Patrick Dempsey gets Tully’s, with assist from Green Mountain
At least a half-dozen companies were vying to buy the bankrupt Tully’s Coffee chain in early January, including a small concept known for its scantily clad baristas, a private equity group called Kachi Partners, the company’s Asian franchisee, and the world’s largest coffee chain, Starbucks. But in the end, the concept went to a Hollywood actor known as “Dr. McDreamy.”
The actor is Patrick Dempsey, who played the aforementioned character on the television show Grey’s Anatomy, and who led a group of silent investors, Global Baristas, that agreed to pay $9.15 million for Tully’s. He announced his victory via Twitter, noting that his group bested Starbucks for the chain.
Patrick Dempsey, right, tweeted this picture with a Tully’s barista.
“We met the green monster, looked her in the eye, and … SHE BLINKED!” Dempsey wrote. “We got it! Thank you, Seattle!”
Never turned a profit
All those companies were vying for a chain that never made a profit on its coffee shops and then sold off two of its best assets, including the rights to its brand name, to pay off debt.
Tom “Tully” O’Keefe started the chain in Seattle in 1991 almost as a hobby. Five years later he began raising money from investors and used those funds to expand the concept and turn it into a rival to the fast-growing Starbucks. At its peak the chain had 106 locations in 2001, and today lists franchised and licensed stores concentrated on the West Coast. But it also had 6,000 shareholders and had to operate like a public company, which cost it about $1.5 million a year. O’Keefe stepped down as CEO in 2001 but kept his chairman title.
In 2008, Tully’s sold its wholesale operations, and its brand name, to the maker of single-serve Keurig coffee machines, Green Mountain, for $40 million, using the funds to pay off debt. Yet the coffee shops still lost money. And by last year, Tully’s—now known as T.C. Global—had an accumulated deficit of $91 million. It filed for Chapter 11 bankruptcy protection and put itself up for sale.
Tully’s brand name drew multiple bids, including Kachi’s $4.3 million bid. But Dempsey would be the most public, announcing in late December his interest. After his group’s $9.15 million bid for the company was chosen at auction, he spent the next day visiting some of the chain’s Seattle area locations.
Dempsey’s bid was made possible by Green Mountain, the Waterbury, Vermont-based single-serve coffee maker. During the auction, Starbucks was bidding on the 25 best Tully’s locations. Other bidders were seeking the remaining parts ignored by Starbucks.
At the end of the 10-hour auction, Green Mountain decided it wasn’t comfortable with those partial bids and indicated it would only approve a bid for the full company. Dempsey’s group had been the last full company bidder left standing. Bidding was stopped, and the actor got his coffee chain.
“We are very encouraged and excited about Patrick Dempsey’s commitment to Tully’s, to the company, the stores,” said Tully’s CEO Scott Pearson. “This is a big win for Seattle.”