Embattled Compass Coffee Files For Bankruptcy – CoffeeTalk

Compass Coffee, founded by Marine veterans Michael Haft and Harrison Suarez in 2014, has filed for Chapter 11 reorganization bankruptcy, raising concerns about its future amid lawsuits from landlords and suppliers. The company intends to retain 15 of its coffee shops while rejecting leases on 11 others, including its roasting facility in Ivy City, due to significant revenue declines, especially in downtown locations, where sales have plummeted over 50% since before the pandemic.

Haft stated that the cafes will remain operational as negotiations with landlords occur, but the roastery will not be negotiated and will close, with ownership being relinquished by January 31. Compass Coffee’s financial troubles include approximately $1.3 million in unpaid rent owed to its Ivy City landlord, an affiliate of the American Armed Forces Mutual Aid Association, and a complete shutdown of its in-house distribution system, leading to reliance on third-party supplier Odeko.

Despite the challenges, Haft highlighted a potential acquisition deal from a “global” coffee chain to purchase Compass’s assets as a going concern, likely to attract additional bids. He aims to keep Compass financially viable while preparing for a liquidation scenario if no suitable plans materialize. The company faces demands from creditors, amounting to total liabilities of $10 million to $50 million against assets of $1 million to $10 million.

Compass has requested court approval to access cash collateral and financing essential for operations, stressing that failure to secure these funds could halt business activities. The bankruptcy proceedings come amid ongoing disputes including labor relations issues following unionization votes at several cafes, back rent litigation from landlords, and separate lawsuits from suppliers for unpaid dues.

In addition to business adversities, co-founder Suarez, who alleges wrongful dilution of ownership interests and misappropriation of relief funds, has filed a lawsuit against the Hafts, complicating the company’s legal landscape as claims of fraudulent activities are reviewed under the RICO Act. Haft has denied Suarez’s allegations and moved to dismiss the claims as part of the ongoing legal battles tied to the company’s volatile situation.

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