For a minimum of a number of days after Christmas, nothing appeared out of the extraordinary at Blue C Sushi, the favored conveyor-belt sushi chain in Seattle and Southern California. Diners filed in. Cooks handcrafted an array of sushi and nigiri, inserting them onto color-coded plates that drifted by means of the restaurant’s eating space on a transferring platform, out there for patrons to choose from because the dishes crawled by. The official Blue C web site marketed a January hamachi nigiri particular, together with brand-new sake choices. Buyer Phil Rose went to the Blue C restaurant in downtown Seattle for lunch on New Yr’s Day and ordered three rolls and an octopus nigiri. “I observed that the service was slightly extra attentive than it had been on earlier visits,” he says. “Nothing else distinguished it.”
However on Monday, January 7, issues floor to a sudden halt. Kent-based seafood provider Younger Ocean Inc. tried to make a supply to one of many Seattle Blue C areas, however nobody was there to obtain it — the constructing was darkish and the doorways had been locked. On the identical day on the Blue C in Westfield Southcenter Mall in Tukwila, a busser got here to work for her shift and noticed chairs upturned on the tables, with clients unable to get in. One observer took a photograph of a padlocked door on the College Village location with a hire default discover posted on the window.
At 10:45 p.m. the earlier night time, Madison Holdings Inc. — Blue C Sushi’s dad or mum firm — despatched out an e-mail to its workers saying the closure of all seven remaining eating places in its empire and the termination of greater than 100 folks, efficient instantly. Administration issued last paychecks that week and knowledgeable a minimum of some staffers that they would wish to go to a close-by Starbucks to gather their pay. The chain, which had been round since 2003, rising to 6 areas in Seattle, two within the Los Angeles space, and one other in San Francisco, was successfully wiped from the map.
On the time, a Blue C consultant cited “surprising monetary and different circumstances” as the rationale for the closure. Eater reviewed chapter filings and different monetary paperwork that reveal Blue C was greater than $34 million in debt, suggesting that the circumstances across the restaurant’s closing might not have been so surprising — to a minimum of some throughout the group. Interviews with previous workers at a number of ranges throughout the firm paint an image of a company that stumbled by means of a sequence of poor administration selections and long-term infighting. In the meantime, employees had been laid off with out warning, distributors couldn’t work out who would settle up unpaid payments, and clients who had bought reward playing cards over the vacations had been left with nugatory plastic.
Abrupt closures that depart workers, suppliers, and patrons within the lurch are all too frequent within the restaurant enterprise. What made Blue C’s sudden and full shuttering so alarming was that there have been loads of indicators that issues weren’t going nicely, stretching again greater than seven years — however the main figures concerned both selected to disregard these warnings or tried to energy by means of. The result’s a cautionary story about what can occur to a restaurant when inexperience, ample money circulate, and unchecked ambition collide.

Blue C Sushi included RFID know-how.

A BLT roll. (Each pictures: Blue C Sushi/Official)

