On Jan. 6, Compass Coffee, a Washington-based coffee company, filed for a Chapter 11 bankruptcy. The filing covers Compass Coffee’s request to the court to end the unexpired leases for at least 10 of its locations.
On Jan. 23, British-run Caffè Nero North America offered to buy Compass Coffee’s assets and assume some of its liabilities. This news comes as other popular spots in Washington, including Mi Vida and Chicken + Whiskey, announce closures.
Compass Coffee was founded in 2013 by Michael Haft and Harrison Suarez, two former Marines who met during their deployment. Haft and Suarez were inspired to begin the company after their experiences with poor-quality coffee during their deployments. Their website announces their belief “that the best cup of coffee is the one that points you in the right direction at the start of your day, every day: just like a Compass.” Compass Coffee currently has 25 locations in the Washington area and is a frequent destination for many Sidwell students.
According to Haft, the COVID-19 pandemic played a large role in the company’s decision to close down multiple locations. In 2020, Compass Coffee sales were affected by changes in how people bought coffee and where they bought it, as well as shifts in the dense weekday patterns.
In an address to the “Compass Community,” Haft said “the rhythm has changed in lasting ways since 2020. Foot traffic downtown has not returned, work patterns are different and the economics of running urban cafes look very different than they did even a few years ago.”
The pandemic caused issues that led Compass to lay off 150 of its 189 employees.
After losing so many employees, the company then cut the wages of the remaining 39. In the spring of 2024, workers announced their decision to unionize.
Christopher Buchanan, an employee at Compass Coffee, said, “[A] lot of our maintenance concerns…just weren’t being addressed or fixed in a timely fashion.”
Another reason for Compass’s decision to file for bankruptcy is the amount of debt the company has accumulated over the 12 years it has been open.
According to Haft, Compass Coffee owes around $11.7 million to various creditors and investors. Included in its debt is over $500,000 owed to Square, a point-of-sale company, which helped them finance some of their cafes.
Compass Coffee has been a big part of the daily routine for many in the Washington area. Haft described his goal as building “something meaningful for this city and the people who show up for it every day.”
“This has been a difficult chapter, and the decisions we’re making reflect the reality of this moment in Washington,” Haft said in an announcement. “They allow us to keep serving the city with the same real good coffee and sense of community that have defined Compass from the beginning.”
However, freshman Avery Foxworth noted a recent decline in quality.
“I went to Compass Coffee a lot as a kid, but as I got older I could tell the drinks were getting worse, so it’s not a surprise to me that they are filing for bankruptcy,” she said.
To cut losses, Compass Coffee has requested rejection of the leases for at least 10 locations. The filing says the locations “are likely to continue to drive losses for the Debtor, and as a result, should be rejected.” This is likely to result in high closure rates, which may be avoided if a buyer is found.
In filings, Compass Coffee has agreed “to sell substantially all of its assets to a strategic buyer with a substantial, global presence in the retail coffee business.” If a buyer is found in accordance with the court’s ruling and Chapter 11 auction processes, the buyer would assume possession of Compass Coffee’s current assets.
Caffè Nero seems like a likely buyer, and, as an asset purchase, it will not necessarily have to assume control over all of Compass Coffee’s liabilities. Caffè Nero’s bid does potentially leave room for an auction if other buyers show interest by a proposed deadline of Feb. 12.
