The pandemic and its aftermath have apparently been tough on Compass Coffee.
The Washington, D.C.-area concept filed for bankruptcy on Tuesday, citing the pandemic and then a slow return of consumers to urban areas followed by cuts in the federal workforce.
Compass has a potential buyer in the form of a company “with a substantial, global presence in the retail coffee business” that will be revealed in a filing within days, according to court documents.
Compass was founded in 2014 and operates retail café locations in D.C., Maryland and Virginia. All its locations are leased.
The company developed a roastery and distribution business during the pandemic, according to court documents, to offset the loss of traffic to its cafes. That traffic did not return in force after the quarantine was over.
Michael Haft, the company’s cofounder, said in a document that a reduction in government employment and growth in post-pandemic remote work both kept customer traffic from recovering over the past couple of years.
“Foot traffic downtown has not returned, work patterns are different, and the economics of running urban cafes look very different than they did even a few years ago,” Haft said in a post on LinkedIn. “Like many local restaurants and cafes, we reached a moment where we had to confront that reality honestly.”
The company said that some of its café locations are profitable while others are “only minimally profitable or unprofitable.” Compass cut overhead to maintain cash flow. It also eliminated a coffee roastery and distribution business it had created during the pandemic to offset the loss of its café business for a time.
Compass has been sued by landlords and some other vendors over past due rent and other payments, according to court filings.
The company has asked the court to reject leases on 10 of those locations, according to court documents, though it noted in a court filing that it will work to determine whether there is a potential suitor for those units.
The bankruptcy filing is the year’s first involving a restaurant company but comes at a difficult time for many concepts as customer traffic has remained weak, which has hurt profits as costs continue to climb. Several companies have filed for bankruptcy over the past couple of years. Almost all of them, like Compass, have cited the pandemic as a major cause for those actions.
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