Bow Truss Coffee Roasters started as a Chicago version of Blue Bottle, fueled by tech investor money and a Silicon Valley growth mindset. Today, all its Chicago stores are closed after unpaid employees didn't show up for work.
Bow Truss employees, who weren't paid last week, didn't show up to open the doors at Bow Truss' 10 locations. Founder Phil Tadros, who also runs the interactive agency Doejo, confirmed the news. He told Crain's, which originally reported the closings, that he hopes to re-open in a matter of days. The coffee chain is searching for an "emergency partner" to bail it out; meanwhile, it's taking “a time out until we can figure out what's going on, what's getting paid," he said.
The chain has been known to be in financial straits. Earlier this week Marcus Lemonis, a celebrity investor who owns Lincolnshire, Ill.-based Camping World and hosts the CNBC show "The Profit," began backing out of a deal to infuse $3.25 million in return for a majority stake. Lemonis cited problems that emerged in due diligence, including rents past due and "a habit of bouncing checks," he told Crain's at the time.
In an emailed statement, Tadros accused Lemonis of smearing him and the company publicly, in order to put it in a weakened position before proceeding with his buyout. "Marcus Lemonis lied about buying Bowtruss to me, my team, and the public," Tadros wrote. "He also lied about the original deal we struck in the letter of intent when this all began. He has also lied about being in the dark when it comes to debts that were fully disclosed to him and his team in mid December all the way to the present."
Update: Lemonis responded and didn't mince words. In a phone interview, he said while Tadros disclosed the amount of the debt, Lemonis' due diligence found murky accounts of how Tadros spent money.
The only asset worth a damn in the entire business are the people that work there.
For example, Lemonis said Tadros diverted payments from landlords for tenant improvements, in order to make payroll. He also accused Tadros of diverting funds withheld from employee paychecks, not remitting them to the company's health insurer, Blue Cross Blue Shield, but instead using them for other purposes. "Several employees went to the doctors and were not able to process their claims," Lemonis said.
Tadros responded to those comments, which were added to this story after it was initially published, acknowledging that there were two missed payments but saying it was "no intentional thing."
Lemonis went on to dispute the notion that he is weakening Bow Truss' position in an ongoing buyout negotiation.
"The best part of going through the due diligence process was realizing that the people that work there were unbelievable--spectacular and loyal," he said.
"The only asset worth a damn in the entire business are the people that work there. ... It’s not the sticker on the glass. Nobody gives a shit about the sticker," Lemonis said. "What they care about is how they get treated when they go in there."
In December, Lemonis told Crain's his majority buy-in was a done deal. Now that certainly does not seem to be the cae. Lemonis has until end of February to close, according to Crain's, but as of today, has "zero interest" in partnering with Tadros, he told Crain's. Per the Crain's report:
If Lemonis opts to terminate the agreement, he is subject to a breakup fee of $162,500, provided that the decision to walk away is not the result of “seller's fraud or any misrepresentations with respect to the financial condition or otherwise of the business subject to the transaction,” according to the letter of intent. Tadros said Lemonis has injected just short of $100,000 into the company as of today.
Bow Truss started out in 2012 with bold plans: Its website lists 10 locations in the Chicago area and one in Beverly Hills, plus a long list of spots that are "coming soon." Its reach quickly made it the largest piece of a Tadros retail portfolio that has seen a handful of closures and investor disputes in the past year.
In November, Tadros sued Alan Matthew, a Chicago angel investor who was an earlier backer of Bow Truss and other Tadros projects. In July, Tadros was the defendant in a string of investor lawsuits. The lawsuits and investor relationships raised questions about a crowdfunding initiative Tadros had talked about launching to back local businesses. In September, Tadros parted ways with Jared Leonard, his co-owner on a Chicago fried chicken restaurant, Budlong, which closed in the breakup. That split later led to a lawsuit.
Tadros didn't respond to questions about the status of Bow Truss' Beverly Hills location, but he said the firm urgently needs a $100,000 cash infusion to meet short-term payroll, and has $2 million in debt that it needs to resolve. "We need an operational investor partner," he said.
