Chip City, the New York-based cookie chain, was started five years ago by two childhood friends who wanted to recreate a taste from their childhood in a local bakery. But if you ask CEO Peter Phillips now, he says that the company has nine equity partners, including its chief operating officer and pastry chef.
The reason, Phillips said, is simple. “I needed people that were as passionate about this as my cofounder and I were passionate about this,” he said in an interview.
The strategy appears to have worked. Chip City has grown to 14 locations, with 10 under construction. And on Thursday it landed the big backer, with a $10 million investment from Enlightened Hospitality Investments, the investment fund from Union Square Hospitality Group Founder Danny Meyer.
“It’s a great opportunity to build off their experience,” Phillips said, particularly given how much Meyer has accomplished. “They have a great infrastructure and the dollars are going to help us really grow.”
Chip City was founded in 2017. Phillips and a childhood friend, Teddy Gailas, thought it’d be cool to create a cookie concept. They worked on recipes, trying out cookie after cookie in a bid to get something they liked. “It was just a lot of trial and error,” Phillips said.
They started with a chocolate chip cookie but then developed other flavors, getting their inspiration from a variety of places.
Eventually, they opened a tiny, 250-square-foot shop in the Astoria neighborhood of Queens. Shortly thereafter, they got some press and social media attention and soon there were lines around the block. Chip City prefers larger locations these days. “Two hundred and fifty-square feet is difficult to manage,” Phillips said. “We had just one small freezer and had to do multiple reloads during the day.”
The company sells cookies from a rotating menu of specialty flavors, similar to other cookie concepts in the space. They sell for $4.50 per cookie, though Chip City has a staple buy-five-cookies, get-one-free offer. It also sells ice cream sandwiches in some locations, along with a full coffee bar. Every location sells milk.
Chip City has 40 flavors of cookie. Chocolate chip is always on the menu, but there are other cookies like Peanut Butter and Jelly, Pumpkin Spice Latte, Rainbow, Cinnamon Roll and Baklava.
Inside a Chip City, which features a weekly rotating menu of cookies.
Chip City expects to keep growing next year, with 40 locations by the end of 2023. It’s opening in Boston and its suburbs, Washington, D.C., Virginia, Maryland and Miami Beach.
The chain enters an increasingly competitive market, however. Insomnia Cookies, the late-night cookie delivery concept owned by Krispy Kreme, has been growing fast. The Utah-based Crumbl Cookies franchise is one of the fastest-growing chains in the U.S. and has inspired a host of copycats, which it is suing.
Phillips is aware of the competition. “It’s a real concern,” he said. But, he added, “We try to stay in our lane and focus on being the best-in-class.”
The big differentiation, he said, is that Chip City controls its production process. It makes all its own cookie dough at its own facility. The dough is prepared and scooped and then frozen before it is shipped to the individual shops. “One of the good things about our business, when we were going through recipes, we found that our cookie bakes much better from frozen,” Phillips said.
At the same time, cookies are popular and a wide range of consumers love them. “It’s a nostalgic thing for people,” Phillips said. “Everybody has a memory of a fresh-baked cookie at home.”
Culture also matters. And that’s where the equity comes into the equation. So it has been issuing stock to key workers. “We try to create a really good culture for the team and it shows,” Phillips said. “There’s a lot of people that are super passionate. It’s changed a lot of people’s lives.
“They have equity in the holding company. It’s something more. We all have skin in the game.”
It’s a key point for Meyer, whose Enlightened Hospitality has focused on companies that focus on their employees.
“Beyond the cookies, which speak for themselves, we are excited to support the growth aspirations of the passionate team behind Chip City, who exemplify our values of hospitality and community,” Meyer said in a statement.
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