New Economic Realities   //   April 23, 2024

What went wrong at Foxtrot

Toward the end of 2023, Foxtrot, an upscale convenience store chain, held a meeting with corporate employees to discuss the company’s finances. The meeting came right after Foxtrot had announced the company would be merging with a competitor called Dom’s Kitchen, and the financial picture was bleak.

Specifically, a member of the executive finance team said that Foxtrot was on track to miss its sales goal by about $35 million in 2023, as confirmed by two people who attended the meeting. Foxtrot had initially projected it would do about $165 million in sales in 2023, but it was only on track to bring in about $130 million.

That’s one statistic that helps partially explain how Foxtrot — now called Outfox Hospitality after its merger with Dom’s Kitchen — ended up announcing on Tuesday that it would be shuttering the business and closing all of its stores, which include 33 Foxtrot locations across Illinois, Texas, and the Washington, D.C. area, as well as two Dom’s Kitchen locations in Illinois. The news was first broken by the publication Snaxshot, and employees were notified in an all-hands meeting that took place on Tuesday morning. 

In a statement released on social media, Outfox said, “we explored many avenues to continue the business but found no viable option despite good faith and exhaustive efforts.” Modern Retail reached out to Foxtrot co-founder Mike LaVitola for comment, as well as to Foxtrot’s press email, but did not receive a response. Requests for comment sent to former Outfox CEO Liz Williams, and current chief executive Rob Twyman also went unanswered on social media. 

Still, the news came as a shock to many Outfox employees. While there had been continuous talk of cost-cutting — and multiple rounds of layoffs over the years — there was no indication that Foxtrot was in danger of going out of business. Outfox had just named a new CEO, Whole Foods veteran Rob Twyman, two months earlier. What’s more, Foxtrot was well capitalized for most of its tenure, having raised roughly $186 million in equity and debt financing.

By Tuesday afternoon, now-former employees, who had been told they wouldn’t be receiving severance, were unsure of what to do with themselves. Word spread on social media of employees handing out free bottles of wine and pre-packaged salads.

Among three former Outfox employees who spoke with Modern Retail, the sentiment was that Foxtrot was a company that was struggling to figure out what it wanted to be. It struggled to figure out the right balance between brick-and-mortar and e-commerce sales. When it first launched in 2015, one of the big selling points that the company said made Foxtrot different than say, a 7-Eleven was that it made a point to carry beloved local brands in the markets it operated in, like Ceremony Coffee and Little Sesame hummus in D.C.

But as the company grew — both for the sake of profitability and to ensure a consistent experience across locations — these former employees said that local and emerging brands were deprioritized in favor of national brands. For example, earlier this year, the company brought in La Colombe — the Philadelphia-founded coffee company that was recently acquired by Chobani — to service its cafes. Previously, Foxtrot used coffee beans from roasters that were local to whatever area it was operating in. 

“They were trying to be so many different things, and please everybody [versus] saying this is what we are,” one former employee said. 

Unveiling national ambitions then paring them back

Foxtrot launched in 2015 with aim of building an upscale convenience store chain, starting in Chicago. What made Foxtrot different from other convenience stores was both its assortment and its ambiance. LaVitola told The New Consumer that he wanted his stores to almost feel like the opposite of a traditional convenience store. That is, “it’s a place that you’re excited to go to,” he told The New Consumer, “because you’re going to find something cool, there’s going to be some interesting music on, the folks behind the counter are going to be able to turn you on to something new.”

In turn, its stores — most of which were in urban areas — carried everything that an office worker might want to pick up before, during and after work: coffee and pastries in the morning, freshly made salads and sandwiches in the afternoon and a six-pack of locally-brewed beer for after work. The stores also boasted a cafe area that turned into a wine bar at night, making it a comfortable spot to hang out in.

Foxtrot also tried to establish itself as an authority on what was cool and trending in food and beverage, through initiatives like its Up and Comers awards.

Delivery was another big area of focus. In 2019, delivery accounted for half of Foxtrot’s sales. At the time, customers located within Foxtrot’s delivery radius could get items delivered to them in under an hour. At the time, for a $5 fee, and the company also used all in-house couriers to fulfill and deliver orders. 

Co-founder LaVitola told Modern Retail at the time that using in-house couriers was “the only way to keep service levels up.”

Initially, Foxtrot took a slow and methodical approach to expansion. It operated only in Chicago for four years before expanding to another city, Dallas, in 2014. During its early days, Foxtrot’s stated strategy was to open at least three or four stores in a city in order to be able to support delivery. It would then expand to a new city. 

