Foxtrot's Abrupt Closure Means A Bunch Of 'Premium Real Estate' Is Suddenly Available

As the saying goes, one tenant’s trash is another tenant’s treasure. 

The trash, in this case, is literal. When small-format grocer Foxtrot Market closed all 33 of its locations in Chicago, Washington, D.C., Austin and Dallas two weeks ago, it was so sudden that its workers reportedly shooed customers out of stores, locked the doors and left its stock of perishables and prepared food to rot — which it did for days on end.

The treasure is the real estate Foxtrot will vacate, which retail insiders in Chicago and D.C. say tenants are chomping at the bit to fill in.

“Their strategy was to find central locations in populated neighborhoods,” said Danny Jacobson, senior vice president at CBRE. “They executed that plan fairly well, which is why this real estate that is now coming back to the market is highly attractive.” 

Dom’s Kitchen & Market, which merged with Foxtrot in November into an entity named Outfox Hospitality, also closed its two locations, both in Chicago.

“We explored many avenues to continue the business but found no viable option despite good faith and exhaustive efforts,” the companies said in a press release. 

Its failure opens up significant urban retail space all at once. Foxtrot occupied about 51K SF of Chicago retail space, according to data provided to Bisnow by Mid-America Real Estate Corp.

The company’s average footprint across its 15 Chicago locations was 3,400 SF. It also will vacate 11 D.C.-area stores and eight in Texas. 

“It’s premium real estate,” said John Vance, principal at Chicago-based Stone Real Estate. “For the most part, they had really solid locations in solid trade areas and corner [storefronts].” 

Vance said food and beverage retailers are likely candidates to fill a lot of the space, but locations in different submarkets have other dominant retail categories that may lead to different uses.

The company’s shop at 900 W. Armitage St. is in a Chicago hotbed for soft goods, and Foxtrot’s River North location is close to stores specializing in home furnishings and design, Vance said.  

Some landlords may turn to national chains with more established credit to fill the space, while others may look to local tenants with a good understanding of the area, Vance said. 

D.C.-based Asadoorian Retail Solutions President John Asadoorian, who represented Foxtrot in its deals in the nation’s capital, said the fallout from the pandemic enabled the company to snap up desirable locations in the metro previously held by longtime tenants.

Foxtrot was a pandemic “golden child” for landlords, as it provided a great location for people to get out of their houses and meet up, he said. 

The company's closure puts its locations back on the market in a more competitive environment, Asadoorian said. Retailers might have been more likely to get a bargain on rent if the company's implosion hadn't been so public, he added.

“There's no secret anymore,” Asadoorian said. “If the market didn't know the space was going to be available, maybe you could have preyed on the landlord's fear and said, ‘Hey, they're going to close. I'll take the space over.’ Now the cat's out of the bag.”

Landlords of the vacated locations will likely be able to charge equal or slightly higher rents because of low retail vacancy rates in their neighborhoods, CBRE's Jacobson said. Depending on who the next users of the space are and what modifications landlords will need to make to accommodate them, it is possible some storefronts could reopen this year. 

“Every ownership group is going to have a different motivation driver as it relates to the decision they make on who the ultimate user is that fills that space,” Jacobson said.

Foxtrot launched online in 2014 and opened its first store in Fulton Market in 2015, its sights set on establishing an upscale convenience store chain, according to Modern Retail. It expanded to Texas and D.C. as it raised $160M in venture capital funding as of 2022.

Dom’s opened its first store in Lincoln Park in 2021 and expanded to a second location in Old Town in 2022, with ambitions to open 13 more locations by 2025, Block Club Chicago reported. 

While the full autopsy of the company has yet to be made public, Foxtrot was reportedly on track to miss its 2023 sales goal by about $35M, according to ModernRetail. The company merged with Dom's last year in a bid to stabilize its finances.

When the stores closed April 23, area residents gathered outside many of its storefronts to visit the markets for a final time. Some even walked away with free wine.

The stores have largely sat untouched since, as rumors swirl around a potential Chapter 7 bankruptcy filing and charitable organizations look to save the leftover food, Eater Chicago reports.

Foxtrot creditor JPMorgan Chase is looking to recoup as much of its investment as possible by initiating a foreclosure sale of “substantially all of the assets” of Foxtrot and its affiliated companies on May 10, according to a public notice. 

Former employees have filed at least three lawsuits against the company, alleging it neglected to properly notify workers of impending closures and violated worker protection laws, Crain’s Chicago Business reported. Last week, two produce suppliers entered the fray, suing Foxtrot for allegedly failing to pay for over $208K in produce and other goods before the shutdown, the outlet reported.  

If Foxtrot was hemorrhaging cash in one store but its other locations were performing, it may have opted to shut down operations there and work out an agreement to sublease the space, Vance said. Other retailers have shut down stores in the past to lose less money by just paying rent, he said. 

The company having to manage stores in three distinct geographies may have contributed to an overrun in costs, he said.

“It closed down every blessed store,” Vance said. “Something up top was wrong.”

Foxtrot’s business model was threefold, combining a bodega, a coffee shop and a delivery service, said Bill Miller, principal and co-founder of D.C.-based retail brokerage Miller Walker. The marketplace perception was that the stores appeared busy, but it was hard to tell how successful they were from the outside looking in, he said. 

As a result, the closures came as a surprise. 

“We didn’t get, in the general broker marketplace, a whole lot of warning,” he said. “Because it was so unconventional, it was harder to track.”