New Economic Realities   //   May 17, 2024

What to know about Foxtrot’s potential comeback

It appears the new owners of Foxtrot’s assets are hoping to bring the company back from the dead after the convenience store chain abruptly went out of business at the end of April. 

Within the past week, Snaxshot, Eater Chicago and real estate website The Real Deal have all published stories about Foxtrot’s attempted comeback. Modern Retail has spoken with a source familiar with the matter who said the brand’s former co-founder Mike LaVitola is allegedly involved in discussions to bring Foxtrot back from the dead. 

According to The Real Deal, multiple Chicago landlords are considering deals with the new ownership group of Foxtrot. According to the source Modern Retail spoke with, there are discussions to bring back the Lincoln Park location of Foxtrot. The deal that is allegedly being explored would involve the new owners paying back rent that had become delinquent over the past two months — some of which would be paid upfront and some of which would be paid back over the course of the next 12 months. A future revenue-sharing agreement was allegedly also being discussed. 

Foxtrot — renamed Outfox Hospitality after it merged with competitor Dom’s Kitchen in 2023 — went out of business with little notice, after having raised roughly $186 million in debt and equity funding over the course of its more than eight-year history. As Modern Retail previously reported, Foxtrot had gone through multiple rounds of layoffs over the past two years and had allegedly missed its revenue targets by $35 million at the end of last year. Still, the business’s closure was a shock to employees and vendors alike; Outfox Hospitality was still placing orders in the weeks leading up to its closure, and employees only received notice the day that the company was going out of business.

Now, the question is whether the new Foxtrot can strike enough deals with landlords and vendors to determine a path forward. 

Outfox Hospitality announced it was going out of business on April 23. A sale for its assets, which was organized by JPMorgan Chase, was subsequently held on May 10. Holding company Further Point Enterprises acquired Foxtrot’s assets for $2.2 million. The virtual sale concluded without any bids for the assets of Dom’s Kitchen. Parent company Outfox Hospitality then filed for Chapter 7 bankruptcy on May 14. 

According to the source Modern Retail spoke with, some of the people involved in the discussion for the Lincoln Park deal included co-founder LaVitola, Further Point Enterprises’ managing partner David Magruder, Outfox’s former senior vice president of store development Jason DaPisa and Bradley Giordano, a partner in the business restructuring group at McDermott Will & Emery. 

LaVitola, Magruder, and DaPisa did not respond to requests for comment by press time. Giordano declined to comment. Modern Retail also reached out to an attorney representing Outfox Hospitality in its bankruptcy case who did not respond to a request for comment by press time. 

Outfox Hospitality had 33 Foxtrot stores, in Illinois, Texas and the Washington, D.C. area, as well as two Dom’s Kitchen storefronts in Chicago. According to The Real Deal, the new ownership group is trying to keep “its stores on the Gold Coast, in Fulton Market, at West Hubbard and North Wells streets, and in Old Town, Uptown and at the Willis Tower,” among others. 

According to the Real Deal, the new ownership group has struck a deal with at least one former Foxtrot landlord to reopen. The group is also allegedly considering reopening some Texas locations, but not in Washington, D.C. 

Speculation has been building over what was going on at Foxtrot. After the company went out of business, it took more than three weeks for a bankruptcy filing to materialize.

What was also unusual was that the foreclosure sale of Foxtrot’s assets technically took place before Outfox Hospitality filed for bankruptcy. 

According to Jeffrey Chubak, a member of the law firm Amini LLC, “if the auction had happened after bankruptcy, the sale would have probably been materially delayed.” That’s because the bankruptcy code has a number of provisions regarding the sales of assets — it requires notice of liquidation sales, as well as “an evidentiary burden to be satisfied that the sale is consistent with director fiduciary obligations to maximize value,” Chubak said. 

Trustees are also prohibited from operating businesses during bankruptcy pending a sale, absent court authorization. The fact that the sale of Foxtrot assets happened before Outfox Hospitality filed for bankruptcy presents a much quicker path to potentially launching a new Foxtrot. 

As Slate also noted in its story exploring the legal ramifications of the sale, “If JPMorgan sold Foxtrot for less than the fair market value, JPMorgan would likely lose its right to sue Foxtrot to recover any additional money. But, generally speaking, secured creditors like JPMorgan don’t have any obligations to all the unsecured creditors who are behind them in line.”

However, anyone looking to bring back Foxtrot still has the matter of optics to contend with. For example, Outfox Hospitality was hit with a class action complaint alleging the company violated the WARN Act. 

A complaint like that “doesn’t happen when you proceed with a liquidation sale in an organized fashion,” Chubak said.