The minds behind Blue C Sushi, James Allard and Steve Rosen, had been two ’90s dot-com entrepreneurs based mostly in Seattle who needed to go away behind the seemingly countless fallout of the tech bubble burst to embark on a totally completely different sort of undertaking: a restaurant. Neither had any expertise within the enterprise, however Allard hung out in Japan as a regulation scholar and “fell in love with conveyor-belt sushi as a result of it was reasonably priced,” says Rosen. After leaving a Seattle-based search engine firm referred to as InfoSpace in 2002, the duo labored with Arthur Rubinfeld, a former Starbucks government who specialised in retailer improvement and actual property. Collectively, the three males scouted present conveyor-belt sushi joints (identified in Japan as kaiten) within the Pacific Northwest, London, and Tokyo, and analyzed the market to measure the viability of what would turn out to be Blue C.
“Scrutinizing the visitors over a number of days, we may calculate that [a local] kaiten restaurant was simply doing 1,000,000 {dollars} a yr in gross sales!” writes Rubinfeld in his guide Constructed for Progress: Increasing Your Enterprise Across the Nook or Throughout the Globe. “This and the opposite elements had been sufficient to persuade me of the attraction of the idea, not simply in Seattle or on the West Coast however all through america.” So Allard and Rosen determined to do what Starbucks had achieved earlier than them: gentrify an present idea and revenue handsomely.
On the time, kaiten eating places weren’t identified for his or her atmosphere in Japan or the U.S. They typically had a cafeteria-like ambiance — fluorescent lighting, minimal decor, and fundamental menu gadgets. Sushi Land, an organization from Osaka, was already within the Seattle space, and it was gaining traction. One other Japanese-based chain, Genki Sushi, finally landed on the scene. For these locations, the conveyor belt wasn’t only a gimmick: It was a solution to minimize down on staffing prices. Allard and Rosen noticed a chance to go upmarket, delivering higher-quality meals in an attention grabbing area at a barely increased value level than its rivals.
Their marketing strategy solidified, Allard and Rosen wanted a cash man. Enter Russell Horowitz.
Rosen and Horowitz grew up collectively within the Seattle space, and when Horowitz based an internet listing firm referred to as Go2Net within the ’90s, he referred to as on his childhood buddy to be one of many first workers; Allard got here on as vice chairman of operations at Go2Net not lengthy after. With an inflow of cash from tech large Paul Allen, issues had been going nicely. However then Go2Net merged with InfoSpace; Horowitz left in January 2001 and bought his shares for greater than $30 million, in what firm investigators have since probed for potential insider buying and selling. Whereas neither the SEC nor the corporate filed prices, shareholders efficiently sued InfoSpace executives. As soon as the mud settled, Horowitz used a few of his earnings to fund Allard and Rosen’s nascent sushi enterprise.

A California roll.

The eating places conveyor belt offered real-time knowledge to cooks. (Each pictures: Blue C Sushi/Official)Blue C Sushi/Official

In August 2003, the primary Blue C location opened in Seattle’s Fremont neighborhood, that includes dim lighting, an unlimited film display, and decor meant to mirror the world’s bohemian vibe, together with a 15-by-3-foot mural of native landmarks. The house owners upgraded the conveyor belt to include RFID know-how that offered real-time knowledge to the cooks, documenting the precise second a plate was lifted from the belt and the way lengthy it had been revolving. On opening night time, the restaurant was packed, and clients continued to flock in droves.
Over the following seven years, Blue C discovered its area of interest. Whereas it by no means ended up on the highest of “greatest Seattle sushi” lists, it did a very good job catering to college students on a finances, businesspeople on a lunch break, and households with youngsters. Allard, Rosen, and Horowitz opened six extra Blue C areas within the Seattle space, together with three noodle joints referred to as Increase Noodle. In accordance with Rosen, the restaurant group — christened Madison Holdings Inc. — was pulling in between $15 million and $20 million in income and about $2 million in internet revenue yearly by 2011.
In April of 2012, the founding trio even landed on Seattle journal’s inaugural checklist of the “70 strongest gamers within the Seattle meals scene.” For 3 dot-commers with no prior restaurant expertise, it was excessive reward. Even in a metropolis crowded with sushi rivals, Blue C appeared like it will stick round.
Behind the scenes, although, issues had already begun to unravel.
Three months earlier than their look in Seattle journal, Allard and Rosen left Madison Holdings — neither would touch upon the explanations behind their departure. With the pair gone, Horowitz re-organized administration, leaning extra closely on George Christothoulou, the manager vice chairman who oversaw finance, accounting, and operations at Madison Holdings. And, for the primary time, he additionally determined to rent some high-level choice makers with restaurant expertise. In late 2011, Horowitz introduced on Richard Dalton as the corporate’s president. Dalton had been a longtime government with the now defunct Boston-based Again Bay Restaurant Group, which was behind mega-popular high-end east coast chains like Atlantic Fish Co. and Papa Razzi. Then in June 2012, he tapped Jeffrey Lunak, an government chef at Morimoto Napa, to be the corporate’s chief culinary officer. Horowitz tasked the brand new hires with a plan to increase the franchise into California, opening eating places in Hollywood in November 2013, then Newport Seashore and San Francisco in July 2014. However issues didn’t precisely go easily.
Two sources with intimate information of the Blue C growth into California, who requested to not be recognized resulting from concern of litigation, cite main issues with this period of the enterprise. “The build-outs had been far more costly [than anticipated], the areas had been no good, they usually weren’t performing nicely. Each a kind of needed to be funded by Russ, after which on high of it, the general revenues of the companies had been declining,” says one former high-level worker.
One other supply says, “There have been instances when the California eating places had been behind on hire and vendor funds. It was a relentless sport for them to attempt to get funds from us.”

