Chop Chop, FoodUp and a delivery deal gone wrong

A screenshot of the Chop Chop website in 2018. The company has gone dark amid a dispute regarding a sale of the company to another local startup. (BizSense file)

A bid to create a more formidable local competitor to national restaurant delivery apps like DoorDash has left a five-year-old local startup defunct and its founder considering legal action.

In late 2022, Richmond-based delivery service Chop Chop agreed to be acquired by local takeout service FoodUp. Chop Chop powered down as part of the deal, in what was envisioned as a temporary pause, with an eye toward the service relaunching under the FoodUp banner.

But the deal has since soured, with Chop Chop founder Chris Chandler and FoodUp founder Phu Nguyen now pointing fingers as to who’s to blame.

Chandler claims it led to a complete shutdown of Chop Chop about a year after the deal was signed. He says he’s owed $120,000 from the pact. In an interview last week, Chandler was weighing legal action against Nguyen to begin the process of either getting the payment promised in the purchase agreement or reclaiming Chop Chop.

“It’s kind of sad but the only option we have is to go down the path of suing him,” Chandler said. “At that point we can start the discovery process to look for funds in their accounts.”

Nguyen, who crafted FoodUp as a cooperative with other restaurants buying in as owners, said he wasn’t aware Chandler was considering legal action against him until BizSense sought comment on the matter. Nguyen said the deal fell apart despite his efforts to hold it together.

“I didn’t do anything wrong. I was acting on behalf of the co-op. I tried to do the best for the co-op and tried to look out for (Chandler), too, and things didn’t work out. The biggest issue is rather than trying to find a productive solution around it, it looks like he’s going nuclear,” Nguyen said.

Chris Chandler

Nguyen argued Chandler didn’t fulfill his side of the purchase agreement when he failed to hand over Chop Chop’s customer database and wasn’t able to transition merchants on Chop Chop’s platform to the FoodUp system. Nguyen said as far as he’s concerned Chandler still owns Chop Chop, and Nguyen said he shared that position with Chandler in the fall but that Chandler didn’t agree.

“When we started the merger between FoodUp and Chop Chop there were some requirements and terms that were put into place and those terms were not met,” Nguyen said.

Chandler said he was willing to provide the customer database but was unclear on who to send the information to, and that he wasn’t asked for it. He said he attempted to transition restaurants onto FoodUp but ultimately wasn’t successful in doing so because the change came across as a bad business proposition to restaurateurs.

“It wasn’t an easy sell,” Chandler said.

Acquisition unravels 

While both Chop Chop and FoodUp have since gone dark, in 2022 the companies were on the cusp of building what their founders envisioned as a stronger homegrown competitor to national food delivery companies.

Chop Chop pitched itself to the area’s restaurant operators as a local, lower-cost food delivery alternative to companies like DoorDash. In 2021, Chop Chop was charging 20 percent commissions to eateries for its drivers to fulfill orders.

FoodUp was envisioned as a takeout ordering service with a cooperative model in which restaurant operators owned the company and collected profits from its operation. The concept featured a flat $500 membership fee charged to restaurants that wanted to use the platform.

Both companies cast themselves as more restaurant-friendly counters to national food delivery companies. DoorDash and UberEats charge commissions of 15 percent to 30 percent for delivery orders and 6 percent commissions for takeout orders, per the companies’ websites.

The idea was that Chop Chop with its delivery service and lineup of restaurants, coupled with FoodUp’s in-house software development capabilities, would create a better local counterweight to national operators.

Chandler said he heard about Nguyen and FoodUp through a business contact, and the pair began discussions about a deal in which FoodUp would buy Chop Chop. Chandler felt that between FoodUp’s goals and his own desire to let someone else take the reins of Chop Chop, it made sense to work out a sale.

“It aligned at the time for what their needs were and my exit strategy,” Chandler said. “It’s just one of those things you have to have a little trust and faith in people and from the due diligence that I did, it all seemed to align.”

