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Louisville Cookie Franchise Filed for Bankruptcy

The owner of the St. Matthews Crumbl Cookies location has ceased operations following a Chapter 7 liquidation filing.

Updated on Oct. 9, 2026 in Openings & Closings

Isometric editorial illustration of a metal key on industrial trays, symbolizing a business liquidation.
Red Sheep St. Matthews LLC has permanently closed its Crumbl Cookies location in Louisville after filing for Chapter 7 bankruptcy on Oct. 1. AI Illustration. Upload story photo >

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Red Sheep St. Matthews LLC has permanently closed its Crumbl Cookies storefront at 291 N. Hubbards Lane in Louisville. The operator filed for Chapter 7 bankruptcy on Oct. 1, 2026, seeking to liquidate its assets.

Why it matters

The closure highlights the financial pressure facing individual franchise operators as the parent chain navigates a 32% year-over-year decline in traffic across its network. The company reported significantly higher liabilities than assets, leading to the liquidation filing in the U.S. Bankruptcy Court for the Western District of Kentucky.

The firm reported $352,780.03 in total liabilities, including $269,108.74 in secured debt to Republic Bank, compared to just $10,000 in assets. While this location has shuttered, five other Crumbl Cookies locations continue to operate in the Louisville area.

The players

Red Sheep St. Matthews LLC

A franchisee operating a Crumbl Cookies storefront in Louisville.

Republic Bank

A financial institution serving as a secured creditor for the bankrupt franchisee.

Richard and Emily Diamond

The owners and operators of Red Sheep St. Matthews LLC.

The details

Red Sheep St. Matthews LLC utilized the Chapter 7 bankruptcy process to initiate a court-supervised liquidation of the business. By filing, the operators ceased all retail activities at the Hubbards Lane address to address the outstanding debt obligations. This move mirrors a broader industry trend that saw at least 57 Crumbl locations close across the country in 2026.

Timeline

  1. 2017: Crumbl Cookies was founded in Utah.

  2. Early 2024: The St. Matthews location opened for business.

  3. August 2026: Chain-wide customer traffic declined by 32%.

  4. Aug. 28, 2026: A separate Crumbl location opened at 10970 Dixie Highway.

  5. Oct. 1, 2026: Red Sheep St. Matthews LLC filed for bankruptcy.

Market Landscape

This closure follows the pattern of unit contraction observed after the system-wide traffic downturn. The liquidation occurs against the backdrop of a 32% year-over-year chain-wide traffic decline that has affected the brand's network of over 1,100 locations.

Franchise operators should monitor local traffic trends and debt-to-asset ratios closely when operating in sectors experiencing wider volatility. Review current credit agreements with lenders to ensure that personal or business liabilities do not reach unsustainable levels if revenue dips.

The takeaway

Business owners should regularly stress-test their balance sheets against sustained declines in customer traffic. When facing insolvency, consult with bankruptcy counsel to understand the specific implications of a Chapter 7 liquidation process versus debt restructuring.

Further reading

For more local market shifts, visit the Louisville Openings & Closings section.

Source note: This article includes information reported by The Courier-Journal.

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