growing

spending power. Globally, women are becoming an economic force to be reckoned with.

http://blogs.bnet.com/intercom/?p=326 This trend is only going to grow and therefore is very

important for any retail industry to consider. Not only do the working women have money to

spend for themselves, but they also have money to spend on meals for their children. With time

poverty on the rise this means more fast food for families.

Affluence of Latinos: The dynamic mobility of America’s Hispanic middle class will be the next

generation to replace aging American Baby Boomers and they are the fastest growing segment of

the middle class in America. The income and spending power of this demographic group is just

beginning to reach significant potential because the Latino community is 5-10 years younger

than the average U.S. population. “It’s not that the war on poverty is over, but there is a

common misconception that all Hispanics in America are undereducated and low-income. The

reality is that there is an emerging Hispanic middle class, and it holds tremendous potential to be

a significant market force,” said Harry Pachon, Ph.D., president and CEO of The Tomás Rivera

Policy Institute. “As the American ‘boomer’ generation moves closer to retirement and their exit

from the workforce, there are many middle class and upscale Latinos who stand poised to fill the

pending economic gap.”

http://juantornoe.blogs.com/hispanictrending/2007/04/the_tomas_river.html In other words,

companies such as Cosi need to take into consideration a diverse food offering to capitalize on

the emerging minority groups. More specifically, for a well-established company such as Cosi,

it needs to be able to market to America’s Hispanic middle class.

Greater disparities in income levels:

The food industry must still be sensitive to the disparities in income levels since many

consumers cannot afford healthy meals such as the ones Cosi provides. Therefore, Cosi being

located in a middle class setting is essential for Cosi to be profitable.

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More Women in the workplace:

The entry of so many women into the workforce has greatly increased demand for the

types of services that women traditionally perform: cooking, cleaning, and childcare. A

generation ago, three-quarters of the money used to buy food in the United States was spent to

prepare meals at home. Today, about half of the money used to buy food is spent at restaurants -

mainly at fast food restaurants. http://www.nytimes.com/books/first/s/schlosser-fast.html As

stated earlier, this is why it is so important to attract female customers. They not only buy for

themselves, but they buy for a family. This makes them a very profitable target market.

Increase in temporary workers:

The accommodation and food services industry added an estimated 8,000 jobs in 2005

giving it a total growth rate of 3.8 percent for the year. Average employment was at 218,600

with 189,800 of those jobs in the food services side of the industry. We would expect consumer

spending on the services of the accommodation and food services industry to increase during

good economic times. Therefore, the large employment gains over the year are really not

surprising. http://www.workforceexplorer.com/article.asp?ARTICLEID=6598 An increase in

temporary jobs helps companies like Cosi limit spending on their workforce.

Greater concern for fitness:

Four in five U.S. consumers are more concerned about health, nutrition and fitness than

they were a year ago, but nutrition now beats out fitness. A survey of approximately 3,000

consumers by food industry expert Phil Lempert suggests convenience, technology and value

will be key food consumer drivers in 2007. The survey, which evaluated consumers' attitudes

toward selecting foods, found 95 percent of consumers are concerned about nutrition, and there

is a growing trend toward fresh, minimally processed foods and greater interest in fruits and

vegetables. http://www.goodnewsdaily.net/modules/news/article.php?storyid=4728 With this

current trend Cosi must continue toward a healthy food orientated menu.

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Greater concern for environment:

• It would be a mistake to assume that only more affluent consumers are concerned with

health or environmental and social issues related to their food. These issues are of equal

importance to consumers across all income groups.

• By far the most important thing for consumers is the quality of food; with over three

quarters (76%) saying it is very important.

• A cluster of issues are very important for between 30 and 40% of consumers. These

include appropriate consumption of fats, sugars and salts, health and environmental

impacts of pesticides and other chemicals, fair treatment of workers and animal welfare.

In fact, 24% of consumers think the climate change impacts on food production and

transports are very important.

http://www.clickpress.com/releases/Detailed/28928005cp.shtml

Postponement of family formation:

The postponement of family formation may hurt the food industry as it means less family

members to feed. However, postponement of having children could also lead to fewer meals

made at home and therefore more food bought at restaurants.

Strategic Groups within Industries:

Cluster of firms that share similar strategies: Panera, Starbucks, any coffee shop, all downtown businesses in Normal. Breadth of product and geographic scope: Covers breakfast, lunch, and dinner, and its

geographic scope are the Downtown Normal area which includes Illinois State University.

Price/quality: Prices range in the mid to upper range, very similar to Panera and Starbucks, Cosi

tends to have a higher quality food compared too much of Downtown Normal. At the same time

their prices stay competitive with the other restaurants.

Type of distribution system: Has both a restaurant sit-down eatery as well as a catering unit.

