Cookie Chain Sudden Closure
Chip City Cookies permanently closes all store locations amid co-founder lawsuit and wage disputes.
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Chip City Cookies, a popular nearly six-ounce cookie chain with 22 locations across New York, New Jersey, and Texas, has permanently shut down all stores without warning, leaving hundreds of employees without pay or notice Hoodline. The abrupt closure came days after co-founder Peter Phillips filed a lawsuit accusing the company's controlling investor and executives of breach of contract, wage withholding, and retaliation Yahoo Finance.
Phillips, who co-founded Chip City in 2017 with childhood friend Theodore Gailas in Queens, claims he was denied $157,500 in severance and forced to choose between signing away domain rights and $640,000 in loan guarantees or losing his pay Hoodline. The company's president blamed economic headwinds and slowing consumer spending in an internal email to staff on October 1, just before locations went dark The MoCo Show.
From Queens Startup to National Chain
Chip City began in 2017 as a baking challenge between two childhood friends in Astoria, Queens Hoodline. The brand grew rapidly, expanding to nearly 50 operating and developing locations across ten states by 2026. The chain built a loyal social media following of over 300,000 Instagram followers who tracked its rotating weekly cookie lineup.
Growth was fueled by major capital injections from Danny Meyer's Enlightened Hospitality Investments. EHI invested $10 million in October 2022, followed by $7.5 million in 2024 to fuel national expansion Yahoo Finance. The aggressive scaling mirrored a broader wave of fast-casual cookie chains competing for market share in the early 2020s.
A Recapitalization Deal That Triggered Conflict
In March 2026, things shifted dramatically when EHI recapitalized Chip City with $4 million, securing a controlling stake. Co-founder Peter Phillips' equity shrank to just 5 percent, and he stepped down as CEO Hoodline. Phillips agreed to stay on as a part-time advisor through December, a decision he would later claim came with broken promises about his compensation and benefits.
Tensions escalated over the summer. In May 2026, interim CEO Fred LeFranc questioned $15,000 in monthly withdrawals that Phillips claimed were personal expenses covered under his separation agreement. By September 18, the company halted all salary and severance payments to Phillips, demanding he surrender four web domains and sign off on $640,000 in SBA loan guarantees Hoodline.
Founder's Lawsuit and Sudden Shutdown
On September 28, 2026, Phillips filed suit in New York Supreme Court against Chip City, Enlightened Hospitality Investments, Nicolas Baizan, and Fred LeFranc. His lawsuit alleged breach of contract, unlawful wage withholding, and retaliation for exercising legal rights Hoodline. Phillips claimed the company was trying to extort him into signing away liability for loans he'd personally guaranteed.
Just three days later, on October 1, company president Nicolas Baizan sent an internal email to staff announcing immediate permanent closure ABC7 NJ Herald. "Consumers are spending less and their preferences are evolving," Baizan wrote, citing weak sales and exhausted funding. By the evening of October 2, all 22 remaining stores were dark, with no advance notice to workers, customers, or the public.
Legal and Labor Law Risks Ahead
The sudden closure likely violates New York's Worker Adjustment and Retraining Notification Act, which requires 90 days' written notice for mass layoffs at sites with 50 or more employees. Penalties can reach 60 days of back pay and benefits for affected workers. Hundreds of store-level employees were left without immediate income or health insurance Hoodline.
Phillips' lawsuit also raises questions about whether the shutdown was retaliation for his legal action. Customers lost access to gift card balances, while $640,000 in SBA loans remain tied to Phillips' personal guarantee—a liability he disputes. The closure marks a dramatic end for a brand that once had deep venture backing and national ambitions Yahoo Finance.
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