Last week, British coffee chain Caffè Nero bought Compass Coffee at auction after it went bankrupt. It was an ignominious end for what was once one of the DMV’s hospitality high-flyers, a company founded by a pair of local guys. So, what went exactly wrong?
Back Up, Was Compass Coffee All That?
Compass Coffee was started by two D.C. natives — Michael Haft and Harrison Suarez — who met while at school in St. Louis. They later served as commanders in the Marines together in the same area in Afghanistan, often meeting up to debrief over coffee.
Upon returning they decided to start a coffee company, with a significant amount of funds coming from Robert Haft, Michael's father, part of a legendary business family in D.C. They launched their first store in 2014.
What Made Compass So Successful
Compass took off when they opened their first downtown location, relying on the steady influx of downtown office workers. They positioned themselves as a sweet spot between big chains like Starbucks and independent coffee shops, prioritizing drip coffee blends marketed towards people on-the-go. This worked exceedingly well, and eventually, Compass opened six locations downtown which collectively brought in half a million dollars a month.
Compass Coffee in Rosslyn, VA (The Washington Post/Getty Images)
Where It All Went Wrong
Like many businesses, Compass took a big hit during the pandemic when their main revenue stream — downtown office workers — skidded to a halt. It didn’t help that right before the pandemic they dumped millions into a huge roastery in Ivy City which never ended up being profitable.
They slid by for a while thanks to $16 million in different Covid relief funds and a few smart business pivots (like manufacturing hand sanitizer). But in 2021 the relationship between the co-founders started to deteriorate. Haft wanted to dissolve their partnership and sell his shares.
This led to disagreements over the evaluation process and Suarez eventually filed a lawsuit claiming that Haft and his father conspired to hide how much ownership they had over Compass by using generic-sounding LLCs.
To make matters worse, Compass was also undergoing a considerable fight with its workers over union efforts at the time, leading to several public boycotts and a general downfall of its image among locals.
Finally, last month they officially filed for bankruptcy.
So What Happens To Compass Coffee Now?
The final sale hearing for Compass Coffee is today, where the judge will most likely approve the sale to Caffè Nero for $4.76 million. However, Suarez submitted an objection to the sale on Monday, saying it was rushed and inadequately marketed, which could slow things down.
As for the cafes themselves, Nero plans to continue operating Compass Coffee as Compass Coffee, but it’s unclear for how long.