Nguyen told BizSense around the time the deal was pending that the Chop Chop acquisition was desirable as a means to fast track FoodUp’s implementation of delivery service.

A screenshot of FoodUp’s website around the time the concept launched in 2022.

Nguyen told BizSense at the time that FoodUp stood to have 75 to 80 restaurants available on its app once the acquisition was completed.

The deal was signed in December 2022, and a three-month transition period ensued. Chandler said he and Nguyen worked together to promote FoodUp and get the restaurants that Chop Chop had relationships with onboard with the new concept, which launched as a takeout app with plans to incorporate a delivery service in the future.

Chandler said it was difficult to get restaurants to buy into a takeout service, which he said was seen by restaurant owners as a downgrade from the delivery service offered by Chop Chop. Another hurdle was pitching restaurateurs on an upfront buy-in to participate in FoodUp. Chop Chop had previously charged restaurants only a per-order fee.

By March 2023, the transition period ended and Chandler decided he didn’t want to stay on with FoodUp and parted ways. He said he left because he felt his advice wasn’t being heeded at FoodUp, and that it was unclear to him when the planned delivery service would be introduced.

Per the purchase agreement, Chandler was to receive a total of $120,000 spread across 12 monthly payments starting in August 2023. But the money never materialized, and as of last week Chandler said he still had not seen any payment related to the deal.

Last September, after emails to people involved in FoodUp seeking an update, Chandler had a lawyer send a letter requesting payment addressed to Nguyen and former board members of FoodUp: Gagik Suleymanian, Jaynell Pittman-Shaw and Walter Guevara.

A copy of the purchase agreement shared with BizSense by Chandler shows that he signed on behalf of Chop Chop, while Suleymanian, Pittman-Shaw and Guevara signed on behalf of Food and More LLC, which is tied to FoodUp.

Suleymanian, in an August 2023 email shared with BizSense by Chandler, told Chandler that he resigned from the board in December 2022, which Chandler said was an early indicator that the deal was in trouble. The purchase agreement was dated Dec. 12, 2022, and it was unclear from the email whether the resignation occurred before or after that date.

“That was a huge red flag because they signed the agreement,” Chandler said. “I’m like ‘how are you not part of this cooperative whatsoever and signing this legal document?’”

Late last year, Chandler said he was considering legal action against the FoodUp board members, but that a lawyer advised him otherwise. He said he has since shifted attention toward Nguyen because it’s been disputed how involved the board members actually were in the company’s ownership.

Phu Nguyen

Nguyen has previously identified the FoodUp board members as co-owners of the company, and more recently reiterated that he transferred ownership of the company to a group of local restaurant operators that included the board members by the time the acquisition deal was signed.

Cooperatives by definition are owned by their membership, and FoodUp launched with an arrangement in which using the platform didn’t necessarily make one an owner. Nguyen told BizSense in late 2022 that Suleymanian, his wife, Pittman-Shaw, Guevara and two other local restaurant operators were part-owners of FoodUp.

In recent interviews with BizSense, Pittman-Shaw and Guevara both disputed they were ever co-owners of the company and said they were simply users of the FoodUp platform, which they said ultimately didn’t become operational. Both said they never received any orders from the platform.

The Suleymanians, who operate The Greek Taverna and declined to comment for this article, told BizSense in September 2022 that they were part owners of FoodUp, which purportedly had launched that month.

Chandler said it was his understanding early on in his dealings with FoodUp that the board members who signed the purchase agreement were the owners of FoodUp.

Pittman-Shaw, who operated the now-closed Maple Bourbon in Richmond, and Guevara, who operates Perlas Pizza in Short Pump, denied in interviews with BizSense they’re responsible for the payment to Chandler. They said responsibility for resolving the dispute lies with Nguyen because he handled the deal, a sentiment that Nguyen told BizSense he agreed with.