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Economic and Global Environment:

World commodity prices have risen greatly due to increased demand for grain used in bio

fuel production. This, in turn, can have a harsh effect on raw material costs. Corn is slowly

recovering from this situation but wheat and soybeans remain at a high commodity price. Food

industries will be greatly affected by this and must plan ahead in order for problems to be

minimized. The food industry is one where many people end up working due to being laid off or

not having the required education to work in a more career oriented position. Unemployment can

have a positive as well as adverse affect on many businesses. If unemployment rises, it will

decrease the amount of businesses created and how well they can thrive. If our economy wants

to stay out of a recession, then the unemployment rate must decrease to benefit all industries.

The food industry can benefit from low unemployment because they will most likely obtain the

individuals who cannot find a job. Many fast-food restaurants do not require high school

education much less college experience. This can, in turn, help food industries obtain the

individuals that are looking for work.

By understanding the state of the nation’s economy, food manufacturing and retailers will

be able to tell if a marketing campaign or new product is successful. Consumer spending trends

are linked to the U.S. GDP. When total value of goods and services rises and falls, consumer

spending increases and decreases respectively. Understanding GDP is the key to understanding

your business and how it will succeed and expand. Food recalls play a large role in today’s stock

market values. Stakeholders take a serious roll when illnesses happen because of drops in sales

and service. Consumers, employees, and whole communities will boycott or demand better

security when these recalls happen. Stakeholders deserve better insurance for their health and

well being when they are the ones keeping the business afloat. Processed food sales have grown

to 3.2 trillion dollars in the last three decades but only 6% are due to global trade thus not

playing a huge role. The Euro has grown over the dollar affecting how the U.S. imports and

exports goods. U.S. import costs have grown over 14%. The world dependency on Indian and

Chinese manufacturing and economies has started to scare some people. Shareholders of

companies will be affected greatly on the deficit owed to these countries. The U.S. might have

to accept foods below FDA standards causing citizens to be unsafe if our imports do not meet

requirements.

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The U.S. buys and sells processed food and beverages in nearly every country in the

world. By dispersing production to other countries, quality can rise while costs are lowered. We

must be careful about the quality and maintain a high standard of quality in each country. Global

food markets are changing and evolving as food suppliers, manufacturers, and retailers meet the

needs of consumer who are increasingly demanding a wider variety of higher quality products.

The food sector is constantly evolving and generating a lot of sales. Today there are two trillion

dollars in annual sales in the global food industry.

Porters Five Forces:

Fast Food

Sit Down Food Coffee Shops

New Restaurants in Downtown Normal

Family Cooked Meal

Minimal Vendors changing prices or supply

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INTERNAL ANALYSIS

Strategic Issues for Cosi:

One of the main strategic issues for Cosi is their location of the restaurant. Cosi is

located in Uptown Normal which is currently under massive construction. With its current target

market directed towards Illinois State University students, it raises a massive problem for the

target customers getting to the restaurant.

The Second strategic issue for Cosi is their marketing scheme. Currently, Cosi depends

on the word of mouth marketing tactic. With a current life of 10 months, Cosi has to depend on

other forms of marketing. Guerilla Marketing is the best source of marketing for a new firm in

the restaurant industry and is something Cosi needs to consider.

Competitive approach:

The main competitive approach for Cosi would be the differentiation that it offers

compared to its competitors. The main differentiation will be the healthy options that Cosi offers

throughout the menu. With a nationwide craze of being active and eating healthier, Cosi gains a

competitive approach by offering healthier options throughout each meal of the day. In addition

to the healthier menu, Cosi also gains a direct competitive approach with the fresh cooked bread

made during every shift of every day. Similar companies receive shipments of frozen bread for

their sandwiches, which they then have to thaw out in order to make the sandwiches.

Strategy:

• Cosi competes in the fast casual segment of the restaurant industry. The segment is

characterized as a higher quality, healthier menu offering that is competitively priced and

more time efficient relative to its casual dining counterparts.

• Cosi’s business strategy focuses on building a nationwide system of distinctive

restaurants that caters to customers across five day parts: breakfast, lunch, afternoon

coffee, dinner and desert. In order to achieve this strategic vision, the company is

focusing its resources in several key areas.

• Cosi’s business strategy focuses on building a nationwide system of distinctive

restaurants that caters to customers across five day parts: breakfast, lunch, afternoon

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coffee, dinner and desert. In order to achieve this strategic vision, the company is

focusing its resources in several key areas.

• First, Cosi is seeking to build brand equity for its products by focusing on its signature

bread and coffee offerings. Cosi appears to have developed substantial brand equity in its

customer base by becoming fairly well known for these products. In turn, the company

intends to strengthen and further develop this brand loyalty by continuing to offer menu

items based on these signature products while ensuring favorable customer experiences.

To ensure freshness, all bread products are produced on the premises and to better ensure

that Cosi can maintain food quality as one of its competitive advantages

• New menu segments are developed in-house or through partner suppliers and are

thoroughly evaluated by both internal and external consumer focus groups. New

products are intended to drive customer frequency and average checks, resulting in

increased average unit volumes in new locations and positive same restaurant sales in

existing locations.

