Clover Fast Food Inc., the parent company of Clover Food Lab’s fast-casual vegetarian chain, has filed for bankruptcy protection, blaming rising costs, sluggish sales, and difficulty in raising additional money from investors.
The Cambridge-based startup, which had high hopes of expanding after surviving the pandemic, said in its Chapter 11 filing last week that it can no longer pay the leases on its new commissary and several restaurants.
Clover investors stopped writing checks following the turmoil in the tech industry that followed the market-shaking collapse of Silicon Valley Bank this spring/summer, according to documents filed Nov. 3 in US Bankruptcy Court in Delaware.
Chapter 11 is the part of US bankruptcy law that allows debtors to reorganize their liabilities with the goal of continuing to operate.
In a blog post Monday, Julia Wrin Piper, who replaced founder Ayr Muir as CEO last month, said the company will try to use bankruptcy to fix its business.
“We are all focused on putting Clover on solid financial footing so we can continue to make the food you love for many years to come,” Piper wrote.
Muir, an MIT–trained engineer and Harvard Business School graduate, launched Clover in 2008 as a single food truck that offered vegetable-based meals that would appeal to meat lovers.
“The first moments we had 200 people in line for the truck at MIT still feel impossible and electric when I think about it nearly 15 years later,” Muir wrote in a blog post last month. “We’re trying to create a new food system, a new food culture, one that’s both more delicious and has a much lower carbon footprint.”
Muir did not return a call seeking comment.
The company attracted funding from venture and private equity firms such as Boltendahl International Partners and Bamcap, according to Crunchbase. Clover’s bankruptcy filings also list The Carlyle Group, one of the world’s largest private equity firms, as a shareholder.
Today, the company operates 12 restaurants, two kiosks within Whole Foods stores, a catering business, and a meal box service, the latter of which now accounts for over 20 percent of its annual revenue. Clover employs more than 220 full-time and part-time workers.
The company, which was able to survive the pandemic thanks to government programs and tax credits, said it was confident that sales would return to normal in 2024. The company was also bullish on its larger future.
At the start of 2023, Clover hoped to raise money from investors to build a second commissary that would fuel its expansion throughout New England and New York City. So it made the fateful decision to sign a lease and start construction on a building at 50 Industrial Drive in Boston that was 2.5 times larger than its original facility.
But then SVB collapsed in February and funding dried up, leaving Clover unable to afford the lease on the new commissary it had just signed. Clover did not directly bank with SVB but the bank’s problems spooked investors in general.
“Unfortunately, Clover’s expansion plans and equity raise coincided with the failure of Silicon Valley Bank and the subsequent slowing of growth equity financial markets,” the company said in its bankruptcy filing. “Despite fund-raising efforts … the funding plan was unsuccessful.”
Compounding matters, traffic to its existing restaurants also slowed throughout the year and government pandemic assistance ended. In its filings, Clover blamed sales declines at its restaurants to employees continuing to work from home and not the office.
“COVID changed everything for restaurants like us,” wrote Piper, the company’s CEO, in a blog post. “The way we eat, drink, work, and get together has shifted substantially and, while Clover has seen a steady recovery in sales… our sales are still below pre-pandemic levels.”
Burt Flickinger, CEO of Strategic Resources Inc. consulting firm in New York, said restaurants like Clover did not anticipate inflation, which has driven up employee wages and the cost of food ingredients, forcing restaurants to raise their menu prices.
Compounding Clover’s challenges is that it prefers to buy its vegetables from local sources versus national distributors that can use their considerable scale to offer restaurants less expensive produce.
Inflation has prompted consumers to buy food at discount grocery chains and eat at home, Flickinger said. And the ones that still do visit restaurants are buying fewer items.
“It’s tough for restaurant chains to remain viable in today’s economy,” Flickinger said. “Clover is a very good chain facing impossible odds that its owners and operators could not have planned for.”
To keep afloat, the company raised another $1.8 million in May and slashed corporate wages by 43 percent. Clover also attempted to renegotiate leases with landlords on three of its struggling restaurants but to no avail.
So in August, Clover shut down its Copley Square/Back Bay location at 565 Boylston Street, which is owned by Community Church of Boston. In a blog post, the company said the restaurant, which was its poorest-performing location, was losing $350,000 annually over the past few years; its rent was also $350,000 a year.
In its bankruptcy filing, Clover said it may also shut down its restaurant at 27 School Street but it has yet to make a decision.
Thomas Lee can be reached at email@example.com.