Two years ago, John Geoghagan was having dinner with executives from some of the largest food companies in the world.

He recalls a vice president from retail giant Costco lavishing praise on Geoghagan's company, the comparatively tiny America's Kitchen, telling General Mills and Pillsbury execs that they should be doing business more like him.

Ben Gray/AJC file photo (ENLARGE)

America's Kitchen founder John Geoghagan, shown in 2007 at the company's now-defunct plant, said his plans to expand backfired. Some ex-employees have sued.

Ben Gray/AJC file photos (ENLARGE)

Last year, Vitalina Avila boxed up packages of Moe's Southwest Grill queso cheese dip at the America's Kitchen plant in northwest Atlanta. America's Kitchen ceased operating in May.

ABOUT AMERICA'S KITCHEN • Founded: 1988, as Strategic Marketing • Stopped operating: May 2008 • Former clients: Moe's Southwest Grill, Costco, Holiday Inn Express, Kroger RELATED: Government funds help workers recover wages BUSINESS Latest Headlines: 401 (k) 'dippers' robbing future to pay now  Peachtree City Panasonic plant to cut 500 jobs  Down payment assistance program to end  H&M attracts three generations in suburbs  Former eBay exec joins Home Depot  • More business news • Business photo galleries

It's a bittersweet memory for Geoghagan, who now is dismantling the food processing company he built over 20 years. A skeleton crew is combing the corporate office in Alpharetta, looking to sell anything that can help repay $6 million to its lender, Marquette Business Credit in Dallas.

The last food products have been sold out of company freezers. Recipes for pot pie filling, cheese dip and cinnamon rolls were peddled to other food producers. A sushi company is negotiating the purchase of the company's primary plant.

America's Kitchen ceased operations in May after being ambushed by rising commodity prices. The spike exacerbated problems for a company Geoghagan said already was weakened by poor accounting and two disastrous expansions into the bakery business. What's left are piles of unpaid bills, allegations of mismanagement and dozens of unemployed workers.

Some of those former employees are alleging that they were not paid for at least three weeks of work and that the company did not deposit enough money in their 401(k) retirement accounts or fully fund their health insurance.

Karla Phillips, who for more than four years handled procurement for America's Kitchen, hasn't been able to find work since the plant closed. She has fallen two months behind on her mortgage, and friends are helping her buy food and keep up car payments.

Another former employee, Coy Bishop, who worked at the plant for two years, no longer has health insurance for himself or his two children.

Eleven employees including Bishop jointly filed a lawsuit against America's Kitchen on June 3 alleging they were not given final paychecks. Phillips and some other workers filed complaints in small claims court.

Geoghagan doesn't dispute his former employees' claims. But Marquette, the lender, gets first priority, he said.

"When you're all in, and you owe the planet, it's hard to pay everybody," he said.

Entrepreneurs overreach

The long climb and quick fall of America's Kitchen could be the story of hundreds of small businesses across the country.

Ambitious and optimistic entrepreneurs overreach, often losing focus on existing operations and funding expansions with capital that could serve as a financial safety net for their companies. Without that money, what might have been a manageable problem — such as a sudden rise in commodities prices — becomes a crisis.

"It's a typical scenario," said John Maynard of the Georgia Small Business Development Center in Athens.

"People assume, not always correctly, that you have to grow, that it's bigger and better," he said. "But it has ramifications that people aren't always willing to expect."

Plant manger Ron McGinnis saw that unfold at America's Kitchen.

"John [Geoghagan] had a lot of big dreams. He had a vision, and he wanted to do it right now," McGinnis said.

For Geoghagan, a religious man who insists he tried to run a company with high ethical standards, the downfall of America's Kitchen has been humbling.

He takes responsibility for buying the bakeries, but he said accounting problems led to financial blind spots.

"We really didn't figure out where we were bleeding until March," he said. "You just can't catch up on the accounting side."

Geoghagan's business choices affected his personal finances, he said. He is considering filing for bankruptcy.

"I'll be destroyed," he said.

But Geoghagan's financial distress has not tempered the anger of his former employees, who say they feel abandoned and mistreated.

"At the very least, they could have informed their employees about the problems," former maintenance manager Dan Dial said.

Starting at the bottom

America's Kitchen began in 1988 as Strategic Marketing, a food brokerage company that Geoghagan ran out of the basement of his Roswell home.

In 1996 he began creating his own food products, and the company became America's Kitchen.

Geoghagan rented an apartment for the company: The bedroom was his office, the living room was for accounting, and new products were tested in the kitchen. He said that by 1999, the four-person operation was doing $5 million in sales a year.

America's Kitchen began producing food in 2003, when it bought half a 17,000-square-foot plant on Ellsworth Industrial Road in Atlanta.

It bought the rest of the building in 2006. By then, Geoghagan said, annual revenue was $20 million, buoyed by a contract to supply cheese dip to Moe's Southwest Grill.

The next year, Geoghagan was a finalist in Ernst & Young's regional entrepreneur of the year contest.

The success attracted a suitor: Another company offered to buy America's Kitchen for more than $15 million in 2007.

With the business growing, Geoghagan said, he didn't want to relinquish control, although as the majority shareholder he would have walked away with more than half of the sale price.

"I could have sold the business, bought a house up in Reynolds and fished for the rest of my life," he said.

Instead, Geoghagan kept expanding America's Kitchen. In February 2007, he bought the Art of Baking, on Hank Aaron Drive in Atlanta. In May, he leased Heavenly Cheesecake in Tucker. At its peak, the company had more than 100 employees.

Geoghagan said America's Kitchen started losing $300,000 a month on the bakeries in September. He said the company tried to overhaul its product lines and integrate accounting operations but did not have the expertise to succeed.

About the same time, the cost of foods used for their products began to rise. Geoghagan said some prices went up 50 percent.

At the management team's annual Christmas party, Geoghagan handed out empty cards instead of holiday bonuses.

"As most of you know this year at America's Kitchen has been financially challenging," he wrote in the card, adding that he hoped to give out bonuses in July.

Money problems continued.

Bishop, the production supervisor, said the company started to cut corners as its finances declined, using more water and less cheese in its dip.

Dial, the former maintenance manager, said he had to front the money for a new exhaust fan in April because the vendor refused a company check.

"It's a lot of little things like that," he said, "that makes you say, 'What's going on?' "

Cash stops; doors locked

Geoghagan still had hope. Two Marquette representatives flew in from Dallas on May 13, and Geoghagan made his pitch: The company could survive if he could just have some more money.

Marquette said no.

When employees showed up for work May 16, the doors were locked.

On top of the $6 million the company owes Marquette, Geoghagan said America's Kitchen has racked up millions of dollars in debt to others.

Some settlements already have been reached. Diversifood Associates, a produce distributor in Marietta, plans to retrieve $83,000 in frozen carrots, peas and celery sitting in cold storage.

Geoghagan — who is receiving a salary from Marquette, but won't say how much — said he plans to find a way to make up what is owed for former employees in salaries and 401(k) contributions, in part by using his own money.

But his former employees aren't convinced.

"They told us so many lies, I don't know what to believe," Bishop said.

He, Phillips and Dial remain unemployed.

"With the economy the way it is," Dial said, "companies just aren't hiring."