• What is unique about Cosi’s operations is the sophistication that they have achieved in

order to be able determine performance of each restaurant entity. Virtually all reporting

has been computerized allowing for members of the management team to incorporate real

time unit volume information into their strategy. Because of this access to sales,

Regional Vice Presidents and District Managers can forecast sales and more importantly,

quickly react to current market conditions. This information technology infrastructure is

yet another competitive advantage that helps Cosi refine its operations and stay ahead of

its competitors. Management believes that all of these factors will help Cosi to build

brand awareness, increase customer frequency and grow sales per visit.

http://www.waseda.jp/mnc/RESEARCH/mnc_comm/papers/oshika/Top.html

Customer Base:

Ideally, the customer base for Cosi would be the population surrounding Illinois State

University campus. This would include the students and faculty members of ISU. Cosi also

identifies the population base of Normal (approx 10 square miles) as their geographic coverage.

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Cosi Prices and Costs:

While Cosi’s cost of goods sold is lower than Panera (Cosi: 26.8%, Panera: 30.8%),

Cosi’s restaurant operating expenses are much higher than those of Panera (Cosi: 64.3%, Panera:

49.8%). This means that Cosi’s lower gross margin is due to higher restaurant operating

expenses. Also, operating expenses might be higher than those of Panera because the fact that

they make their bread fresh from dough every employee shifts. We considered that the factor of

higher expenses is higher rents (because of the strategy focusing on downtown areas) and the

inefficiencies in handling the operation due to lower sales and less experienced employees.

Besides these factors, the fact that Cosi does not have franchise contributes to the difference with

the industry average gross margin, which was mentioned in the industrial analysis section.

http://www.waseda.jp/mnc/RESEARCH/mnc_comm/papers/oshika/Top.html

SWOT ANALYSIS:

Strengths

- Healthy food selection

- WiFi internet technology

- Fresh bread for sandwiches

Weaknesses

- Not very marketed

- Surrounding business with

established business

- Surrounding bars with food

for cheaper

- Difficult parking for access

Opportunities

- Catering options for

surrounding areas

- Franchise options

- New restaurant for

upcoming renovated Normal

Threats

- Ongoing construction

throughout Uptown Normal

- High expenses for perishable

goods

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Strengths: Cosi’s main strengths include: their healthy food selection in comparison to others,

the WiFi internet technology offered in the restaurant, and the fresh bread baked every day for

their sandwiches. The healthy food of Cosi targets the younger generations who seek a healthier

life than years past. In addition the WiFi Internet technology gives students and faculty members

of ISU to have the freedom dine at Cosi during lunch breaks and study sessions with other

students. Finally, the last strength is the fresh bread that Cosi bakes on a daily basis. Cosi bakes

fresh dough during every shift ensuring fresh baked bread for every sandwich ordered.

Weaknesses: Cosi encounters weaknesses that every new venture has when establishing a name

in the restaurant industry. One of the primary weaknesses is the fact that Cosi is not very

marketed throughout the industry in the Bloomington-Normal area. Another weakness that

correlates directly with the marketing of Cosi is the competitors marketing abilities and schemes

that they offer to the community that Cosi does not. One of the competitors strengths is the

pricing tactics of the bar foods around the Uptown Normal area (IE $2 Burger Baskets at Brew-

Ha’s. Parking, just for any other businesses in Uptown Normal is an issue. However, it lurks

more of an issue for Cosi since it is located on the corner of College and Linden.

Opportunities: Opportunities could be endless for newer companies. With catering as one of

their primary services, Cosi makes dining healthy an at home or at the office experience as well.

With the franchise options for Cosi, it makes it easier to operate with financial support from the

Cosi as a company. With the renovating of Uptown Normal, Cosi makes its mark as one of the

firsts to facilitate the newer generation look in a predominantly outdated area in Uptown Normal.

Threats: A major threat in the restaurant industry and for Cosi is the fact that Cosi emphasizes

so much on the freshness of the doughy bread they cook. However, if Cosi overemphasizes the

fresh bread and does not fill the customer need to consume the bread cooked each day, it costs

more than it would for normal restaurants that freeze their bread. Another threat for Cosi is the

fact that Uptown Normal is in the construction phase. Even though it will be an attractive site in

the future, community members may find it a hassle to travel to Cosi as a destination. This

makes Cosi depend more on foot traffic than any other type of customer traffic.

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Main Competitors: Companies that operate in Bloomington/Normal

• Noodles and Company

• Potbelly Sandwich Works

• Qdoba Mexican Grill

• Jimmy John’s

• Panera

• Quizno’s Subs

Core Competencies:

Product- Cosi provides fresh, innovative sandwiches. They also provide salads, pizzas, and

there famous authentic crackly crust bread. This bread is baked throughout the day, so it is

always fresh for the customer.

Service- Cosi provides high quality service system which goes the extra mile and compares with

a sit down restaurant. This is a significant advantage over fast food establishments.

WI-FI Internet- Cosi provides an upscale urbane atmosphere that offers WI-FI internet, this is

great for students or businessmen looking for a quiet place to work.

Affordable Upscale Food- Prices are relatively low for the quality of food. Cheaper than most sit

down restaurants in Bloomington/Normal.