But that started to change in 2022. After the company raised a $100 million Series C, Foxtrot’s ambitions went national, and it quickly unveiled serious growth plans. Foxtrot said in a press release that it planned to open 25 new stores in 2022. It planned to triple its tech team over the next three months. Spurred by the online ordering rates it saw during the pandemic, Foxtrot made investments to fulfill orders even faster, with 30-minute delivery and five-minute pickup. 

Six months later, Foxtrot brought on Liz Williams, a former Drybar and Taco Bell expansion, as its president. In April 2023, she was promoted to CEO. 

“Her focus 100% was numbers, and she was good at it,” said the first former employee. “Anecdotally, I know a lot of people were not happy with Liz Williams’ leadership decisions and style,” countered a second former employee. 

Williams’s focus was on growing and nationalizing the brand. Then, particularly as the economic environment worsened in 2023, her role turned to cost-cutting. In turn, Williams oversaw a lot of decisions that were unpopular with people depending on what department they worked in.

Under her tenure, Foxtrot stopped managing delivery contracts directly and outsourced it to third-party delivery platforms. Streamlining operations and store ordering was another big area of focus. For example, Foxtrot stopped using local farmers and purveyors in its cafe program and instead opted to work with larger companies when ordering items like produce and meats. 

Figuring out what the right equation of rent, labor and merchandise was to ensure each location’s profitability was also a challenge — particularly in locations where foot traffic was dependent upon concerts or other events.

One of Foxtrot’s locations near Wrigley Field might do $10,000 in sales on a good day, or $1,500 in sales on a bad day. Two former employees pointed to the Tribune Tower store in Chicago store as another problematic location. That store did around $10,000 to $14,000 in sales per week and was unprofitable. 

In turn, reducing labor costs at stores was another big area of focus. One former employee said they heard of some store managers who worked more than 70-hour weeks to keep labor costs down at their particular location.

And there were slow cuts over time. Employees said there were multiple rounds of layoffs over the course of 2022 and 2023. Foxtrot had previously talked about signing leases in Miami, but then those talks stopped in 2023. Employee perks started to disappear; for example, the company stopped offering a monthly credit to hourly employees that they previously could use to buy items in Foxtrot stores. But, Foxtrot continued offering that perk to corporate employees. 

A murky vision

As a result, Foxtrot started to feel like it lost its way. According to another former employee, they felt like Williams’s decisions had “removed our authority in the retail space,” and Foxtrot became a place that “carried Magic Spoon cereal that Target also has, but for cheaper.” 

Still, much of the talk at Foxtrot centered on rightsizing the business. During all-hands meetings there were talks about how “hey, we are not doing well financially,” the second former employee said. “But there were no signals that we were going to file for bankruptcy.” 

And then, in November of 2023, Foxtrot announced that it would be merging with Dom’s Kitchen, a small-scale grocery store chain. Dom’s Kitchen did boast a seasoned leadership team. One of its co-founders, Bob Mariano, was previously CEO of the Roundy’s grocery chain and co-founded Mariano’s, a popular chain in Illinois. 

Still, the deal was puzzling because it was positioned as a merger. Foxtrot was a much bigger company, with 33 locations, compared to Dom’s Kitchen, which only had two stores. 

Another former employee said that shortly after the merger was announced, Foxtrot gave an internal presentation about all the benefits of the merger — namely, that “there is a share of consumers who shop at both brands, [that we are] joining forces instead of taking away from each other’s business,” according to the third former employee. 

In smaller groups, executives were more candid. One employee said that shortly after the merger was announced, they were in a closed-door meeting with someone on the executive leadership team who said that Foxtrot’s options had been to merge with Dom’s or file for bankruptcy. 

The message to employees was clear: the current focus was on rightsizing the business. And to do so, the company, now called Outfox, once again brought on a new CEO. Twyman, a grocery veteran who worked for decades at Whole Foods, would become CEO starting March 11, according to a company press release.

Twyman didn’t have much time to implement his vision. According to the first former employee, Twyman spent the first few weeks visiting all of Outfox’s stores in Illinois, Texas and the Washington D.C. area, asking a lot of questions about how Outfox could improve ordering.

On Monday, when the news broke that Outfox was closing its doors for good, employees — particularly those who worked in stores — were unsure of what to do. Two former workers at one Foxtrot store filmed a TikTok, set to the “Curb Your Enthusiasm” tune, wondering if the people who were still lingering in the café area had known that the company had gone out of business. 

“[For] people that worked with Foxtrot and Dom’s, it was our full-time passion project,” the second former employee said. “No one was at this job because it was an easy cookie-cutter retail or merchandising [job] to be in.” They added, “It just sucks that the poor decisions of a few people in executive leadership impacted hundreds of employees.”