A fowl’s-eye view from the second degree of the Bellevue Blue C location. (Picture courtesy of Mandy T./Yelp)Mandy Livingston

In 2014, the behind-the-scenes chaos bubbled over into the general public realm. That yr, two out of the three Increase Noodles closed after an effort to remodel them into high-end izakaya eating places failed.
Dalton left the corporate shortly thereafter. The Boston restaurateur filed a lawsuit in 2015 towards Horowitz, alleging {that a} sample of micromanagement made it unattainable to do his job. In accordance with the preliminary grievance, Dalton “grew to become more and more annoyed as [Horowitz] … took a extra energetic position in enterprise selections on behalf of Madison with out [Dalton’s] information or approval, and with out having any enterprise expertise within the restaurant business.” As cited within the lawsuit, Horowitz as soon as “grew to become outraged” with Dalton in the summertime of 2014 when he found {that a} new sushi place was opening in the identical Newport Seashore mall the place a Blue C location had just lately arrived. Within the submitting, Dalton asserted that Horowitz misunderstood how such negotiations with the owner labored and thought an exclusivity settlement had been promised when it wasn’t.

In that very same lawsuit, Dalton claimed that he was terminated with out trigger shortly after the Newport Seashore argument. He sued Horowitz for non-compliance of termination fee that totaled 9 months of his base wage, or $180,000. The lawsuit was finally compelled into arbitration and settled for an unknown sum. When reached for remark in regards to the lawsuit and different circumstances round his departure, Dalton stated, “I desire to place that chapter of my life behind me.”
Others echoed Dalton’s points with Horowitz, as detailed within the lawsuit. “He jogs my memory lots of a wise model of Donald Trump,” a one-time Madison Holdings worker says of Horowitz. “He had desires of taking the Blue C Sushi idea public, considering it was identical to the tech corporations he began and bought.” (The worker, afraid of retaliation, additionally requested for anonymity.)
For his half, Horowitz stated he thinks what occurred was enterprise as normal. “Over a 16-year historical past, I don’t consider the turnover was notably excessive as in contrast with most different corporations, notably within the restaurant business,” he says. “The intent was to construct the infrastructure to help progress and to proceed elevating the standard and variety of the Blue C Sushi product providing. Like with many different corporations, a few of these hires labored out as supposed, and sadly some didn’t.”
With Allard, Rosen, and Dalton all gone, the problems on the high of Madison Holdings appeared to affect day-to-day operations by the tip of 2014, in response to workers. “The whole lot was more durable than it wanted to be,” says Theresa Tonelli, a server at Blue C’s Alderwood Mall location, in Lynwood, Washington. “We’d run out of inventory for issues — we didn’t get new paper menus and even substances that we would have liked.”
“He jogs my memory lots of a wise model of Donald Trump,” a one-time Madison Holdings worker stated of Horowitz. “
Buyer evaluations mirrored the disorganization. One Yelp reviewer wrote in August 2015, in regards to the chain’s downtown Seattle location, “The on-table menu didn’t work. The decision button for the waiter didn’t work. The customized supply prepare didn’t work. The uncooked sushi on the belt stayed there all the time we had been there, over one hour.”
One other Yelp evaluate of the identical location from January 2016 stated, “This place has gone approach downhill over the past 4-5 years. There’s little or no contemporary fish in something they make anymore, and the costs have elevated. Even the sushi rice was stale.”