Catering- Provides most of the catering for ISU events, while providing catering to other

companies as well.

Healthy Food- Cosi offers fresh ingredients and bread that is cooked continuously. This is

important advantage in an increasingly health conscious world.

Alcohol- Cosi offers alcoholic beverages for people looking for a drink to go along with their

dinner.

Distinctive Competencies:

Environment- Cosi’s environment is not duplicated among its main competitors. Its upscale

urbane interior provides a relaxing setting. While it’s large dining area is broken down into

many alcoves that provide a quite place to study. There is an outdoor eating area that is still

covered from weather threats such as rain and wind.

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Fresh Bread- Unlike Panera which orders their bread and receives it frozen, Cosi provides bread

that is cook in a fire oven continuously throughout the day. Cosi prides itself with their unique

bread taste and way of cooking it.

Cosi’s Main Marketing Opportunities:

Best prospects for profitable long-term growth

• Expand the catering services of Cosi.

• Offer not only catering for large events but also for individual family meals.

• Cater more toward affluent suburbanites (24,810 households with at least $50,000

income)

• Provide cheaper meals for students who are already on a tight budget.

Potential for competitive advantage

• A more concentrated approach on its core and distinctive competencies which are healthy

meals with fresh ingredients and freshly baked bread.

• This means more advertising for lunch menu rather than breakfast

• Need to push the sandwich aspect and that it is a better alternative to Panera.

• “According to the NPDFoodworldtotal sales in the restaurant industry for 2002 estimated

at $408 billion. This segment is expected to grow in the range of 8-14% in the next ten

years. Factors contributing to this growth are largely attributed to longer working hours,

an increase in dual income families, the tendency of baby boomers to eat out more

frequently and a larger time premium on the part of consumers for convenient dining”

Cosi must target busy workers on their way home from work. This may mean either a

relaxing environment to sit and wind down in or a place that makes a meal quick and

ready to go.

http://www.waseda.jp/mnc/RESEARCH/mnc_comm/papers/oshika/Top.html

• “In addition, the restaurant industry has experienced a shift in consumer tastes geared

towards newer, fresher, higher quality products and driven largely by a health conscious

society in which Cosi finds itself well positioned.” Cosi must continue to think of

innovative ways of making meals healthy, otherwise other restaurants will copy this trend

and therefore eliminate one of Cosi’s core competencies.

http://www.waseda.jp/mnc/RESEARCH/mnc_comm/papers/oshika/Top.html

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Identifying External Threats:

Emergence of cheaper/better technologies

• Most of the surrounding competition in Downtown Normal tends to be cheaper than Cosi.

Although they do not match its atmosphere and technology which offers Wi-Fi internet.

Introduction of better products by rivals

• Currently Downtown Normal is expanding and other mimic restaurants may be opening

soon. (Sandwich Bakery)

• Other alternative restaurants are opening such as Harold’s Chicken.

• Jimmy Johns may make new and better breads than Cosi’s.

Intensifying competitive pressures

• The growing area will only provide more competition for Cosi.

• Bloomington/Normal already has an abundant restaurant population (89 in Normal alone)

http://www.census.gov/econ/census02/data/il/53234.HTM

• Competing companies such as Panera and Jimmy Johns will only continue to innovate.

• These competitive pressures will keep Cosi on its toes and ready to innovate for the

future.

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Sales Growth: Cosi’s average sales of the restaurant are smaller than Panera. This is mainly due to the size of the restaurant. While Panera’s size ranges from 3,500 to 5,000 square feet, Cosi’s ranges from 1,800 to 4,000 square feet.

Cost of Sales: Cosi’s lower gross margin is due to higher restaurant operating expenses. In this particular research they felt that the higher operating expenses were because of higher rent costs for Cosi. This tends to be a problem for Cosi since their strategy focuses on downtown areas.

General and Administrative Cost Comparison: According to this research Cosi’s general and administrative expenses (26.2% in 2001) are much higher than Panera (9.7% in 2001) because they have built the corporate team that matches the future growth. Therefore, at the current sales level, the general and administrative expenses exceeded the comparable company level.

Asset Management: Cosi’s net working capital is negative and net trading cycle is -52.4 days, compared to -5.1 days of Panera. Cosi is better than Panera in terms of asset management.

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All data and statistics found at:

http://www.waseda.jp/mnc/RESEARCH/mnc_comm/papers/oshika/Top.html

Strength of Company’s Competitive Position:

The part of the food industry that Cosi and its rivals are competing in has about a 2%

share right now, which will continue to grow with new trends toward health across our country.

