A well-known coffee brand has filed for bankruptcy.
Turns out, it’s Compass Coffee.
The 25-unit chain in the DMW market submitted its application on Tuesday, all because the pandemic has left a lasting, “tremendous” impact.
Plans were drawn up for the company to sell itself to a “strategic buyer with a substantial global presence in the retail coffee business.”
QSR said when it plans to submit an asset purchase agreement, it will designate the buyer as a “potential bidder,” meaning the buyer sets a baseline that other bidders must exceed.
Compass will refuse to lease 10 non-profit-producing sites, including its former headquarters and roastery, as part of the bankruptcy.
The entire brand has branches located in Washington, D.C., southern Maryland and Virginia.
The company currently owes $11.7 million and is being sued by multiple landlords and vendors for overdue rent or other payments.
Helping Compass is one of its investors, National Investment Group, which has committed up to $450,000 in debtor-in-possession financing to help Compass fund bankruptcy restructuring costs and power throughout the sale.
But the funding cannot be finalized until a judge approves it.
CEO and co-founder Michael Haft admitted in a LinkedIn post that the whole ordeal “has been a tough chapter.”
“The decision we made reflects the reality of this moment in Washington and is about ensuring that Compass can continue to provide the city with the same truly great coffee and sense of community that has defined us from the beginning.”
Haft noted in court documents that the brand had “lost significant revenue” during the pandemic due to forced layoffs.
Compass is trying to offset the revenue loss by growing its in-house roasting and distribution operations.
But with fewer government employees and an increase in remote work in the region, things are not back to where they were before the pandemic.
While some locations remain profitable, others are either “marginal” or unprofitable. In order to cut costs, Compass exited the coffee distribution business and focused on its main business of cafes.
“Downtown is busy, with people gathering in offices and cafes every day, and Compass has grown with the city,” Haft said in his LinkedIn post.
“This has been a lasting change of pace since 2020. Foot traffic in the city center has not returned, work patterns are different, and the economics of running an urban cafe look completely different than even a few years ago. Like many local restaurants and cafes, we have reached a point where we must be honest about reality,” the post reads.
Read the original article at pennlive.com.