A Western Washington restaurant chain that started in Whatcom County has closed after being unable to reorganize in bankruptcy court.
Court documents show NYP Bar and Grill shifted from a Chapter 11 reorganization bankruptcy filing to a Chapter 7 personal filing on May 11. By the weekend, all the Western Washington NYP restaurants were closed, including in Bellingham and Lynden.
The bankruptcy filing indicates debts of more than $2 million. That includes a $1.47 million claim by the Internal Revenue Service for taxes and more than $450,000 owed to Sysco Corp., which distributes food products to restaurants. The filing lists more than 100 businesses, agencies or people that are owed money.
Mike Novak founded the restaurant chain in 2009, first opening in Bellingham and Lynden. In an open letter, Novak said the opening of the downtown Seattle restaurant in 2011 was a major factor in the company falling into financial trouble.
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“Almost immediately the store started losing about $5,000 a week, and we fought on to try different ways of marketing it, executing the model etc. to no avail,” Novak said in the letter, adding the Seattle restaurant did not make money since it opened.
He said they didn’t close the restaurant earlier because they thought they could make adjustments to get it back on track. They also didn’t want to default on a commercial lease or lay off workers.
“Not closing Seattle NYP within a year or two of opening it and having these challenges is the biggest mistake made knowing hindsight,” Novak said.
The problems further escalated after the Chapter 11 reorganization filing, Novak said in the letter. The Washington Department of Revenue and the IRS challenged which chapter it would be filed under. Novak said they conceded to convert the case to Chapter 7, which led to the abrupt closures. He said in the letter they wanted to close slowly and pay the employees their final paychecks, but that the trustee, Virginia Burdette, told him that they would be a priority claim. The abrupt closures meant putting 300 people out of work, he said.
“The last thing we wanted to do was to immediately close our locations that remained but I also was not in a position to defy a court appointed trustee,” Novak said in the letter.
Novak declined to comment beyond the letter.
An attorney representing the trustee in the case said they would not have a comment about the filing at this time.
Also known as New York Pizza, other locations included Tacoma, Burlington, Everett, Seattle and Renton. According to court documents, the Seattle restaurant closed soon after the April Chapter 11 filing while the Tacoma News Tribune reported the Tacoma spot closed May 4.
The closure left employees, vendors, and landlords wondering what to do next. Brian Finnegan, who owns the building that was home to the Bellingham NYP at 902 N. State St., said he was told the Bellingham spot was among the restaurants the company was trying to save through reorganization when it was filed in April. When the filing switched to Chapter 7 last week, all the assets were turned over to a trustee and the restaurants were shut down.
Finnegan said that there is already some initial interest from strong, financially solvent restaurant chains. He expects that space will reopen as a restaurant relatively soon, once it gets approved by the trustee.
“It’s an up-and-coming area that draws a lot of college students,” he said.
Before operating NYP, Novak was vice president of Apex Construction, a Bellingham home-building company. His father, Thomas Novak, was president. That company also went into a personal bankruptcy protection, leaving behind millions of dollars in unpaid bills and lawsuits in 2008. Novak currently works in real estate in Everett.
According to a report from Seattle television station KIRO 7, some employees were left in the dark about what was happening until the announcement came that the restaurants were closing.
The (Tacoma) News-Tribune reported that the company also has a case pending in Pierce County Superior Court, involving a contractor who did renovations to the Tacoma restaurant. The suit alleges that the NYP owner owed $672,447 for the work.