It didn’t take long for Chip City Cookies to recognize its offerings are meant for families.
When the chain opened its first, 250-square-foot location in Queens, New York, it was picked up by a Facebook group comprising local moms who communicate about new concepts in the market.
“We had an army of strollers outside of our first location,” said cofounder Peter Phillips, speaking at the ICR Conference earlier this year. “We really just grew organically from that and developed very good around that.”
Establishing a brand identity early on aided awareness and expansion.
The fast casual, debuting a little more than 15 locations in 2023, has expanded to 30-plus shops throughout New York, New Jersey, Maryland, Connecticut, Florida, Massachusetts, and Virginia. The plan is to open 30 spots in 2024 and another 40 in 2025 to reach 100 outposts systemwide.
Chip City units are typically between 300 to 1,500 square feet and largely use a grab-and-go model. There is seating inside certain locations. The brand doesn’t use a cookie-cutter design (no pun intended by Phillips) and instead opts for unique colors and graphics representative of the specific market. The average cost to build a location is $250,000 to $300,000, with an average payback period of one to two years. AUV is $750,000 to $800,000, and the store-level margin is 25 percent.
The brand has a weekly rotating menu of flavors that resets every Friday. The 5.5-ounce cookies fall into three categories: classics, specialty, and seasonal. The most popular flavor is the Italian Rainbow Cookie, which only appears once or twice per year. When it does come on the menu, wait times are as long as an hour, Phillips said. Other notable flavors include classics like Chocolate Chip, Apple Cider Doughnut, and Banana Cream Pie, specialty cookies such as Strawberry Shortcake and Mike’s Hot Honey Cornbread, and seasonal versions like Pumpkin Spice Latte and Sweet Potato S’mores.
Stores are open 11 a.m. to 10 p.m. The brand is usually hit with an early lunch rush close to 12 p.m. to 1 p.m. and another one around 6 p.m. to 7 p.m. Seventy percent of business comes from in-store pickup, which Phillips attributed to guests wanting to smell the freshly baked cookies.
“It’s a really warm, inviting environment,” he said. “We call it smell equity. It’s a great experience to walk into a Chip City and you get hit with that aroma of fresh-baked product. I think that one of the strong points about our brand is how it really plugs into feelings of nostalgia for people. I think most people have a memory of a fresh-baked cookie coming out of the oven at their home, and experiencing that when you come into a Chip City, it brings you back those childhood memories.”
One cookie costs $4.75. Additionally, the company offers Lil’ Chips, which are 2.5-ounce cookies available for catering events. Those are priced at $55 for 20 pieces. Alongside cookies, Chip City recently incorporated ice cream as an add-on at some locations. Coffee and espresso are featured in certain areas as well, although the brand doesn’t view these products as must-haves. Merchandise has become big for the company, with items such as T-shirts, candles, cookie tins, mugs, and backpacks.
The chain controls manufacturing thanks to its 18,000-square-foot commissary in Queens. Frozen cookie dough is produced here and then shipped to shops. Phillips is confident in the facility supporting Chip City’s growth for “quite a while.” There isn’t any storage issue because the brand can send excess dough to long-term freezers until it’s need.
“That was one of the happy accidents through our recipe development process,” Phillips said. “The fact that the dough bakes better from frozen, that’s how we’re able to maintain the structure of the product. It allows us to store it long-term without any degradation to the product, allows us to maintain our quality standards, allows for very little waste. That’s one great thing about our brand is that we’re running out like 1.5 percent waste across our entire portfolio. And that was something that from recipe development, ended up working out really beneficially.”
Going back to the days of the mom Facebook group, Chip City has always been social media driven, with almost 300,000 organic followers in New York. The brand posts daily to its Instagram account to connect customers with new flavors. All of it is supported by a full in-house marketing team, designer, social media coordinator, and content creator, headed by chief brand officer and cofounder Teddy Gailis. One Instagram video had nearly 3 million plays.
“That was a very exciting moment for us to get that kind of traction on a single post and some of the analytics around the post showing how driven our customers are to our social media and how much they love the brand,” Phillips said.
Chip City has also received major attention by appearing on “The Tonight Show Starring Jimmy Fallon” and being named the favorite cookie of Bethenny Frankel, an American TV personality with a large social media following.
The cookie fast casual’s growth trajectory took a leap in 2022 when Danny Meyer’s Enlightened Hospitality Investments announced that it would give $10 million in capital. In addition to finances, the fund is providing “deep expertise in fast casual retail operations and an unparalleled focus on hospitality and people.”
The support is a big reason why the chain will stay corporately owned for the foreseeable future. Chip City does have a franchising page, but only so that it can be prepared if it chooses to go that route.
“We’re really invested in the corporate side of the model,” Phillips said. “We like the control that it provides us. We like the ability to innovate and change things as needed. Our unit economics are very strong. Our cash-on-cash is very strong. So we feel like the best path forward is just continue to expand on a corporate level. We’re not going to face the problem a lot of companies face where it just becomes a never-ending need for capital.”