Chip City abruptly closed all remaining storefronts nationwide this week, citing macroeconomic headwinds. The Astoria-born cookie chain’s shutdown follows a legal dispute between the company and its former CEO, Peter Phillips.
What began as a single bakery in Astoria, Queens, in 2017 grew into a sprawling multistate operation known for oversized, 5.5-ounce pastries and a rotating lineup of over 180 flavors. But that expansion slammed to a halt when management ordered employees to permanently shutter all remaining storefronts. Employees received word of the closures through an email sent on Thursday, catching incoming staff and loyal patrons entirely off guard.
The company issued a formal statement addressing the sudden collapse, pointing to difficult financial conditions that made continued operation impossible despite earlier growth.
“Despite extensive efforts to stabilize our business in the face of significant macro-economic headwinds, we have made the very difficult decision to close all of our City Chip locations. We are grateful to all of our dedicated employees and loyal customers who have supported us for the past 10 years.”
Chip City management, via company statement
Rapid Expansion and Financial Backing From Danny Meyer’s Fund
Childhood friends Peter Phillips and Teddy Gailas founded the brand, which attracted heavy outside investment as it scaled up. Enlightened Hospitality Investments, a growth equity fund affiliated with restaurateur Danny Meyer’s Union Square Hospitality Group, invested in Chip City since at least 2022 to help accelerate the chain’s expansion when it operated just 14 locations and was preparing to expand beyond its New York base into additional markets like New Jersey, Connecticut, Maryland, and Virginia.
The partnership fueled a fast-paced rollout. EHI made an additional $7.5 million investment in 2024, bringing the total to $17.5 million. By 2024, the business operated 45 company locations, and Technomic data shows the chain generated more than $35 million in system sales by 2025.
Yet the footprint shrank rapidly over the course of the year. By the time Nicolas Baizan — named company president only 10 weeks prior — sent the closure notice to staff, the store count had dwindled to 22 nationwide, down from a peak of more than 45 locations.
Legal Battle and Sinking Severance Claims Behind the Scenes
The nationwide shutdown arrived just days after co-founder and former CEO Peter Phillips filed a lawsuit on September 28 against Chip City, EHI, Baizan, and former interim CEO Fred LeFranc. The legal action outlines a bitter fallout over unpaid compensation and small business loans following Phillips’ departure from the chief executive role in March 2026.
The litigation states that the firm initiated inquiries in May regarding roughly $900,000 in expenses accrued by Phillips during his tenure as chief executive.
While the base rent for the storefront leased by the company from one of Phillips’ family members was $4,000 a month, Chip City alleged it overpaid for years; in fall 2022, the company allegedly paid $4,750 in rent before upping payments to $5,000 a month from November 2022 until September 2025.
The enterprise also faced questions over unexplained disbursements tied to a Brooklyn branch; Chip City transferred a sum close to $280,900 spanning June 2024 to January 2026 into the private account of Dion Vangelatos, the ex-chief financial officer who exited his post prior to Phillips’ departure.
The legal filing outlines that the organization halted disbursements to Phillips on September 18, noting they would remain frozen until he handed over administrative control of four Chip City domains along with upwards of $640,000 in SBA loans that are under his partial oversight.
Disrupted Employees and Local Fallout Across Regions
The sudden shuttering left newly hired workers and regional customers in the lurch. In Astoria, Ariel Fybush described a disorganized group interviewing process and lack of scheduling communication, calling the situation “kind of absurd” after feeling she was trying not to panic about seeing red flags.
In New York City’s Upper West Side, the permanent closure coincided with an unrelated police investigation. Officers from the NYPD Evidence Collection Team arrived at the 370 Columbus Avenue storefront between West 77th and 78th streets on Friday morning after police received reports that two individuals had entered the business around 2:30 a.m. on Friday and removed an unknown amount of U.S. currency.
Other regional markets felt the blow instantly. Local rivals stepped in to help mitigate the disruption; the MidnighTreats bakery announced that any customers who have Chip City gift cards or coupons are invited to use them at its Arlington location at 4238 Wilson Blvd., Level C, inside the Ballston Quarter by Oct. 14, while also encouraging former Chip City employees to apply for open positions.
