Chip City abruptly closes all locations, including New York stores, citing ‘macroeconomic headwinds’ for closure

The chain, which opened its first store at 30-06 34th St. in Astoria in July 2017, quickly expanded its presence across the city and across the United States, but began scaling back operations in recent weeks, closing all of its stores in Connecticut and Virginia.

But the proverbial cookie crumbled Thursday evening, when the company informed staff via email that it would permanently close all remaining locations in New York, New Jersey and Texas at the end of the business day.

“Our industry and business have faced a challenging environment,” Chip City told staff in an email seen by QNS and amNewYork. “Consumers are spending less and their preferences are changing, which has negatively impacted our sales. … Unfortunately, we no longer have the financing to operate this business.”

Chip City’s rapid expansion has been driven by private equity, with Danny Meyer’s Enlightened Hospitality Investments providing $10 million in 2022, followed by another $7.5 million funding round in 2024.

But staff wrote on social media that they noticed “red flags” about the company’s supply chain earlier in the week before receiving an email on Thursday informing them that the company would cease all operations.

Chip City later confirmed it was closing all locations in a statement to QNS.

“Despite significant efforts to stabilize our business in the face of significant macroeconomic headwinds, we have made the very difficult decision to close all of our Chip City locations,” the company said in a statement. “We are grateful to our dedicated employees and loyal customers who have supported us for 10 years. »

Former Chip City CEO sues for breach of contract

The news comes shortly after co-founder and former CEO Peter Phillips sued Chip City and its majority investor for an alleged breach of contract regarding his September 28 severance package.

Phillips, who agreed to resign as CEO on March 2, also accused Chip City of willful wage theft and unlawful retaliation in the lawsuit, alleging the company abruptly stopped paying his transition salary and health benefits in mid-September — three months before the end of the nine-month transition period.

Phillips alleged that the company informed him that his salary would remain frozen until he transferred four web domains to the company and signed documents relating to five SBA loans for which he claimed to remain a guarantor. The loans would total more than $640,000.

During the transition period, Phillips alleged, the company began raising questions about $900,000 in pre-closing expenses dating back to his tenure as CEO, which he described as “fabricated” counterclaims. Phillips claimed in the lawsuit that the March 2 agreement resolved all pre-closing spending investigations.

In a letter to Phillips on May 26, Fred LeFranc, then interim CEO of Chip City, requested information on a number of expenses unrelated to Chip City, including $110,271 in payments from Chip City’s accounts at Somedays Bakery and Massi’s, both of which are owned by Phillips.

LeFranc also requested information about rent payments at a Chip City location in Astoria, saying the company appeared to have overpaid on-site rent by $53,000 between September 2022 and May 2026.

It also reported payments of approximately $443,000 to a construction company affiliated with Phillips, adding that the company had been unable to locate invoices, contracts or other documents that would substantiate the connection between the payments and Chip City’s operations.

The letter did not accuse Phillips of any wrongdoing.

Phillips claimed in the lawsuit that the March 2 agreement resolved all pre-closing expense investigations, stating that the severance agreement covered all claims, “whether known or unknown.”

Chip City has not yet responded to a request for comment regarding the lawsuit. The company and its majority investors have yet to respond to the allegations in court. The lawsuit does not establish that the dispute is related to the recent closures or any financial difficulty.

Staff, meanwhile, have confirmed that they will be paid until October 18. However, New York State’s Worker Adaptation and Retraining Notification (WARN) Act requires businesses to provide 90 days’ notice before mass layoffs or closures. A company that violates the WARN Act may be required to pay its employees up to 60 days of back wages and benefits.

To add insult to injury, one of Chip City’s closed locations had money stolen early Friday morning.

Police said shortly after 2:30 a.m. Oct. 2 at 370 Columbus Ave. on the Upper West Side, two unidentified individuals were observed on surveillance cameras entering the premises and withdrawing an unknown amount of cash.

The incident was reported to the 20th police station. Police said no arrests have been made in the ongoing investigation.

This story first appeared on our sister publication qns.com.