Plant-based concept By Chloe filed for bankruptcy Monday, and will look to sell its business after the devastating effects of the COVID pandemic.
In conjunction with the filing, Jimmy Haber has stepped down as CEO. By Chloe is currently searching for a new leader, but in the meantime, Chief of Staff Catey Mark Meyers will lead the company.
The 14-unit New York brand—owned by BC Hospitality Group—is navigating the process with debtor-in-possession financing from a consortium group led by QOOT International, along with Kitchen Fund, Lion Capital, and Bain Capital Double Impact.
“The COVID-19 pandemic hit all sectors of the restaurant industry especially hard, including the fast casual category. In the face of remarkably challenging conditions to operate in, we believe that a complete reorganization of the company is necessary for by CHLOE. to emerge and thrive long-term,” Mark Meyers said in a statement. “While we are working to retool the brand’s operations, the by CHLOE. experience remains intact and our immediate priority is to continue to serve our loyal guests and preserve the jobs of our valuable restaurant team. The financial restructuring is a positive step forward towards our planned growth goals pre-pandemic, which include expansion in the Los Angeles market and internationally in 2021 and enriched investment in a culinary innovation pipeline.”
When the COVID crisis hit in late February and early March, business was severely disrupted, court documents said. Three restaurants have not reopened since the spring, and the rest are operating at a reduced capacity. By Chloe was forced to furlough or lay off more than 50 percent of its staff; revenue has dropped 67 percent since February. The chain applied for and received a Paycheck Protection Program loan of $2.67 million.
Bid procedures are subject to court approval at a hearing that will be scheduled in early 2021. The company expects to hold an auction in mid-February.
The chain first opened in July 2015. It’s entirely plant-based menu quickly gained popularity, and the concept soon expanded to Boston, Los Angeles, and Providence, Rhode Island. By Chloe also licenses restaurants in Toronto and London. The young brand gained an environmentally friendly reputation with its cash-free locations and recyclable and/or compostable to-go packaging.
The brand hasn’t been without controversy, even before the bankruptcy. Over the past few years, BC Hospitality Group has been involved in litigation with By Chloe founder and former co-owner, Chloe Coscarelli. Previously, Coscarelli owned 50 percent with ESquared Hospitality, the parent of BLT Steak and other concepts. Coscarelli’s relationship with the company soured and she was terminated in 2017.
A year later, Coscarelli filed a lawsuit seeking her 50 percent stake. Additionally, Coscarelli alleged that her firing was related to the rejection of advances from Haber, who is still CEO of ESquared.
The case went to arbitration in 2019, and an arbitrator has since ruled that Coscarelli’s ownership should be restored and that she should receive attorney fees of $2.3 million. The ruling is contingent on confirmation from a federal court judge, which is still pending. Therefore, BC Hospitality Group said the arbitrator’s ruling is currently unenforceable.
Following the announcement of the arbitrator award, BC Hospitality said in court documents that it engaged in good faith negotiations trying to resolve its issues with Coscarelli. The negotiations reached an impasse, and the two sides headed toward mediation. BC Hospitality said they reached an agreement in principle, but after more negotiations, Coscarelli terminated the mediation process without a final resolution.