1171014--3/16/2006--COSI

related topics

{acquisition, growth, future}

{competitive, industry, competition}

{financial, litigation, operation}

{stock, price, operating}

{cost, contract, operation}

{condition, economic, financial}

{personnel, key, retain}

{operation, natural, condition}

{system, service, information}

{property, intellectual, protect}

{control, financial, internal}

{cost, regulation, environmental}

{investment, property, distribution}

We must identify and obtain a sufficient number of suitable new restaurant sites for us to sustain our revenue growth rate. Our expansion in existing markets can cause sales in some of our existing restaurants to decline, which could result in restaurant closures. Our expansion into new markets may present increased risks due to our unfamiliarity with the area. The restaurants we open in new geographic regions may not achieve market acceptance. We may not be able to successfully incorporate a franchising and area developer model into our strategy. If our franchisees cannot develop or finance new restaurants, build them on suitable sites or open them on schedule, our growth and success may be impeded. Additional foodservice strategic alliances may not be successful and may materially adversely affect our business and results of operations. Any inability to manage our growth effectively could materially adversely affect our operating results. If we are unable to successfully integrate future acquisitions, our business could be negatively impacted. Any acquisitions may also be costly. Risks Related to Our Business If we are unable to execute our business strategy, we could be materially adversely affected. We have a limited operating history and we may be unable to achieve profitability. If internally generated cash flow from our restaurants does not meet our expectations, our business, results of operations and financial condition could be materially adversely affected. We may need additional capital in the future and it may not be available on acceptable terms. Our franchisees could take actions that could harm our business. We could face liability from our franchisees. Our financial results are affected by the financial results of our franchisees. Our restaurants are currently concentrated in the Northeastern and Mid-Atlantic regions of the United States, particularly in the New York City area. Accordingly, we are highly vulnerable to negative occurrences in these regions. You should not rely on past increases in our average unit volumes as an indication of our future results of operations because they may fluctuate significantly. Seasonality, inclement weather and other variable factors may adversely affect our sales and results of operations and could cause our quarterly results to fluctuate and fall below expectations of securities analysts and investors, resulting in a decline in our stock price. Our operations depend on governmental licenses and we may face liability under dram shop statutes. Our failure or inability to enforce our trademarks or other proprietary rights could adversely affect our competitive position or the value of our brand. We hold significant amounts of illiquid assets and may have to dispose of them on unfavorable terms. We may face litigation that could have a material adverse effect on our business, financial condition and results of operations. We have a new management team that does not have proven success with the Company. If we are unable to protect our customers credit card data, we could be exposed to data loss, litigation and liability, and our reputation could be significantly harmed. Risks Relating to the Food Service Industry Our business is affected by changes in consumer preferences. General economic conditions and the effects of the war on terrorism may cause a decline in discretionary consumer spending, which would negatively affect our business. Our success depends on our ability to compete with many food service businesses. Fluctuations in coffee prices could adversely affect our operating results. Changes in food and supply costs could adversely affect our results of operations.

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1171014--3/16/2006--COSI_INC