This new market niche is expected to grow between 8 to 14% over the next 10 years. With this

said, Cosi stands to develop at a respectable rate. Cosi’s present strategy involves offering 5

meals for each day which is unique and benefits a wide variety of lifestyles within one niche of

the market. Their strategy includes breakfast, lunch, afternoon coffee, dinner and desert. This

process caters to the new lifestyle developing across our country which entails on the go, fast

paced, and healthy. Since Cosi has already put itself on the map throughout the country using

these concepts, they can continue to improve by using the same strategy because it is so unique

and caters to a trend developing rapidly.

http://findarticles.com/p/articles/mi_m3190/is_9_37/ai_98544332

Key Success Factors: Competitors and Cosi:

After researching and reviewing Cosi, its competitors, and the key success factors within

the industry, several conclusions were made about Cosi’s competitive strength. The key success

factors used in this research were customer service, cleanliness, quality as well as health of food,

environment, and convenient location and access. Cosi’s competitors within this niche include

California Pizza Kitchen, Krispy Kreme, Starbucks, and Panera Bread. After rating each

business on each key success factors Cosi finds itself near the top of the competition in almost

every level.

Key Success Factors:

Cosi struggles to be at the very top right now since they are still not well known like the

big time chains such as Panera Bread and Starbucks. After looking at research on Cosi, their

unique environment and “fresh” idea of bread preparation gives them a few competitive

advantages within this niche that need to be exploited. The youth and different geographic

placements of Cosi across the Midwest and West Coast will allow Cosi to prosper and develop

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into a new and exciting eating experience in the near future. A few things Cosi does need to be

concerned with include consumer preferences that go through constant change throughout

industries. Although it does look like a new healthy, fit, fast lifestyle is taking over, this could

change at anytime directly affecting Cosi’s ability to stay competitive in the short term.

Discretionary income is also a very big part of Cosi’s market and therefore a change in consumer

trends could have an adverse affect on Cosi’s sales as well as further penetration in the market

segment. Location and weather can also have an adverse affect due to inclement temperatures

driving people away from Cosi’s outdoor eating area. If Cosi is trying to develop their

environment as a competitive advantage, then they must factor this into their strategic planning.

The last risk issue is the possibility of a recession. All industries would be greatly be affected by

this and therefore causing consumer sales to plummet and force many undeveloped businesses to

close.

http://www.qsrmagazine.com/articles/news/bychain.phtml?id=1364

Strengths within the Industry:

Cosi has both strengths and weaknesses within the industry. They have healthy food

which not only adults are leaning toward but also trying to push children into. Customer service

is a key element in the success of small businesses as well as any organization and Cosi must

continue to put customers first in order to succeed. The trend of today’s fast paced lifestyle is

very relevant to Cosi’s menu strategy, which is offering of breakfast, lunch, afternoon coffee,

dinner, and desert. The focus on the menu being fresh attracts people who are focused on a

healthy lifestyle. By seeing someone make it fresh to order, it gives the customer a sense of

feeling healthy and enjoying what they eat instead of wondering about the contents later.

Weaknesses within the Industry:

A few drawbacks to consider would include price, establishment, and ability to penetrate

the market. Although people want to be healthy, price can sometimes be the deciding factor in

someone’s decision on food. This could affect Cosi’s ability in certain areas where health is not

as important as price. Establishing a name in towns where larger franchises already exist is very

difficult and needs to be considered when strategizing against them. Starbucks and Panera have

a following that is more than likely unwilling to leave and therefore each customer that comes

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into contact with Cosi must be treated with utmost care. They must also provide high quality in

their order to assure no fallbacks. Finally, because of the size of this market niche, it is very

important to slide into the market quickly and significantly without being pushed out by

competitors. The niche only has so many consumers who are willing to spend their money on

Cosi and without a grasping the majority of them quickly, it will be hard to compete in the long

run.

http://www.angel.com/docs/cosi.pdf

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STRATEGIC MARKETING ANALYSIS (Based on-campus survey results)

What do you look for in a restaurant?

Analysis of Results:

The top two results in this particular on-campus survey question were; high quality and

variety of food. Fortunately, Cosi offers both high quality food and a wide variety for the menu.

Our initial thought of this particular question was that these two answers would be the least of

the concerns of students throughout Illinois State University. When formatting this question we

wanted to show Cosi that low cost is one of the most important traits in a restaurant located

within walking distance of the Illinois State University campus. After looking at the data, low

Cost was coupled with customer service as the least important facets when dining at a restaurant

Therefore, Cosi seems to be on the right page with their core competencies which are directly

correlated with the desires of the on-campus population.

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On a scale of 1 to 10 how does the construction being done around Uptown Normal impact your dining choices?

Analysis of Results:

The renovation going on in Uptown Normal, along with the construction being done

plays a smaller role that we initially anticipated. With this on-campus survey question we asked

the students to rate on a scale from 1-10 (1 being no effect and 10 being major effect) what effect

construction had on their desires to dine in Uptown Normal. The results concluded that over

68% of surveyed participants answered that the affect of the Uptown Normal construction was

medium at most. We determined this because over 68% marked that the effect was 5 or lower on

our on-campus survey. Originally, we projected that the main reason why Cosi was not chosen

as a place to dine as regularly as desired by the franchise was because of the Uptown Normal

construction taken place. However, only 8 of 90 survey participants answered that the

construction being done had a impact of 8 or higher, proving most student aren’t concerned

about with it.