“I’m disappointed he wrapped us up in this at all. This has nothing to do with the FoodUp co-op members. We’re not members of the entity (Food and More) that entered into an agreement with Chris,” Pittman-Shaw said. “I’m not going to pay back something I never owed.”

Pittman-Shaw said she signed the purchase agreement because Nguyen told her the board needed to approve the acquisition. Guevara said he signed the agreement because he was asked to and didn’t want to hold up the deal.

Pittman-Shaw said the expense of using national delivery apps, which charge upwards of 30 percent per order, motivated her to consider getting involved with FoodUp in the first place.

“The co-op was simply supposed to be a group of restaurant owners trying to figure out how to reduce their delivery rates,” she told BizSense. “It sounded good. It sounded reasonable. Independent restaurants can’t afford 30 percent all the time.”

Pittman-Shaw and Guevara said they have both left FoodUp, and it appears so too did Suleymanian.

Nguyen left the company in spring 2023 in order to focus on other business ventures, and said that as far as he knows FoodUp isn’t actively operating. He is now working on a food truck park and entertainment venue called The Glades. Nguyen said The Glades is still slated to open at a site in Innsbrook but as of last week didn’t have an opening date set.

‘I don’t know how we survived as long as we did’

Chandler founded Chop Chop in 2018 and pitched it as a lower-cost alternative to national delivery companies for restaurants seeking delivery service. He said app-based food delivery is a tough gig, particularly for a local operation contending with heavyweights like DoorDash and UberEats, and customer expectations of larger operators were applied to Chop Chop as well.

“It’s very hard to do. You have to have a niche market. You have to have the organization to run a platform pretty well,” he said.

Chandler said Chop Chop didn’t allow drivers to cancel orders, so it was frequently an issue when restaurants got backed up, which led to delays to deliveries and unhappy customers.

“People tried to hold the expectation of Uber and DoorDash to us. We don’t have a hundred drivers waiting around for an order,” he said.

Chandler said his primary goal in weighing legal action is to get the money he would have received under the purchase agreement. He said that legal action could also serve to secure the Chop Chop brand, though Chandler says he still has access to the company’s website, data and social media.

“I have to find out if they are accountable. And if they aren’t accountable, I’d like to at least get the name back if there’s a chance to relaunch it,” said Chandler, who admitted he expected it would be difficult to relaunch the brand for financial and other reasons.

“I don’t know if it’s something that can be brought back because the restaurant world changes so rapidly,” he said. “It takes funding, and that’s something that’s not there right now.”

Still, Chandler was bullish that a local delivery service could hold its own against national competitors, particularly if a local company pitched itself as a lower-cost alternative to local restaurants using national apps. He said the FoodUp concept had some promise because it intended to give restaurant operators a bigger stake in its success with its joint-ownership model and encourage them to part ways with national delivery brands.

“There’s always going to be a market for that. When you’re dealing with those large-scale companies, it’s not going to benefit the restaurants,” he said. “The whole idea transitioning to FoodUp was that if the restaurants owned the business and bought into the co-op, they would be more likely to get rid of the bigger players.”

Nguyen agreed that local food delivery companies could be successful, but said that one hurdle, which FoodUp wasn’t able to clear, was the need to have critical mass of restaurants behind the concept.

“I absolutely think a local delivery service, especially a co-op, is essential and it can be successful. But with every cooperative, in order for it to be successful it needs economy of scale. In this instance, more people have to buy into the business model. I stepped away too soon before it got to that,” Nguyen said.

At Chop Chop’s peak, Chandler said the company had around 80 to 120 restaurants listed on its platform. But it never achieved profitability, Chandler said, and he frequently borrowed money to keep the business running and drivers paid. He noted major players in the industry have also struggled to turn a profit, but they have greater financial backing.

“DoorDash and all those companies are losing money all the time. We were doing the same thing, and we didn’t have the funding they did,” Chandler said. “I don’t know how we survived as long as we did.”