Chip City Closes All Locations Abruptly After Co-Founder's Lawsuit

Chip City, a popular cookie store chain that began in New York City, has abruptly closed all of its locations, with the company citing "significant macro-economic headwinds" for the decision. The announcement came just one day after the bakery had promoted its new fall flavor, the Crisp Apple Fritter.

The company, which had over 22 locations across New York, New Jersey, and Texas, shared the news via an Instagram post on Friday. "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 Chip City locations," the post stated. The company also expressed gratitude to its employees and customers.

Employees received an email from company president Nicolas Baizan, informing them of the immediate closure of all 22 remaining stores. Baizan attributed the closures to a "challenging environment" where customer spending had decreased, negatively impacting sales. He noted that the company had made "extensive efforts" to address its challenges over the past year but no longer had the funding required to continue operations. He also stated that the day of the announcement would be the employees' last day.

The sudden closure has led to confusion and anger online, with customers and former employees expressing shock. Some customers had upcoming events, such as catering for weddings, that were planned with Chip City.

However, the abrupt shutdown followed a lawsuit filed on September 28 by Chip City's co-founder and former CEO, Peter Phillips. The lawsuit accused Chip City, investor Enlightened Hospitality Investments, and Baizan of "bad-faith self-dealing," breach of contract, wage theft, and unlawful retaliation. According to the complaint, these allegations stemmed from a corporate restructuring on March 2, 2026.

Phillips claimed that his agreement to step down as CEO entitled him to a prorated salary of $157,500 and continued health insurance. He alleged that Chip City required him to surrender four personally registered web domains and sign documents related to over $640,000 in Small Business Administration-backed loans, for which he was a guarantor. Phillips described the company's alleged counterclaims of over $900,000 as "manufactured."

Phillips further alleged that his direct-deposit payroll was cut off on September 18, 2026, after he issued a notice of "material breach and wage demand" on September 21. He claimed that the company retaliated by ending his employment status and seeking to revoke his family's health insurance, also accusing the company of violating the Employee Retirement Income Security Act and its fiduciary obligations.

By 2024, Chip City had expanded to 45 company-owned locations and generated more than $35 million in system sales the following year. However, the chain had been shrinking throughout 2026, closing stores and leaving fewer than half of its locations open before the company-wide shutdown was announced.