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MARKETING PLAN Company Analysis and Goals:

Cosi’s goals focus on building restaurants that cater to breakfast, lunch, afternoon coffee,

dinner, and desert. These restaurants are located throughout the United States and focus on

urban areas. In order to achieve their dining goals the company is focusing its resources in

several key areas. First, Cosi needs to build on its core competencies by focusing on its signature

bread, atmosphere, and fresh ingredients. Cosi appears to have developed substantial brand

loyalty in its customer base by becoming fairly well known for their unique bread. To ensure

freshness, all bread products are produced on the premises to better ensure that Cosi can maintain

food quality as one of its competitive advantages. The company needs to continue to strengthen

and further develop this brand loyalty by continuing to offer menu items based on fresh

ingredients and great bread. Of course expansion growth is a key factor in ensuring brand

recognition which will lead to future growth for Cosi. In addition, the company must introduce

new menu items in order to increase sales. These new menu items should continue to stress

freshness and quality in order to meet with society’s emphasis on healthy foods.

Customer Analysis:

Cosi also offers a cozy interior atmosphere that attracts people looking for a relaxing

place to sit down. It also attracts potential customers looking for a place to use their lap top

through the free Wi-Fi. This gives them an excellent opportunity to attract business men or

women coming home from work. Cosi selects sites based on strong foot traffic and visibility.

This is why many of the current Cosi’s tend to be in urban areas. The one here in Normal is an

excellent spot for foot traffic; unfortunately right now it is suffering from the downtown

construction. While the construction may hurt the company now the future growth and expanded

parking of Uptown Normal should benefit the company. Cosi also adds versatility to the

restaurant environments through music, lighting, and setting up inviting alcoves to sit in.

Company Risks:

The restaurant industry is severely competitive especially in Bloomington Normal. The

area has already seen numerous restaurants shut down and many of them have been well

established such as Bandanas. As Cosi competes and expands into other markets, there are

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significant challenges that the company will need to overcome. First, expansion can usually

cause a shortage of labor as well as an increase in labor costs, and according to research from the

external analysis Cosi cannot afford to increase anymore staffing costs. In addition, if the

company decides to expand into other markets, Cosi will face competition from other

competitors all of which may have a presence in one of Cosi’s main competencies. Market

saturation as well as cannibalization of existing restaurants may also occur. Cosi will also need

to take adequate steps to continue to protect its intellectual property (unique bread) as well as

employees from possible competitors.

Industry Risks:

There are also a number of risks that are out of Cosi’s control. First, there may be a

change in consumer preferences and demographic trends which could adversely affect Cosi’s

sales. One of the main risks for Cosi and any other retail store is the possibility of a recession.

This would decrease consumer spending which would ultimately hurt the food industry. In

addition, inflation could also result in increased labor and food costs. Finally, adverse weather

conditions, such as severe winters may also impact customer traffic, especially if Bloomington-

Normal sees a winter like last year.

Competitor Analysis:

Cosi’s marketing position is a new, innovative feel to dine healthy. The name “Cosi”

speaks for itself. With the symbolism of the name meaning comfy, friendly, and cozy, Cosi

offers a laid back sandwich shop/ coffee house with an innovative look and feel to the dining

experience. With the wireless internet incorporated throughout the restaurant, Cosi provides

optimal arrangements for the business world to take a short break from their busy days and come

in and enjoy a real lunch break without the threat of falling behind. In doing this, Cosi’s

customers will be provided the healthy options they need for diverse, yet still satisfying meal.

The ideal taste of fresh baked artisan bread that Cosi bakes hourly will make customers think

twice about having sandwiches on traditional bread.

Cosi’s main strengths in the restaurant industry, is the variety of healthy foods that Cosi

offers, the Wi-Fi internet technology embedded in each restaurant location, and the freshly baked

artisan bread that Cosi is known for. Cosi’s menu articulates influences from the Mediterranean

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giving customers a unique and diverse look at healthy choices without sacrificing the taste of a

superior meal. In addition to the healthy food, Cosi offers the wireless internet throughout the

restaurant by incorporating Wi-Fi in many locations. Wi-Fi is a great benefit for the working

class and the student population, which enables them to stay on top of what they need to

accomplish. Finally, the artisan bread is one of the main competitive advantages since it is not

cooked, but baked fresh during every employee shift during each day.

Cosi’s weaknesses include: the lack of marketing throughout the Bloomington-Normal

area along with nationwide marketing, the already established bars surrounding Cosi in Uptown

Normal, and difficult parking locations for the non foot traffic customer base. Marketing must

be accomplished in order to recruit the primary target market for Cosi. Ideal marketing schemes

would include, guerilla marketing, pamphlets, promotions, and flyers around the Bloomington-

Normal area for regional marketing. Established surrounding businesses pose the biggest threat

to Cosi because they established themselves as quality restaurants in the area.

