SEATTLE -- Tully's Coffee filed for Chapter 11 this month, citing low cash reserves and a need to renegotiate leases with landlords.
In the bankruptcy filing on Oct. 10 in the U.S. Bankruptcy Court for Western Washington, the specialty coffee company identified 19 locations for lease rejection. Ten have closed over the past two months, and the final nine closed on Sunday, Oct. 14. No more closures are planned.
Court documents indicated the company has been considering a possible sale of assets or a search for a candidate that may provide debtor-in-possession financing. TC Global recently hired Deloitte Corporate Restructuring Group to explore strategic options.
Tully's opened its first store in Seattle in 1992. Founder Tom Tully O'Keefe, who retired in 2010, planned to rival Starbucks, and his company quickly developed into a strong regional specialty coffee retailer concentrated in the Puget Sound market area. In 2006, Tully's made its first net profit. More recently, the company's focus shifted from Starbucks competitor to specialist in fine handcrafted coffee and coffee wholesaler. Plans for an IPO in 2007 were shelved, and in 2008 Tully's sold its bean distribution business and brand to Green Mountain Coffee Roasters for $40.3 million.
The company, which has about 610 employees, began 2012 with 71 company-operated stores and 105 licensed or franchised locations in Arizona, California, Colorado, Idaho, Montana, Oregon, Washington and Wyoming. For the third quarter ended Jan. 1, 2012, the most recent period the company reported, Tully's recorded a net loss of $573,000, compared with a net loss of nearly $1 million in the prior year.
However, TC Global president and chief executive Scott Pearson said same-store sales had increased 4.1% during the quarter. "Our focus continues on sales growth, expense management, EBITDA growth and operational effectiveness," he said in a statement in February.