Viral Cookie Chain Chip City Abruptly Closes Stores Amidst Founder's Lawsuit

Chip City, a viral cookie chain that expanded rapidly from a single New York storefront into a multi-state enterprise, has abruptly closed its doors across the U.S. The closures come just days after co-founder Peter Phillips filed a lawsuit against the company, its controlling investor, and executives, alleging a dispute over his compensation, benefits, company web domains, and hundreds of thousands of dollars in small-business loans.

Social media videos and customer reports indicate darkened storefronts and closure notices on doors, with some employees reportedly receiving emails stating it was their final day of work. While some locations remained listed as open on online platforms, many customers found them inaccessible. The company has not issued a public statement regarding the systemwide shutdown.

This wave of closures follows recent shutdowns of Chip City's Connecticut locations and several stores in Virginia. By late September, the company's website indicated a significantly reduced footprint, listing only 24 locations across New York, New Jersey, and Texas.

Chip City emerged as a prominent player in the oversized-cookie trend, similar to brands like Crumbl and Last Crumb, gaining popularity for its nearly six-ounce cookies with rotating weekly menus. Founded in Astoria in 2017, the chain attracted significant investment, including $17.5 million from Danny Meyer’s Enlightened Hospitality Investments across two funding rounds in 2022 and 2024, intended to fuel further expansion.

Internal turmoil, however, began to surface recently. Phillips, who stepped down as CEO in March as part of a restructuring that positioned Enlightened Hospitality Investments as the controlling investor, filed a lawsuit on September 28. The suit claims Chip City froze his pay and pressured him to relinquish company web domains and sign paperwork related to over $640,000 in SBA loans that he alleges he personally guaranteed. Phillips is seeking unpaid compensation, damages, and other relief, accusing the company of breach of contract, unlawful wage withholding, and retaliation.

The defendants have not yet filed a response to the lawsuit in court, and the legal filing does not explicitly state that the dispute caused the recent store closures. Nonetheless, the timing has introduced considerable uncertainty for a company that was recently signaling aggressive growth. As of Friday morning, Chip City's social media accounts continued to promote its weekly cookie offerings to its more than 300,000 Instagram followers, leaving the future of its operations unclear and hundreds of employees without work.