Tully's Coffee files for bankruptcy, closes stores

After struggling with cash flow and real estate issues, Tully's Coffee filed for Chapter 11 bankruptcy protection in federal bankruptcy court in Seattle on Wednesday.

Seattle-based Tully's was founded in 1992 by Tom O'Keefe. But the company constantly struggled to make a profit and distinguish itself from Starbucks and other coffee chains.

Tully's, which has been closing stores around the country, including several in the Seattle area, also announced it would close additional "unprofitable stores" in the near future. Tully's Seattle stores in Wallingford, Madison Park, Columbia Tower, Fourth Avenue and Union Street, as well as stores in Redmond and Kirkland, will all close their doors Sunday.

In the bankruptcy filing, Tully's - which operates under the corporate name TC Global Inc. - listed $5.9 million in personal property as the company's only assets and $3.7 million in total liabilities, including $2.6 million in unsecured credit.

Tully's cash-flow issues have had a direct effect on its ability to pay suppliers, including a $347,000 bill from Green Mountain Coffee Roasters of Vermont.

In 2009, Tully's sold its wholesale business to Green Mountain Coffee for $40.3 million. That money allowed Tully's to pay off its debts and provide a $6 million dividend to shareholders.

The Green Mountain deal left Tully's with its domestic retail and international retail and wholesale business.

Tully's also owes Seattle catering company Gretchen's Shoebox more than $550,000 and the Seattle Times $22,000.

In a press release, Scott Pearson, president of TC Global Inc., said the company would continue to have a "formidable presence" in the Puget Sound area, despite the store closures.

Tully's has often tried to emulate the success of its giant rival Starbucks, including mimicking Starbucks by adding food and cold summer drinks.

In 2008, Tully's planned an initial public offering of stock to raise around $34 million, but that was tabled because of market conditions.

In 2009, fresh out of debt and fresh off its first profitable year since 2006, Tully's added dozens of stores in the U.S. and Asia.

From: bizjournals.com