Welcome to Retail Watch, a new Restaurant Business column highlighting news from convenience stores, grocers and other retailers that compete with restaurants.
The lawsuits are mounting against Outfox Hospitality, the parent company of 33-unit restaurant-retail hybrids Foxtrot and Dom’s Kitchen & Market, which shuttered all locations abruptly last week.
As of this writing Monday afternoon, Outfox faces three lawsuits, all filed by former employees at stores in Chicago, Washington, D.C., and Austin, Texas, who say they were not given 60 days advance notice of their layoffs as required by the Worker Adjustment and Retraining Notification Act (WARN) that is designed to protect workers in the case of mass layoffs.
In one of the lawsuits, a former employee alleges he was told by his store manager a couple of weeks ago that the company was allowing inventory to run low to artificially inflate profit margins, with the manager adding that “this was a tactic to spur investors to provide additional cash for the company’s operations” and that all workers would have “plenty of notice” if their jobs were going away, according to a class-action suit filed Thursday in the U.S. District Court’s Northern District of Illinois office.
Representatives for Foxtrot and Dom’s have not commented on the store closures, save for social media posts the day it happened.
The two companies merged to form Outfox Hospitality just six months ago, and, according to reports, it appears Foxtrot was on the ropes before joining forces with Dom’s.
Until we see some bankruptcy documents, it’s hard to know the full scope of what went wrong at the urban convenience store Foxtrot and Dom’s, the high-end grocer. They had raised nearly $200 million in recent years to fuel their growth.
Dom’s was beautifully merchandised and packed with restaurant-quality food, including made-to-order sushi, fresh-grilled burgers, Bonci pizza by the slice and more, as well as a coffee bar and wine bar.
Jay Owen, Dom’s co-founder and chairman, told me about 18 months ago that retail foodservice made up more than 30% of Dom’s sales—more than twice as much as at a traditional grocery store. He also told me the chain was on track to open 15 stores by 2025.
“We’re trying to blend the lines between the kitchen and the market,” Owen said.
Clearly, there’s a market for restaurant-quality food at supermarkets and c-stores. As Jonathan Maze reported last week, citing new foot traffic data from Placer.ai, restaurants are losing business to grocers, superstores and convenience stores.
With the rate of inflation at restaurants (especially quick-service ones) significantly outpacing that of grocery stores, though, it looks like many consumers are hunting for bargains. And, judging by the sticker shock from my lunch and bag of groceries while I was reporting that story at Dom’s, value—at least in the money-saving sense—was not Outfox’s selling point.
And even Owen, in October 2022, knew that was a potentially tricky equation.
“We’re entering a really uncertain time for the consumer,” he told me. “We think where we sit and the types of products we offer will actually become more important to consumers going forward … When we think about value, we think of our competition. But we also think of the context of the overall experience that we’re providing to our customers.”
Krispy Krunchy Chicken busts out of the coop
Which brings us to Krispy Krunchy Chicken, the Alexandria, Louisiana-based quick-service concept that’s a convenience-store staple around the country.
No, it’s not fancy like Dom’s or Foxtrot but it also doesn’t appear to be on the verge of a bankruptcy filing.
CEO Jim Norberg, who spoke earlier this month at Restaurant Business’ Restaurant Leadership Conference, said his chain plans to expand its third-party delivery offering to more than half its stores by the end of summer.
And he told Chuck Ulie, an editor at RB sister brand CSP Daily News, that the chicken chain plans to open more than 700 stores this year, with a goal to operate more than 3,500 locations by 2025. Those restaurants will be in c-stores, but will also likely include colleges, casinos and retail locations like Walmart.
If successful, that is more locations than both Chick-fil-A (2,964 stores) and Popeyes (3,051 stores), and it is within chicken wing-throwing distance of KFC, which ended 2023 with 3,791 U.S. locations, according to Technomic Top 500 data.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.