UPDATE: Jan. 8, 2021: A bankruptcy judge approved a plan submitted by BC Hospitality Group, parent company of By Chloe to sell the company on Thursday, according to a court filing. The bid deadline is Feb. 25 at 4 p.m. EST. An auction, if any, will be held March 1, while a sale approval/confirmation hearing is set for March 4. Co-founder Chloe Coscarelli, who left the company after a dispute with shareholder, is reportedly exploring a bid for the company, according to The Wall Street Journal.

Dive Brief:

• By Chloe, a plant-based fast-casual chain with 14 units, filed for voluntary financial restructuring and Chapter 11 bankruptcy on Monday, according to a press release. The restaurant group has already obtained working capital financing from a group of existing investors in the form of a $3.25 million debtor-in-possession loan that will provide liquidity for the chain to continue operating and supporting its employees, according to court filings.
• The company also began marketing itself to be sold and expects a sale by mid-February, according to Bloomberg. CEO Jimmy Haber has also stepped down and the company’s board of directors has begun a search for a replacement, with Chief of Staff Catey Mark Meyers leading the company in the interim.
• The financial restructuring is expected to bring the company back on target to meet its pre-pandemic goals, which included an expansion within the Los Angeles market and internationally in 2021, Mark Meyers said in the press release. 

Dive Insight:

By Chloe was rapidly expanding in 2019, opening locations in New York City and expanding into Canada. At one of its locations in New York City, it debuted digital menus and self-ordering kiosks. Another location that opened in October 2019 in the market included a To-Go format shop, offering a more extensive off-premise program with preordering and pickups. In 2018, the company received $31 million from Bain Capital and other funds and then-CEO Patrik Hellstrand had plans to grow the store to 50 units by 2023, according to Restaurant Business.

The company appeared to be firing on all cylinders despite a highly contentious court battle with co-founder and celebrity chef Chloe Coscarelli. But like many other mid-sized chains with locations in Los Angeles and New York City, which have seen strict dining room restrictions, By Chloe has struggled to grow revenue. 

As of March, three of its locations have temporarily closed while the rest have been under reduced capacity. The company had to furlough or layoff over half of its staff and monthly revenue decreased by 67% since February, David Selinger, head of real estate at parent company BC Hospitality, said in a court filing. 

Bankruptcy could help breathe new life into the chain, as it did for Le Pain Quotidien, which was bought by Aurify Brands during the summer. The company is converting at least 10 New York City restaurants that it acquired from bankrupt Maison Kayser into Le Pain Quotidien restaurants with plans to reopen in 2021.