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RECOMMENDATIONS Decision Making Criteria for Selecting Alternatives: Based on the situation facing the client, we created a list of recommendations we felt

were necessary for the growth of Cosi. There were several different criteria used to select these

we believed the following ideas had the strongest evidence to help support the growth of the Cosi

franchise. The alternatives are feasible and effective in nature in order to fully benefit the

company at hand. The alternatives selected also have easy methods of implementation and are in

line with the goals, ideas, and vision of the company.

Recommendations and Implementation Processes: (in order of importance)

Local Advertising: Cosi needs to stick to local advertising and use attractive ways to spread the

word about their restaurant and what they do. Cosi’s unique atmosphere is something that needs

to be exploited within the food industry. If Cosi is able to advertise their environment within the

store, customers will know Cosi is more than just a fast food restaurant but instead a place that is

comfortable and relaxing making it a great place to unwind your day. Customers that remember

the environment along with their fresh healthy food are much more likely to come back versus a

customer remembering a bad experience. When advertising their unique atmosphere, they need

to mention that they offer Wi-Fi throughout the restaurant. This coupled with the unique

environment will definitely bring customers in to experience Cosi not only for their food, but

also for a place to relax and study. Another aspect for local advertising is being affiliated with

different promotions or events throughout the community. One option that could be addressed is

the off-campus meal plan which is offered to students as well as commuting faculty. The off-

campus meal plan is an alternative to unhealthy fast food options. The plan includes a variety of

places throughout ISU campus that have healthy, affordable food options. By associating itself

with ISU, a healthy choice of eating, and having a presence in the Normal community, Cosi will

be portrayed as a good option to eat as well as a place involved within the new Uptown Normal

area. Other ways Cosi can advertise in through mass guerilla marketing and promotional ads in

area newspapers. These are cost effective and great ways to get people into the franchise for the

first time.

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Emphasize fresh bread versus competitors’ alternative of frozen bread: Cosi has a main

distinctive competency in fresh, daily cooked bread. This is something that needs to be exploited

to the fullest in order to separate itself from competitors. Panera Bread Company cooks frozen

bread and therefore this could be used as a great way to prove to customers that Cosi is a better

sandwich alternative. Cosi needs to continue to exploit and establish its fresh and healthy menu

to draw in customers. By focusing on this core competency, Cosi will be able to single itself out

from their competitors who may not offer this unique trait. These stated company competencies

need to be implemented throughout their local advertising strategy. By using their competitors

name and establishing a competitive advantage, Cosi will be able to thrive on this new restaurant

niche toward fresh, minimally processed foods.

Expand catering options throughout Bloomington-Normal area: Cosi needs to expand its

catering offerings throughout Bloomington-Normal in order to get the word out about its

excellent food as well as unique food options. Bloomington-Normal, which is home to two large

universities, holds many events and parties for different occasions and usually results in a catered

event. If Cosi is able to penetrate this segment of the market which does catering, they will have

another aspect of their business in which they can market through local advertising. If they are

able to cater a few events, then those establishments may continue to contact Cosi if they need

their service.

Emphasis on breakfast options: After speaking with Joe Motamedy, we learned that money was

being lost during breakfast hours. In order to become a more complete restaurant offering food

throughout the day, Cosi will need to get the word out about their breakfast offerings. Their

breakfast menu has been successful in urban areas, but seems to fail in rural areas such as

Normal. Therefore Cosi needs to think of creative and innovative ideas to attract customers to

their breakfast offerings. This includes offering coupons in local newspapers, frequent customer

coffee cards, and other promotional ideas.

Continue to expand lunch offerings: Cosi in Uptown Normal is currently very successful at

selling their lunch items. Even though they are successful they should continue to think of

creative ways of promoting their sandwiches, such as emphasis on their freshly cooked bread

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compared to Paneras frozen bread. It is very important that customer believe they offer a better

sandwich alternative than the surrounding restaurants do. By sticking to their lunch offerings,

Cosi will be able to push intense pressure on surrounding sandwich offering restaurants. Lunch

and dinner (ideally lunch) are the areas in which Cosi will profit the most, and therefore they

need continue to focus on lunch offerings while creating new innovative ways to sell breakfast.

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Time Log Group 2 Cosi For Month of September 9/5/07 Group Member #1 called Francisco Petinga to discuss meeting time to lay out outline of project and what he is looking to accomplish. Group Member #2 and #3 went developed questions to bring to meeting for opinion and answers from Francisco. Client Time=10 Minutes Prep Time 3*20=60 Minutes 9/11/07 All group members met to discuss questions and collaborate on discussion to be held at meeting with client. Work was also split up among group members for outlines discussed in class. Prep Time 3*20=60 Minutes 9/12/07 Group Member #1 was forwarded to a new client within the business who is now consulting for Cosi. Joe Motamedy and Group Member #1 discussed a new meeting time and briefly discussed what our goal was over the phone. Group Members #2 and #3 were immediately notified by #1 and scheduled a meeting time to go over the situation. All members met and discussed our plan of attack knowing about our new client. Client Time=15 minutes Prep Time 3*25=75 minutes 9/19/07 All group members and SBC Director met with Joe Motamedy to discuss project and expectations. Group Members #2 and #3 asked pre- developed questions about Cosi and our client with respect to the food industry in Normal, Illinois. Information was exchanged along with requests as a guide. Client Time=50 minutes Prep Time 2*50=100 minutes 9/20/07 All group members developed our Proposal Letter for approval from the SBDC. We also scheduled a good meeting time before we meet with our client to discuss our presentation of the proposal letter. Prep Time 3*60=180 minutes 9/26/07 Group Member #1 called Joe Motamedy to schedule a meeting time to go over proposal letter and further discuss our research for Cosi. Group members met later that day to discuss new material. Client Time=15 minutes Prep Time 1*30=30 minutes

