Starbucks Competitor Based in Seattle Files for Bankruptcy Help
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Starbucks Competitor Based in Seattle Files for Bankruptcy Help

November 6, 2012


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Tully’s Coffee, a chain of coffee outlets that claimed to be the heir to the Starbucks caffeine throne, filed for bankruptcy protection this week after years of financial struggles.

The coffee company had just $1.8 million in cash at the beginning of the year, which was down almost 50 percent from its asset base last year, according to a report from The Seattle Times.

According to the company’s chief executive officer, Scott Pearson, the company decided to file for bankruptcy in order “to position Tully’s for the future.” By heading to bankruptcy court, Pearson says Tully’s will be able to keep operating.

The bankruptcy filing comes at the tail end of a miserable month for the Seattle-based upstart, which owns a number of stores across the western United States. In the past three weeks, the company has closed eight stores, including three in Seattle, that were failing to turn a profit.

According to sources, 57 company-owned stores still remain in business, but Tully’s officials plan to close at least nine of them before the end of the week. In addition to the stores owned by the company, there are about 70 other Tully’s chains that are owned by outside entities.

According to Pearson, the company is currently experiencing numerous challenges, but "the key is we need to keep as many stores as we can open and profitable and, by taking this action now, we’re in the best position to do that."

Sources say the company has suffered from years of financial malaise after briefly enjoying a promising run when it opened its first store 20 years ago. In fact, when Tully’s first opened, it was seen as a worthy competitor to Starbucks, the other Seattle-based purveyor of gourmet coffee.

But when both stores tried to expand their offerings beyond coffee, Tully’s grew heavy with debt, while Starbucks began opening thousands of stores across the entire planet.

Before seeking help from a bankruptcy lawyer, Tully’s did make a few million dollars off the sale of its roasting business to Green Mountain Coffee Roasters, a Vermont-based outfit that provides coffee for many American workplaces.

Today, however, the company is looking to return to its roots by focusing on the everyday operations of its remaining stores.

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