BC Hospitality Group, parent of vegan fast-casual By Chloe, has agreed to sell the chain out of bankruptcy, but the buyers won’t be able to use the name. 

As part of the deal, an investor group including QOOT International, Kitchen Fund, Lion Capital, and Bain Capital Double Impact Fund would purchase the assets for $333,000, plus the assumption of liabilities, and an additional $30,000 if the closing doesn’t occur on or prior to March 19.

However, the group wouldn’t be able to operate under the name “By Chloe” after a judge ruled that BC Hospitality wasn’t allowed to sell the trademark without the permission of co-founder chef Chloe Coscarelli.

The agreement states the buyers would be given a limited purpose license to use the name for six months before having to remove it from “restaurants, supplies, digital media, and all other assets.”

“It is my understanding that the proposed limited purpose license is narrow in scope and duration and is essential to the continuity of the business and the preservation of jobs for the Debtors’ employees, who will be employed by the Buyer. Without this license, I do not believe the Buyer would proceed with the proposed transaction,” said Patrick Bartels, an independent director of BC Hospitality, in a filing.

The investor group—which is serving as the stalking horse bidder—previously agreed to acquire 100 percent equity in By Chloe in exchange for $3.25 million, which is equal to the group’s DIP funding. But after the trademark ruling, the proposal was terminated. Afterward, BC Hospitality renewed the sales process and extended the bid deadline multiple times, but it only received the revised bid from the investor group.

After opening in July 2015, By Chloe grew in popularity and expanded to 14 stores in New York City, Boston, Los Angeles, and Providence, Rhode Island, with construction plans in the initial stages for two additional restaurants. The company also issues licenses for third parties to operate stores in London and Toronto.

However, the arrival of COVID severely disrupted operations in late February and early March of last year. Three units have remained closed since late March 2020 and the others are operating at reduced capacity. By Chloe was forced to furlough or lay off more than 50 percent of its employees. Additionally, monthly revenue has dropped by roughly 67 percent since February 2020. As a result, BC Hospitality filed bankruptcy in December.

BC Hospitality and Coscarelli have spent years in litigation over Coscarelli’s right to ownership. Patrick Arenz, Coscarelli’s lawyer, told the Wall Street Journal that the bankruptcy was a means for BC Hospitality to eliminate the pending litigation and try to obtain rights in her name through the trademark.

In February, Coscarelli said in a testimony that she poured her “entire life’s work, my heart, my sweat and my soul into making that restaurant and it was called By Chloe for a reason because it was by me.” She also said that she will “continue to stand up for what I know is right because I never gave anyone ownership over my name.”

Fast Casual, Finance, Story, by CHLOE