In August 2016, the final of the Increase Noodle retailers closed down, giving its workers simply two days discover. Linus Ahiru was a prep and pantry prepare dinner at Increase Noodle in Capitol Hill on the time, and was one of many few to get transferred on to a Blue C restaurant. He says that the closure of Increase got here as a shock to the restaurant’s workers — however issues had been hardly higher on the downtown Blue C the place he ended up. “Managers stored quitting,” he says. “The final supervisor of our location additionally managed so many different areas. Costs of meals stored going up whereas high quality stored taking place.”
Lunak left the corporate abruptly in February 2017. (He declined to remark for this story.) Not lengthy after, the primary Blue C Sushi eating places closed: San Francisco and the unique Seattle location in Fremont each shut down later that yr. Madison Holdings tried to save lots of the remaining seven areas, renegotiating a minimum of a number of of the contracts with suppliers and landlords. It made a last push to stay solvent in late 2018, however fell brief.
All that’s left of Blue C Sushi now’s a pile of debt and a few restaurant tools locked in a Seattle-area storage unit.
In November 2018, Christothoulou resigned. In statements to Eater, Horowitz and Christotholou laid the blame for the ultimate eating places’ closures at one another’s ft.
By means of a chapter submitting, Eater realized that the Madison Holdings debt amounted to $34,781,565.07. When the chapter finally finishes winding its approach by means of the Washington court docket system, Madison Holdings will stop to exist. The few belongings it has on report will likely be divvied up among the many dozens of collectors it has left behind, together with tax money owed nonetheless owed to the state, defaulted contracts with landlords and meals suppliers, and unpaid or bounced checks to the corporate’s one-time workers. Whereas a number of former Blue C employees instructed Eater they’ve since gotten new jobs, in response to the chapter doc, many different employees members, distributors, lenders, and landlords are nonetheless owed a whole bunch — and, in some instances, a whole bunch of hundreds — of {dollars}.

As for the others who had been as soon as concerned within the enterprise, Lunak has opened Sumo Canine, a Japanese-inspired scorching canine chain within the Los Angeles space; Dalton has left the restaurant business fully and returned to Boston. He’s now the CFO of a regional employment board and serves as director of a Boston metro space chamber of commerce. Allard and Rosen went on to open Elemental Pizza in Seattle, which provided to assist out former Blue C employees who’ve misplaced their jobs. Rosen says they’ve employed 5 individuals who previously labored at Blue C. Others had been much less lucky, left on their very own to navigate the method of submitting for unemployment insurance coverage and looking for new work.
In accordance with the chapter submitting, Madison Holdings owes about $4.6 million to Horowitz and $21 million to Francis J. Feeney, a Boston-based monetary lawyer, and Madison Holdings board member, who has labored with Horowitz because the late 1990s. Neither Horowitz nor Feeney would touch upon the place these figures got here from. Nevertheless, in response to a number of Seattle-based tax attorneys that Eater consulted (none of whom labored with the folks or corporations talked about on this article), each of them may probably see tax advantages from declaring such giant losses, if these tens of millions characterize loans or investments within the firm.
Horowitz tells Eater that he has bought the mental property rights to Blue C, together with all of its logos and proprietary software program. “The surprising circumstances that led to it being compelled to close down had been extraordinarily disappointing to me personally and likewise to many others,” he says. “There’ll hopefully be a chance sooner or later to reintroduce Blue C Sushi in ways in which we predict may very well be very optimistic and thrilling.”
Not everybody feels that approach.

Zachary Kamel is a contract journalist based mostly in Montreal.