07/27/2012 04:10 pm ET Updated Jul 29, 2012

Back Alley Waffles, Which Blamed Groupon For Its Demise, Was Not Legally Allowed To Sell Food

The D.C. restaurant that blamed Groupon for its demise was on track to getting shut down anyway.

That's because Back Alley Waffles, which shut down in July allegedly because of a Groupon deal gone bad, did not obtain the legal permission to sell food, DCist reports. Back Alley Waffles never obtained a business license or certificate of occupancy, and the D.C. Department of Health had sent the restaurant a cease-and-desist letter because it never had a required pre-operational inspection. (Hat tip: Consumerist.)

Craig Nelsen, owner of Back Alley Waffles, told DCist that he had intended to obtain the necessary permits, but it would have taken at least three months to do so. Nelsen wrote on the restaurant's website that his conversion of his struggling art gallery into Back Alley Waffles was "exhausting -- and frequently embarrassing."

Nelsen claimed in an email to The Huffington Post that he never received a cease-and-desist letter and held to his allegation that the Groupon deal was the primary cause of Back Alley Waffles' closure. "There is a long and costly process involved to get all the permits to operate a restaurant in DC. We began the process immediately and were making a good faith effort toward full compliance when the delayed payments from Groupon snuffed us out," Nelsen wrote. "[The D.C. Department of Health sent] an inspector, who looked around, determined we were making a good faith effort, and then went away. That was the last we heard from the Health Department."

Back Alley Waffles went out of business in July after just three months, blaming "the shocking business practices of an obscenity known as 'Groupon'" on its website. Nelsen wrote on the restaurant's website that he could not afford to serve the many Groupon customers who showed up without getting the money owed by Groupon right away. He wrote that Groupon took weeks to pay him.

Groupon said in a statement to The Huffington Post on Tuesday that it did not cause the restaurant's closure. "According to our records, only 132 Groupons, or 18% have been redeemed since Back Alley ran [its deal] two months ago, and Mr. Nelson has received 2/3 of his share of the revenue to date," wrote Julie Mossler, a Groupon spokeswoman, in an email to The Huffington Post.

UPDATE: This story was updated to include comments from Craig Nelsen.