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Mike Isabella Concepts declares bankruptcy

The celebrity chef says publicity over a sexual harassment lawsuit led to a sales decline and lost development deals.
Photograph courtesy of Mike Isabella Concepts

Mike Isabella’s restaurant operating company filed for bankruptcy protection Thursday, citing the fallout from publicity over a now-settled sexual harassment lawsuit filed by the celebrity chef’s former director of operations.

Mike Isabella Concepts has closed four of the company’s 12 locations following steep sales declines this year after news of the lawsuit hit: Requin Mosaic in northern Virginia, Graffiato locations in Richmond, Va., and Washington, D.C., and Isabella Eatery, a food hall in northern Virginia that had been open just nine months. The locations were closed between April and August.

The two Graffiato locations are not subject to the bankruptcy, according to a filing, as other owners must sign off on their filing.

Eight locations remain open, two of which were kept out of the bankruptcy filing: Kapnos Kouzina in Bethesda, Md., and Requin in Washington, D.C.

The other six are Kapnos Taverna locations in Arlington, Va., and College Park, Md., the Arlington concepts Yona Noodle Bar and Pepita and the D.C. restaurants G by Mike Isabella and Arroz.

The restaurants have just over $1 million in loans outstanding, according to a filing.

Isabella rose to prominence through his appearance on the television show "Top Chef" and had used that fame to build a restaurant empire in the Washington, D.C. area. He opened his first Graffiato location in 2012, and kept opening additional restaurants and worked out deals to manage others.

At its peak, his company operated more than a dozen restaurants and employed 400 people. That included Isabella Eatery, a nine-concept, 41,000-square-foot food court in Tysons Galleria in Fairfax, Va., which opened in December.

According to filings, however, there was more to come: Isabella Concepts was working on 20 new restaurant and restaurant management deals for restaurants, including stadium and arena deals and agreements in Houston, Las Vegas and the Middle East. “The future looked very, very bright,” Isabella said in an affidavit filed with the bankruptcy court.

Isabella blames the empire’s downfall on publicity over a sexual harassment lawsuit filed by Chloe Caras, who accused the chef of overseeing a “bro culture” that was hostile to women, with men referring to women as “whores” and men miming sexual acts with her and boasting about cavorting with women.

Isabella settled the lawsuit this spring, with the financial terms kept confidential and the company agreeing to take corrective measures, including “robust training,” and to adopt policies to encourage a work environment free of sexual harassment, according to the filing.

But publicity over the lawsuit hurt the business, Isabella said. A local restaurant association kicked Isabella out of contention for two of its awards.

The company lost 20 new deals that were in development, and sales at the restaurants began falling.

Revenue at Isabella Eatery fell from $1 million per month in the first three months of operation to just $300,000 a month, “an amount which was simply not sufficient to sustain operations.”

Sales at Graffiato in D.C. fell from $50,000 a week to $5,000 per week, and from $30,000 per week in Richmond to $12,000.

“Declining revenues immediately led to vendor problems and to landlord problems, an inability to pay our lenders, and to the conclusion that four of our restaurants were simply not sustainable,” Isabella said.

One of the reasons for the filing, he wrote, was to keep open Kapnos Taverna in College Park, which is being evicted by its landlord.

In his affidavit, Isabella said the plan for the bankruptcy filing is to “settle down the excitement in the press that followed the litigation,” focus on normalizing the business and improving restaurants’ cash flow, restore investor confidence and liquidate closed restaurants.
“I want to stabilize what’s going on in my company,” he told the Washington Post in an interview, “and, obviously, once I go through this, set a path for the future to get me back to where I was.”

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