Longtime Mission residents remember Phil Jaber as a friendly corner store owner who, back in 2003, started a coffee business to compete with the other three corners.
At first, it was a simple operation: a few racks of canned goods and coffee served with Jaber’s secret ingredients, cardamom and manufacturing cream. Philz grew from there into a San Francisco institution, its custom-made coffees sold across the city and eventually as far away as Chicago.
Last week, Jaber and his son, Jacob, who took over the business in 2005, sold their company to Los Angeles-based private equity firm Freeman Spogli for $145 million. (News of the sale was broken by Mission Local.)
The once-indie coffee shop that refers to itself as “the unofficial coffee of Silicon Valley” (Philz apparently even served drinks at Mark Zuckerberg's 2012 wedding to Priscilla Chan) is taking an exit. Whether private equity is the ideal exit remains to be seen.
Known for its specialty pour over coffee, Philz is, by design, a place where customers often linger. Many remember the cloud-painted, poster-laden walls of its original 24th Street location (which closed in 2023), now a distant memory amid the chain’s glossy, angular new spaces.
Some fear the acquisition will lead to a Starbucks-ification of Philz, shifting the chain’s neighborhood vibe to something blander, more universal. Current employees say that transformation is already underway. “It hasn’t been Philz for years now,” a person claiming to be an employee said on Reddit. “They are getting ready for a big Starbucks style change.”
This change apparently includes a different menu with additional flavors and syrups. Beyond that, the Reddit user claims store managers are being pushed out and replaced with those willing to manage multiple locations for a marginal raise. (Calls to Philz corporate office seeking comment were not returned; emails were responded to with a press release.)
Philz is just the latest Bay Area coffee brand to go corporate. Peet’s Coffee started in Berkeley in 1966 before becoming a staple of airports and malls across the country. Blue Bottle started as a Hayes Valley coffee kiosk in 2005 and raised more than $120 million in VC funding before selling its majority stake to Nestlé — the largest food company in the world — in 2017. Starbucks purchased the Fillmore-born French bakery chain La Boulange in 2012, and it was later revealed that they planned to offload the bakery’s 23 locations. (Fear not croissant fans: four remain). Even Sightglass Coffee, which began in SoMa with heavyweights like Jack Dorsey among its investors, has grown to include multiple locations, including one in Hollywood, and now has a former Starbucks executive as its CEO.
While some details of the sale — namely, how common stock held by employees is “effectively useless” — come as a shock, Philz has been flirting with outside investments for years now. Philz began its venture capital journey in 2013 and completed more than three funding rounds, bringing in around $75 million over the last decade-plus. That’s a lot of money for a corner store that specialized in cardamom.
The Philz acquisition fits a broader pattern of private equity targeting coffee brands: Coffee Intelligence, an online trade journal, reported in June of this year that leveraged buyouts have become “the lifeblood of global food and beverage deal-making.”
“It's happening a lot less in retail than it used to because retail is no longer a fashionable industry, but fast casual, coffee, healthcare, housing are all super hot industries right now, which means they are completely primed for private equity takeovers,” said Megan Greenwell, author of Bad Company: Private Equity and the Death of the American Dream.
“Small businesses of many kinds are going to just continue getting swallowed up by the hundreds and the thousands unless somebody wants to get serious about actually changing this system,” according to Greenwell, who grew up in the Bay Area.
Philz now has stores up and down California and in Chicago. It also attempted expansion into Washington, DC, but closed all five of its locations in 2023. Jacob Jaber told Forbes in 2016 that he envisioned opening 1,000 shops nationwide, including a launch in Boston. That dream never materialized. Jacob moved on from his role in 2021 and after a string of location closures, the company shut down its SF headquarters in 2024. CEO Mahesh Sadarangani, who took over in 2021, will stay with Philz after the acquisition.
But Philz, or the suits now backing the company, is invoking Jacob’s manifest destiny once again: “There are no plans to close stores, and in fact we have an exciting pipeline of new store openings planned over the next 24 months,” the company announced on its website.
Freeman Spogli has found success growing local chains in the past and could possibly do it again with Philz. The firm, for example, tripled the number of First Watch locations via an “aggressive growth plan” before the Florida breakfast chain went public.
But the big coffee success stories — Starbucks, Peets, Dunkin Donuts, Dutch Bros. — have fundamentally different business models than Philz. “They're not really doing a crazy amount of specialty as opposed to a place like Philz that is buying better quality coffee than these companies,” said Bryan Warchol, Director of Coffee at Berkeley-based coffee roasting collective CoRo. Not only does Philz specialize in unique blends, but its pour over-only menu sets it apart from other brands that produce beverages at mass scale.
As for why the Jabers sold now, that question has yet to be answered. Given the Trump administration’s sweeping tariffs on imported goods, including coffee beans, their timing is impeccable. They’ve managed to cash out and may live to see their little Mission shop go global on someone else’s dime. “I'm actually pretty surprised that Philz has lasted as an independent brand as long as they have,” Warchol said.
