The 122-year-old company is the latest to be hit by the downturn in consumer spending following the recent collapse of retail icons Woolworths and MFI.
But the Whittard name will remain on the high street after administrator Ernst & Young sold the firm to private equity company EPIC in a rescue deal.
Whittard has around 130 stores in the UK, employing around 950 staff. It has a head office in London and a warehouse facility in Northampton.
Ernst & Young was also appointed administrator of coffee wholesaler Boaters, which is part of the Whittard group. This was also sold to EPIC. But the administrator said both businesses would continue to operate as a going concern and remain open for trading as usual.
Joint administrator Angela Swarbrick said the firms had been suffering trading difficulties due to the "uncertain conditions". She added: "Fortunately a deal was able to be done that sees the businesses of the companies able to continue to trade and the Whittard of Chelsea name, with its 122-year heritage, remain on the high street."
Former owner Baugur, the Icelandic investment company, bought Whittard in December 2005 for £21.5 million. But Baugur was hit by the collapse of Iceland's earlier this year, sparking fears over the future of its many high street UK retail assets.
The company has investments in the supermarket chain Iceland, toy retailer Hamleys, jewellery chain Goldsmiths, and high street fashion brands Karen Millen, Warehouse and Oasis. It also has a substantial stake in department store House of Fraser.
Walter Whittard established Whittard as a tea company on Fleet Street in 1886, and within a few years branched into coffee. It moved to Chelsea after its Aldgate premises were destroyed in an air raid in 1940. It expanded rapidly in the 1980s and by 1998, had 120 outlets in the UK and was pushing into international markets, including Dubai, Abu Dhabi, Kuwait, Singapore, South , Chile and the US.
But Whittard's most recent published accounts show the company was already suffering before this year's retail pain. The company reported a £3.2 million loss for the year to March 31 2007, a like-for-like sales decline of 0.6% and declining margins due to heavy competition.
