Munchery Owes $6 Million to Vendors and Customers, Bankruptcy Filings Reveal

More than a month after abruptly shutting down its operations, San Francisco-based meal delivery startup Munchery has filed for Chapter 11 bankruptcy. In his filings, CEO James Beriker reveals the company has debts of $6 million: $3 million to vendors, including small local bakeries and drinks suppliers who went unpaid for months, and $3 million to customers with unredeemable gift cards, which Munchery shamelessly promoted even as its business circled the drain.

“That’s much more debt than we thought,” says Lenore Estrada, co-owner of San Francisco pie company Three Babes Bakeshop. Munchery owed $20,000 to Three Babes — and when it closed, the company failed to send them and other vendors so much as an email.

Estrada doesn’t expect to see the $20,000 she’s owed, and she’s particularly astounded that Beriker will pay himself $18,000 a month during the bankruptcy proceedings (half his usual monthly salary) plus hundreds of thousands more, depending on the potential sale of assets.

“If he took a pie from me and didn’t pay for it, that would be illegal,” says Estrada. “But he’s getting away with it, and being paid hundreds of thousands of dollars.” Estrada would like to see the city attorney pursue charges against Munchery.

Lenore Estrada

In bankruptcy filings, Beriker blamed Munchery’s failure on aggressive early expansion, competition from on-demand delivery services like Caviar, Seamless, and Uber Eats, and the failure of Blue Apron’s IPO, which softened the market for meal service companies. In Munchery’s final years, Beriker hoped to sell the company, but couldn’t negotiate a buyer.

Now, Estrada is gearing up for brisk sales on Pi Day — practically Christmas for pie enthusiasts — and considering the differences between her small business and large, venture backed companies like Munchery. To her, it feels like they play by different rules.

“Because Munchery’s not paying me, I can’t pay the farmer that gave me the pumpkins to make the pumpkin pies,” says Estrada, “so I have to take what would have been profit from other parts of my business [and pay the farmer.]”

Venture firms don’t have to do that — if one of the companies they back is a success, and another isn’t, they reap only the reward.

“They have profits in some parts of their business, and extreme losses [elsewhere], and they don’t have to take any responsibility for those losses, while I — whose business model isn’t set up to manage that loss — am stuck with it.

That frustration led Estrada and other unpaid vendors to protest outside SF’s Sherpa Capital (which backed Munchery), hosting a mock bake sale on the street in late January. According to a sign, one pie would cost Sherpa Capital $20,000.

• Failed meal-kit service Munchery owes $6M to gift card holders, vendors [TechCrunch]
• Meal Delivery Startup Munchery Stiffed SF Pie Company $20,000, Baker Says [ESF]