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Bankruptcy Filing Puts Clouds in Tully's Coffee

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Photo: Paul Sableman / Flickr CCL

Looks like Thomas Tully O'Keefe finally woke up and smelled the coffee.

Some 20 years after launching the Tully's chain of coffee shops to rival Starbucks, O'Keefe's TCGlobal filed for Chapter 11 bankruptcy yesterday to get out from under a passel of underperforming stores, expensive leases, rising commodity prices and insistent creditors. Nine of the 57 stores in Seattle will close, including downtown store at 4th & Union flagship and a spot in Madison Park that competes with both Starbucks and Bing's.

Competition was supposed to be good, yes, and Seattle loves its coffee, but there's only so many takers for chain-store coffee with so many earnest independents in every neighborhood, not to mention the haters who have, for decades, maligned anything brewed with flavorful beans as "burned."

Tully's now faces the challenge of raising new capital, rejiggering its operations to produce better cash flow, trying to renegotiate its leases, and figuring out how much more it can squeeze its suppliers. (Its beans come from Green Mountain Coffee Company, which bought Tully's wholesale division only four years ago).

"It is a sad day in the history of Tully's; for its shareholders, employees and customers," founder O'Keefe wrote in an email. "Suffice it to say that the most important aspect of managing a business, or serving on its board of directors, is to protect the owners of the business, its shareholders, and make decisions in their best interest."

Seems to us, but maybe that's just our own selfish thinking, that successful businesses are managed in the best interest of the customers rather than to "protect the owners." Defense is not a good offense. Say what you will about Howard Schultz, that's not an email he would have written.

Tully's executives told the Seattle Times and Puget Sound Business Journal yesterday that they expected to emerge from bankrupcy next year.

· Tully's Coffee Files for Bankruptcy, Closes Stores [PSBJ]