San Francisco food delivery startup Munchery shut down yesterday without paying a local bakery and other suppliers, its wholesale vendors claim. Three Babes Bakeshop, a woman- and minority-owned bakery, provided weekly pie orders to Munchery for years — but co-founder Lenore Estrada says that Munchery hasn’t paid for orders delivered prior to Thanksgiving, and owes her company $20,000.
“We haven’t even gotten an email from them,” said Estrada, who heard of Munchery’s closure in the news. The startup, which once raised $125 million in funding, told customers it would shut down yesterday via email — but mentioned nothing to its suppliers.
“All the people we know here haven’t responded for a month or so, and as of today, everyone’s email address doesn’t work,” says Estrada. “It’s really hard — we don’t know who to reach out to.”
That’s why she went down to Munchery’s headquarters in person, sharing her story on Instagram.
“I rang the bell, and the security guard came and said there was no one to talk to,” said Estrada — not entirely true, since there were some employees milling about. Eventually, she was able to speak to one employee, who told her that the company’s funds and assets were already controlled by a bank. (It’s not clear if those claims are true).
Munchery’s debt to Three Babes Bakeshop is just one of several unsettled accounts. Crumble & Whisk, a black-owned Berkeley bakery known for its cheesecakes, says it’s owed $1,700, and Good Stuff Distributor, a family-owned wholesaler of juices and snacks, says it’s out more than $8,000.
“What I find is so disrespectful in all of this is they didn’t even give us the courtesy of an email,” says Crumble & Whisk owner Charles Farrier. “It’s a slap in the face.”
In an email to Eater, a spokesperson for Munchery wrote “We have not yet determined how/ who will be managing the wind down process. All vendors should reach out to firstname.lastname@example.org and we will follow-up in the next few days.”
Late payments from large wholesale clients are nothing new for Three Babes. “We’ve been selling to [Munchery] for three or four years, and this happens almost every year at the beginning of the year,” she says. Munchery isn’t even the worst offender. And because Munchery had eventually paid her in the pst, Estrada assumed they would do so again.
“You don’t have very much of a choice,” she says. “You can choose to not sell to people, but you need the money.”
Munchery isn’t even the first food delivery startup buying Three Babes pies to suddenly close. “We’ve been through this with Sprig, who actually paid all their bills,” says Estrada. Sprig closed in 2017.
“Just like Three Babes Bakery, I’ve experienced a large account owing me over $20K before just to find out they have closed the business and filed [for] bankruptcy,” recalls Nader Chehade of Good Stuff Distributor. ”It takes a very, very long time for those claims to go through, and we only ended up receiving about $400 from the $20K balance.”
“We’re a family-owned business and it’s disturbing to go through that and foot the bill, especially with 30 plus employees we have to take care of,” Chehade said.
For Three Babes, $20,000 is an entire payroll: Estrada pays employees every two weeks, and farmers on delivery or within 30 days at the most. Now, they’ll have to either borrow or be late paying their farmers.
“The most frustrating thing is there’s no recourse,” says Estrada. “I have to personally guarantee all my loans to the bank. But in this case, [with Munchery], there’s no one who’s accountable for paying the bill.”
This story has been updated to include comments by Crumble & Whisk bakery and Good Stuff Distributor, Inc.