(Source: MARKET WIRE)Cosi, Inc. (NASDAQ: COSI), the premium convenience restaurant company, today reported a net loss for the fourth quarter ended December 29, 2008 of $(8,370,000), or $(0.21) per basic and diluted common share, compared with the 2007 fourth quarter, when Cosi's net loss was $(6,175,000), or $(0.16) per basic and diluted common share. Cosi reduced its operating loss in the fourth quarter compared with the year-earlier period by 33%, to $(2,086,000) from $(3,123,000), excluding impairment provisions, closed store costs and lease termination costs. Cosi recorded charges of $(6,300,000) and $(2,667,000) in the 2008 and 2007 fourth quarters, respectively, related to asset impairment provisions, closed store costs and lease termination costs.

Cosi's total revenues for the 2008 fourth quarter decreased 7.3% to $30,735,000 from $33,150,000 in the 2007 fourth quarter.

For the 2008 fiscal year ended December 29, 2008, Cosi reported a net loss of $(16,222,000), or $(0.40) per basic and diluted common share, and an operating loss of $(16,046,000). Cosi's 2008 operating loss included $(7,719,000) or $(0.19) per basic and diluted common share in losses from impairment provisions, closed store costs and lease termination costs.

In the 2007 fiscal year ended December 31, 2007, Cosi reported a net loss of $(20,783,000), or $(0.53) per basic and diluted common share, and an operating loss of $(17,717,000). Cosi's 2007 operating loss included $(4,431,000) or $(0.11) in basic and diluted common share in losses from impairment provisions, closed store costs and lease termination costs, partially offset by one-time gains.

Cosi's revenues for the 2008 full year grew 0.8% to $135,579,000 from $134,556,000 in the prior year. Cosi reported that 20 new restaurants were opened in 2008, 19 of which were franchise locations.

James Hyatt, Cosi's President and Chief Executive Officer, said, "While the current stress on the economy, the financial system and the consumer has created a very difficult environment for the restaurant industry, our team remains intensely focused on driving sales and operating margin improvement, and working very closely with our franchise partners for our mutual benefit and the long-term benefit of our shareholders."

2008 Fourth Quarter and Full Year Financial Performance and Restaurant Economics

Contributing to Cosi's aforementioned 7.3% decrease in fourth quarter revenues as compared to the 2007 fourth quarter revenues was the decline of the Company's restaurant net sales to $29,860,000 from $32,456,000 in the prior year quarter due primarily to 6.2% decrease in comparable restaurant net sales as well as the impact of seven locations closed since the fourth quarter of 2007. Franchise fees and royalties grew to $875,000 in the fourth quarter from $694,000 in the 2007 fourth quarter. During the fourth quarter, Cosi added nine new franchise locations and closed two franchise locations.

Cosi stated that it was able to offset higher restaurant-level costs by successfully exhibiting disciplined corporate expense control. For the fourth quarter, Cosi reported a 220 basis point increase in costs and expenses related to Company-owned restaurant operations as a percentage of restaurant net sales compared with the fourth quarter 2007. The increase resulted from a 240 basis point increase in occupancy and other restaurant operating expenses due primarily to the deleveraging impact of the decrease in comparable restaurant net sales on fixed occupancy costs as well higher costs for utilities during the period. Labor and related benefits costs increased 100 basis points over the 2007 fourth quarter and were offset by a 120 basis point decline in the cost of food and beverage.

During the same period, the Company improved by 380 basis points its general and administrative expenses as a percentage of total revenues, to $3,434,000 or 11.2% from $4,979,000 or 15.0% in the fourth quarter 2007.

For the full year, Cosi saw restaurant net sales increase to $132,501,000 in 2008, up from $132,414,000 in 2007. Franchise fees and royalties grew 43.7% on the year, to $3,078,000 for 2008 from $2,142,000 a year earlier.

Costs and expenses of Company-owned restaurant operations as a percentage of restaurant net sales for 2008 were comparable with the previous year. Labor and related benefits as a percentage of restaurant net sales decreased by 50 basis points compared to the previous year reflecting the improvement in labor costs resulting from better deployment of partners during peak and non-peak hours of operations. Cosi also reported a 60 basis point decrease in food and beverage cost due primarily to menu price increases taken during the 2008 second quarter. The decreases in labor and food and beverage costs were offset by a 110 basis point increase in occupancy and other restaurant operating expenses as a percentage of restaurant net sales.

Cosi demonstrated continued corporate expense control over the course of the year, as general and administrative expense decreased 240 basis points as a percentage of restaurant net sales to 14.7%, compared with 17.1% in 2007. Included in general and administrative expense for 2008 were one-time litigation costs and severance related to workforce reductions of approximately $2,400,000.

Cosi reported that as of December 29, 2008 it had cash, cash equivalents, and short-term investments of $5,589,000 and virtually no debt other than lease obligations.

Development Performance

Cosi finished the year with a total of 151 locations consisting of 101 Company-owned locations and 50 franchised locations. It opened one Company-owned location and 19 franchised locations during 2007. Seven Company-owned and three franchise locations were closed during the year.

Subsequent to the 2008 fiscal year end, one additional franchise location opened while three Company-owned and three franchise locations were closed.

Investor Teleconference

Given the ongoing efforts of the special committee of independent directors to review and evaluate strategic alternatives, as previously announced, as well as the uncertainty of the macroeconomic environment and its impact on the general business climate, Cosi is temporarily suspending its quarterly investor calls. Management will continue to focus all of its efforts on creating shareholder value through revenue growth and improvements in operating margin while also supporting the continued growth of our franchise system.

About Cosi, Inc.

Cosi (http://www.getcosi.com) is a national premium convenience restaurant chain that has developed featured foods built around a secret, generations-old recipe for crackly crust flatbread. This artisan bread is freshly baked in front of customers throughout the day in open flame stone hearth ovens prominently located in each of the restaurants. Cosi's warm and urbane atmosphere is geared towards its sophisticated, upscale, urban and suburban guests. There are currently 98 Company-owned and 48 franchise restaurants operating in eighteen states, the District of Columbia and the United Arab Emirates. The Cosi vision is to become America's favorite premium convenience restaurant by providing customers authentic, innovative, savory food while remaining an affordable luxury.

The Cosi menu features Cosi sandwiches, freshly tossed salads, melts, soups, Cosi bagels, flatbread pizzas, S'mores, snacks and other desserts, and a wide range of coffee and coffee-based drinks and other specialty beverages. Cosi restaurants are designed to be welcoming and comfortable with an eclectic environment.