After rapid growth, Freaky Bean falls into bankruptcy
The Freaky Bean Coffee Co., which burst onto the Greater Portland coffee scene in June 2006 and quickly grew to become the largest independent coffee retailer in the state, has shuttered its stores after being pushed into involuntary bankruptcy by its creditors.
Since late February, Freaky Bean has closed all four of its retail stores in Westbrook, Scarborough and South Portland. At its peak, Freaky Bean operated six retail locations, including two it acquired from Maine Roasters Coffee in December 2007.
On Feb. 25, three companies that Freaky Bean owed money -- The Sunrise Guide LLC in Westbrook, which claimed it was owed $250; Rosemont Market Inc. in Portland, which claimed it was owed $8,700; and Harry J. Acer Co. Inc. in Ramsey, N.J., which claimed it was owed $23,000 -- filed a petition in U.S. bankruptcy court that forced Freaky Bean into involuntary Chapter 7 bankruptcy, according to court filings. Freaky Bean CEO Jon Stratton tells Mainebiz it was not the course of action he would have pursued. "Our company's folks were working incredibly hard to avoid bankruptcy and ultimately honor its obligations," Stratton wrote in an email to Mainebiz. "The bankruptcy was involuntary -- we would have preferred to settle our debts by continuing our operations. Shutting the doors and involuntarily turning the company over to a Trustee translates into no cash flow to honor the company's debts."
The involuntary bankruptcy forces Stratton to step aside, which he says is hard to get his head around since he feels a real obligation to pay his debts. "Those who petitioned put themselves in a place where they are just left with whatever assets were in the company when the Trustee took over," Stratton said. "It is very surreal."
Three days after the initial court filings, Freaky Bean abruptly closed its coffee shops in Westbrook and Scarborough near the new development anchored by Cabela's. In early March, the three original petitioners were joined by Central Maine Power Co. in Augusta, Paul G. White Tile Co. in Portland, T & T Development in South Portland and The L & J Co. in South Portland. In total, there are roughly 100 secured and unsecured creditors claiming $1.1 million, according to court filings.
In March, Freaky Bean closed its remaining retail shops, one it only opened in July 2008 in South Portland and its original location on Route 1 in Scarborough. At its peak, the company employed 56 people; when it closed, there were 23. Stratton said the company's tough times were caused by many things, including high heating costs over the winter and, of course, the recession. "It was certainly more challenging to accommodate the growth when the recession really started to impact us," Stratton said.
Freaky Bean's acquisition of Maine Roasters Coffee also fell apart last year. In November 2008, about a year after Freaky Bean took control of the business, the former owners of Maine Roasters Coffee repossessed the business and its two retail shops in Yarmouth and Falmouth, Christen Graham, co-owner of Maine Roasters Coffee, told Mainebiz. Graham said the deal included a number of obligations that Freaky Bean Coffee Co. needed to meet. "They weren't meeting them," she said. "They also allowed the quality of stores to deteriorate, which made us unhappy and customers unhappy, so we repossessed the business in November 2008."
Stratton co-founded the company with Andrew Kessler. The two met while working at a Starbucks in Portland. Kessler resigned from the company in November, according to Current Publishing.
A meeting of creditors where Stratton and his lawyer will be questioned under oath by the trustee and by creditors is scheduled for April 21.
Read an interview Mainebiz conducted with co-founder Andrew Kessler in December 2006.
Most Recent
Most Recent
Comments