Los Angeles-based private equity firm Freeman Spogli & Co. is in the process of buying Philz Coffee for $145 million, according to documents shared with stockholders and obtained by Mission Local.
Philz board members, which include former CEO Phil Jaber and his son, Jacob Jaber; representatives from investment firms Summit Partners and TPG Growth; and CEO Mahesh Sadarangani will receive payouts or bonuses from the deal.
Those who hold common stock, like employees who bought stock during or after their years at the company, will see their stock canceled under the terms of the agreement, making those investments effectively worthless.
“All Common Stock will be canceled for no consideration and all Options will be canceled and extinguished for no consideration,” the document reads.
The dissolution of common stock is rare outside of cases of liquidation or bankruptcy, but it does happen. Unlike preferred stock, common stock comes with few protections for investors. But to employees who spent years at the company and worked closely with the Jabers, the news comes as a shock.
“Philz ran out of money. That’s really what it is,” said one former employee, referencing a history of private equity and venture capital infusing the company with money when it was running low. He paid tens of thousands of dollars to purchase his stock. “When I saw the price, I thought, well, I hope I can get some of my money back.”
“I was expecting to at least gain something of it,” said another former employee, who paid $12,000 for her shares in 2013. She asked that her name be withheld for fear of legal action. “I committed eight years of my life with them. When I started, there were three stores. When I left, there were 20 stores.”
She said that she had been personally offered stock options by Phil Jaber and Jacob Jaber when they first became available to employees in 2013, and later, in 2015, purchased stock at a discounted rate.
But current and former employees said that the company culture began to change in 2016 with large infusions of cash from investors, like $45 million led by TPG, a private equity company.
Employees who joined the company in the mid-2010s emphasized that the team was tight-knit and that they had direct relationships with the Jabers. That shifted in the last five years, they said, though the company continued to lean into its small business reputation with slogans like “Better Days.”
“It was becoming less of a personality place, more of a purpose place,” said former Philz wholesaler Mike Dalla. “It’s no longer like a treat or destination thing.”
Dalla worked at Philz for nine years until last year, when he was laid off. He said that many longtime employees left around the same time as the company’s culture shifted to a more profit-driven, corporate culture.
On his way out, he said that CEO Sadarangani urged him against exercising his stock options — options that will now, barring changes to the current deal, be worth nothing. “I always assumed they would do the right thing,” Dalla said.
Philz Coffee and Sadarangani did not respond to requests for comment by press time.
The deal is expected to be completed by Aug. 8. Current stockholders have until Aug. 5 to request an appraisal of their shares, according to a notice sent to stockholders.
Philz was first approached by buyers in December 2024, but Freeman Spogli did not enter the mix until April of this year, according to the notice sent to stockholders.
Freeman Spogli has invested in Popeyes, Cinnabon, El Pollo Loco, and Cafe Rio. The firm’s portfolio also includes a keg company, a wine distributor, a med spa company, and a roofing company.
Philz Coffee began in the Mission District in 2003 at 3101 24th St., when original owner Phil Jaber converted a liquor store to a coffee shop. That location closed in 2023, but the business has stores up and down California as well as in Chicago. The chain also had five locations in the Washington, D.C., area, all of which closed in 2023.