Three Babes Bakeshop fears it may have to make cutbacks because the owners fear they will not be repaid by bankrupt startup Munchery.

Scott Lettieri/KCBS Radio

Startup's Bankruptcy Puts Popular Bakery In Jeopardy

Scott Lettieri
March 05, 2019 - 2:23 pm

SAN FRANCISCO -- Dozens of Bay Area small businesses have been left high and dry by Munchery, the once vaunted meal kit delivery service that filed for Chapter 11 bankruptcy on Tuesday.

Three Babes Bakeshop in the Bayview neighborhood of San Francisco claims that Munchery owes $20,000 for orders of baked goods that have been delivered. The women and minority-owned business makes pies, muffins, cookies and special order baked goods, and it’s one of more than 100 vendors who are left in the lurch by the tech unicorn’s sudden collapse.

Paula Sato, Three Babes’ baking operations manager, said there’s little chance they’ll ever see that money.

“It was bigger than our entire profit margin last year,” she told KCBS Radio.

Owner Lenore Estrada said that could mean missed rent payments, layoffs, or waiting another year to expand benefits to its employees.

Munchery owes $28.5 million in secured debt to lenders and $6 million in unsecured debt—about half of it to vendors like Free Babe’s, according to Fortune, and the other half to customers who still have unfulfilled gift cards.

Citing an inability to attract new customers and increasing competition in the food and meal delivery space, the startup waited until the last possible minute to file Chapter 11 after raising more than $125 million in venture capital. The startup has been in financial difficulty for more than a year, and it sent notice on January 21 to its customers that it was ceasing operations effective immediately.

According to the bankruptcy filing, Munchery CEO James Beriker is continuing to receive a salary of $18,750 per month through April, and could receive a $250,000 “success fee” for liquidating the company’s assets.

Munchery officials have not responded to KCBS Radio's inquiries. 

Written by Jordan Bowen.