Washington, DC-based cafe chain Compass Coffee has filed for Chapter 11 bankruptcy protection amid falling sales and rising debts.

Compass Coffee was founded in 2014 and opened its first cafe in the District of Columbia that same year. The chain currently has 25 stores in DC, southern Maryland, and northern Virginia, all of which are operated in locations leased from unrelated parties.

Court documents filed by CEO and co-founder Michael Haft show that the chain has suffered considerable revenue decline since the onset of the Covid-19 pandemic. 

Customer traffic remained low despite the end of the pandemic due to factors beyond the company’s control, including the reduction in government employees and the rise of remote work.

“While some cafe locations remain profitable, others are only minimally profitable or unprofitable,” Haft said in the filing.

“In an attempt to overcome the loss of customer traffic, the company has instituted significant overhead reductions to maintain its operating cashflow while attempting to cultivate opportunities for a value-maximizing transaction.”

According to the documents, Compass owes approximately $11.7 million to creditors and investors.

The company has determined that selling the business as a going concern through Chapter 11 would represent the best way to preserve jobs and maximize the recoveries for creditors. It currently employs 166 people on a full or part-time basis.

The company has agreed, subject to court’s approval, to sell substantially all of its assets to a “strategic buyer with a substantial, global presence in the retail coffee business”.

Compass is also seeking permission to reject 10 leases at the end of this month, citing that those locations “are likely to continue to drive losses.”

The company said on its website that cafes remain open and operating during the restructuring process. It has, however, closed its Ivy City roasting facility, explaining that such a large-scale manufacturing facility “no longer matches today’s retail environment”.

The chain has also been quite controversial over the past years. Last year, co-founder Harrison Suarez sued the company over his termination and alleged it misused pandemic relief funds.

In 2024, the chain faced a union drive at several of its cafes backed by Workers United.

Further reading: Bar Louie rescued from Chapter 11