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9/30/07 All group members met to review external analysis and split up work for internal analysis to be completed before or shortly after meeting with our client. Prep Time = 40 minutes TOTALS: Client Time=90 Minutes Prep Time=505 Minutes

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Time Log Group 2 Cosi For Month of October 10/4/2007 All group members met and analyzed Cosi’s competition, and defined our competitive position. We also worked on creating surveys and editing our external and internal analysis. Prep time 3*60minutes=180minutes 10/7/2007 All group members met at Milner Library and created an initial draft of the survey questions. Prep time 3*30minutes=90minutes 10/11/2007 All group members met with Mr. Motamedy to discuss the progress of the external and internal analysis Client time=20minutes All group member completed draft of surveys, finished the editing of our external analysis while almost completing the internal editing. Prep time 3*60minutes=180minutes 10/14/2007 Group Members Kyle and Scott met and completed internal analysis editing. Prep time 2*40=80minutes 10/16/2007 All group members completed and turned in surveys to SBC department, they were later handed back for a revise which we worked on and completed that night. Prep time 3*30=90minutes 10/17/2007 All group members turned in revised survey questions which were later handed back again, we then met with our professor Mark to address the issue. After addressing the issue we worked on revises the questions again and set up a meeting with Elizabeth. Prep time 3*90=270minutes 10/19/2007 Group members Scott and Derek met with Elizabeth and discussed the surveys. Prep time 2*20minutes=40minutes

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10/21/2007 All group members met and discussed strategies for the final piece of our project the marketing plan. Prep time 3*60minutes=180minutes 10/23/2007 All group members met and broke the marketing plan down into parts in which they would complete. Prep time 3*20minutes=60minutes 10/25/2007 All group members met and started to put together their pieces of the marketing plan. On campus surveys were also completed and numbers from the results were put into excel to create charts. Prep time 3*80minutes=240minutes 10/28/2007 Group members Kyle and Derek began to put together a PowerPoint for Tuesday’s classroom presentation. Prep time 2*60minutes=120minutes 10/29/2007 All group members met in Milner and finished the PowerPoint presentation slides. Prep time 3*90minutes=270minutes 10/30/2007 All group members practiced their speech for the presentation to be given to the class later that day. Prep time 3*120minutes=360minutes TOTALS Client time=20minutes Prep time=2160minutes

COSI Inc. On Campus Survey

1. Have you heard of Cosi? If so how did you hear about Cosi?

2. How many days a week do you eat breakfast? Check appropriate boxes

[ ] Never [ ] 1-2 times [ ] 3-4 times [ ] 5-7 times

3. How many times a week do you go out to eat? Check appropriate boxes [ ] Never [ ] 1-4 times [ ] 5-8 times [ ] 9+ times

4. Approximately how much are you willing to spend per meal? Fill in price ranges

Breakfast________ Lunch________ Dinner________ 5. What do you look for in a restaurant?

[ ] Variety of food [ ] Low cost [ ] High Quality [ ] Customer Service [ ] Other

6. Have you experienced any catering services while attending Illinois State University? [ ] Yes [ ] No If yes, who provided the catering?

7. On a scale of 1 to 10 how does the construction being done around Uptown Normal impact your dining choices?

No effect 1 2 3 4 5 6 7 8 9 10 Significant effect

8. What age group do you fall into?  Check appropriate box 

[ ] 18-22 [ ] 23-30 [ ] 31-40 [ ] 41-50 [ ] 51+

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COSI Inc. In Store Survey

1. How did you hear of Cosi?

2. What makes you choose this restaurant rather than surrounding restaurants?

3. What times do you come into Cosi? Check appropriate boxes [ ] Before 8am [ ] 8am-11am [ ] 12pm-3pm [ ] 4pm-6pm [ ] 7pm-10pm

4. Have you consumed an alcoholic beverage while dining at Cosi?

[ ] Yes [ ] No

5. What transportation method do you use when dining at Cosi? Check appropriate boxes

[ ] Car [ ] Walk [ ] Bus [ ] Other

6. If you chose car, where do you park when you dine at Cosi?

7. On a scale of 1 to 10 how does the construction being done around Uptown Normal affect your choice to dine at Cosi?

No effect 1 2 3 4 5 6 7 8 9 10 Will not dine

8. What age group do you fall into? Check appropriate box

[ ] 18-22 [ ] 23-30 [ ] 31-40 [ ] 41-50 [ ] 51+