CJBS Partner Ryan Guedel, CPA on Foxtrot and Dom’s Kitchen & Market Closure

On April 23–Outfox Hospitality, the owner of Foxtrot and Dom’s Kitchen & Market eateries and grocery stores with 35 locations in Chicago, Dallas, and Washington, D.C.–abruptly announced they would be closing their doors for good. Outfox has now filed for Chapter 7 bankruptcy. The move comes only five months after the two companies merged to form Outfox Hospitality. 

This decision not only affected local patrons, but the company’s employees and vendor partners, as well–who received no warning or notice of the closures and layoffs, according to multiple news reports. 

CJBS Partner Ryan Guedel, CPA shares lessons businesses can learn from the recent closure of this community staple, as well as a few pieces of advice to prevent this from happening to your business. 

Takeaways

1. Media sentiment is not always an indicator of true life. November articles about the merger made this seem like it was a natural evolution of the business. For example, mergers of smaller groceries have been viewed as a way to establish competitive advantages against corporate giants such as Walmart and Kroger.

2. Instead, the November merger wasn’t as strategic as it was reported to be. In hindsight, it now seems like it was a lifeline. Outfox Hospitality missed 2023 sales by $35 million. 

3. The timing of bankruptcy filing matters. Because Outfox Hospitality filed bankruptcy right away after closing their doors, employees and vendors must now wait for the courts to sort through the finances in order to be paid their wages earned 180 days before the filing, if not already paid.

4. You will be hearing about more of these bankruptcies and abrupt closures. With interest rates rising, it has put the squeeze on companies if they have not been operating in a lean manner. That debt that was historically between 3-5% is now essentially doubled. Many entities can’t absorb that and still be profitable.

Advice for Business Owners

• This is why it is so important to have a budget and forecasting as part of normal business operations. They missed their sales by $35 million, so this wasn’t a surprise to them. The earlier you know about problems or issues, the quicker they can be resolved or sorted through.
• Mergers and acquisitions can be very fruitful if done correctly and there is a natural symbiosis, but if you choose the wrong partner to merge with, this can be the result. Making sure you have a strong team around you that can perform due diligence on potential acquisitions and advise you on the right financial and strategic elements is extremely important.
• Making sure you are watching your analytics and internal ratios is extremely important. Is your Quick Ratio consistent? What about your accounts receivable (AR) Turnover? Accounts payable (AP) Turnover? Many times, these analytics and metrics can point out potential issues in your business that need attention before they get out of control. 
• When facing hardship, the way you treat people who helped you get to where you are today matters. Withholding wages and shutting your doors not only leaves a stain on your company reputation, but it creates a ripple effect in communities because former employees will no longer be able to make their personal financial obligations. 

These are all services we offer day-in and day-out as a trusted accounting partner for our clients. At CJBS, we are CPAs Who Care, and we are always in your corner to help you make the right decisions that will lead to long-lasting success for your business. If you need assistance with budgeting, forecasting, M&A, tax preparation, bookkeeping, entity formation, investment opportunities or any other financial services, contact us to set up an appointment with one of our team members