Shake Shack Founder Danny Meyer Invests $10 Million To Accelerate Chip City Cookies’ National Expansion

New York-based cookie and coffee chain Chip City, which was launched nearly five years ago by two childhood friends Peter Phillips and Teddy Gailas to provide nostalgic, gourmet sweet treats, plans to expand beyond its headquarters in the Northeastern U.S., with over 20 stores expected to open in 2023.

The rollout plan will be supported by the founder of fast casual restaurant Shake ShackSHAK
, Danny Meyer, who recently invested $10 million in the cookies company through Enlightened Hospitality Investments (EHI), the growth equity fund associated with his Union Square Hospitality Group (USHGUSHG
).

EHI will provide Chip City deep expertise across retail operations and hospitality, as well as strategic and operational guidance in partnership with USHG, which operates restaurants, including Union Square Cafe, according to a release.

“At EHI, we are always looking for businesses that have created craveable products and have earned a tribe-like following. Chip City checks both of those boxes in a significant way,” Meyer said. “Beyond loving their irresistible cookies, we have such enormous admiration for the purpose-driven leadership team at Chip City. Our cultures are deeply aligned, and that will make it all the more fun and uplifting to exchange learnings and experiences as the company continues to delight new communities with its cookies.”

Self-Ownership Of Supply Chain & Production

Across its 14 locations in Manhattan, Queens, and Brooklyn, Chip City currently offers 18 different classic cookie flavors that are rotated on the weekly basis, including chocolate chip, peanut butter & Jelly, s’mores, in addition to serving Joe Coffee — another USHG’s portfolio company, Phillips recently told me during an exclusive interview.

The company is able to maintain the quality and freshness of its products consistently since the dough is prepared frozen at a 18,000-square-foot plant in College Point, Queens, before being shipped to each retail shop and freshly baked. “We spend a lot of time building out our state-of-the-art facility, and we do all of our own productions,” said Phillips.

With the newly raised fund, Chip City will also establish a new Florida-based manufacturing plant as it’s gearing up for new retail launches in the region, in addition to stores opening across Boston, Connecticut and D.C. areas. These shops will continue to account for the majority of Chip City’s revenue, with around 30% of sales from direct-to-consumer and Uber Eats.

“We put our products in an airtight bag [for shipping] immediately after we bake them, and help preserve their freshness very well,” Phillips said, adding how EHI will potentially help negotiate favorable retail leases as Chip City expands.

The cookies category is growing fast in the U.S. with sales totaling $11.68 billion in 2021, according to Mordor Intelligence. It is projected to register a 3.38% CAGR during the forecast period of 2022-2027, bolstered by a group of emerging brands such as Mmmly, Maxine’s Heavenly, and Last Crumb.

However, entering retail will not be on Chip City’s near-term agenda, noted Phillips. “It’s a very different type of business,” he said. “We just want to keep producing the best products and experience possible, and keep creating opportunities for our customers and employees.”