Is the restaurant industry in contraction or growth mode? Can a better employee experience lead to a better customer experience? We answer these questions and more This Week in Foodservice.

A few short years ago, Foxtrot seemed poised to shake up the convenience store world. The burgeoning chain offered on-site shopping in bright, modern stores as well as app-based ordering for delivery within an hour. Products ranged from craft beer and natural wines to snacks, specialty cheeses, pantry items, coffees, gifts, fresh sandwiches, salads, bowls, and entrees. Many of the items were local, too. For example, the store closest to my house started by serving Metric Coffee, which is a local roaster. I met people there for coffee on multiple occasions and the place was always buzzing with other guests doing some work or meeting up with friends and colleagues.

In February of 2021, the self-described corner store and café received a $42 million investment to fund its growth. As a result, Foxtrot planned to open 50 units in two years. This included expanding beyond its existing locations in Chicago and Dallas by entering the Washington, D.C., market. Then in November of 2023, Foxtrot merged with Dom’s Market, a supermarket concept that heavily emphasized prepared foods along with groceries in an upscale environment that included plenty of space to linger.

The new company would be known as Outfox Hospitality.

Last week Outfox made headlines for all the wrong reasons as the company abruptly filed for bankruptcy, closing all 33 Fox Trot locations as well as both Dom’s units. From all indications, including countless published reports, this caught customers, employees and suppliers off guard, to say the least, as this Chicago Sun-Times story notes. Naturally, the lawsuits were quick to follow as workers filed claims that they were not given proper notice of their termination. And I would not be surprised if more would follow.

The exact reason for the bankruptcy filing is not yet known but it would be surprising if the explanation did not include some combination of less-than-expected sales, higher labor costs and other operating expenses, among others, as a Chicago Tribune article outlines. In fact, a ModernRetail story says that Outfox missed its 2023 revenue goals by 20%.

The execution may not have been ideal but some elements of Foxtrot’s and Dom’s plans maintain their merit. For example, these stores had smaller footprints that allowed them to go into unique areas while potentially lowering buildout and operating costs. Both concepts also embraced technology, including delivery options. And given that both were upscale concepts located in upscale neighborhoods, they understood the present-day need to meet your customers where they are, which is more important than ever.

Still, none of those strengths can make up for a lack of vision or less-than-perfect execution, which are common challenges for many companies in today’s post-pandemic world. What is most ironic is that Foxtrot started as a University of Chicago MBA project, as the Tribune notes, and given its abrupt demise it now may become a cautionary case study for future generations of students.

Foodservice News

• The restaurant industry remained in contraction mode in March, per the National Restaurant Association’s Restaurant Performance Index. The monthly composite index that tracks the health of the restaurant industry came in at 99.2 in March. Although a 0.2-point improvement from February, the reading of less than 100 still indicates contraction. Operators continued to report net declines in both same-store sales and customer traffic. Operators’ outlook for the future, though, is a little more optimistic with the Expectations Index coming in at 100.1 in March, which is up from 99.7 in February.
• Sodexo plans to deploy hot food robotic kiosks at facilities it manages throughout the U.S. Dubbed “Just Baked Smart Bistro,” these kiosks will produce cinnamon rolls, White Castle Cheeseburger Slider 4 packs, bao buns and breakfast sandwiches, among other food items. "Our dedication to innovation in convenience, dining, and the broader evolution of food hinges entirely on technological advancements,” said Husein Kitabwalla, CEO, Tech & Services and Food Transformation, Sodexo North America.
• Burger King has committed another $300 million to remodeling an additional 1,100 U.S. restaurants, per multiple published reports. The company has remodeled about 100 locations to date and those units have seen sales climb, per aa CNBC story. Overall, multiconcept operator Restaurant Brands International plans to spend roughly $2.2 billion to revitalize Burger King. The company expects 85% to 90% of its 7,000 units will have its modern design by 2028.
• Can a company drive better customer experience by creating a better employee experience? Absolutely, says Chipotle. Improved training and scheduling boosted employee satisfaction and order fulfillment speed, per a Restaurant Dive story. This news comes shortly after Chipotle announced it will no longer develop its Farmesa Fresh Eatery Concept, per a different Restaurant Dive story. The chain said it will incorporate learnings from the concept in future culinary innovation at Chipotle. The company did not explain why it decided to end the concept.
• The 2023 expansion rate of the top 500 restaurant chains was the highest it has been since 2016, per data from Technomic. The top 500 chains added more than 4,100 net units, which represents a 1.8% increase from 2022. What is notable about this growth is that more than half of the chains in the top 500 added units per Technomic.
• Crumbl believes smaller portions can lead to bigger sales. On Mini Mondays, guests can purchase smaller versions of the chain’s cookies in packs of three, six or 12. The move comes during a challenging time for Crumbl, which grew unit count by 41% in 2023 but saw average unit volumes decline 37%, per a Restaurant Business report.
• The list of restaurant chains filing for bankruptcy continues to grow. Sticky’s Finger Joint, a New York City chicken tender concept, filed for Chapter 11 bankruptcy, per a QSR Magazine story. The chain operated 16 locations in New Jersey and New York City.
• Renowned Chicago restaurateur David Morton has changed the name of his company to reflect the organization’s widening scope. The company has shed its DMK moniker in favor of Episcope Hospitality + Advisory, per a Restaurant Business story. The change reflects the company’s continued growth beyond Chicago. Episcope has locations in Chicago, New York City, New Jersey, Phoenix, Las Vegas and Houston, per its website. Episcope will also have a consulting arm, the story added.
• The Foodservice Consultants Society International – The Americas Division presented its Product of the Year Award to Structural Concepts. The Michigan-based manufacturer participated in FCSI’s 2024 Innovation Showcase and was recognized for its Autonomous Retail Merchandiser.

Economic News

• Consumer confidence decreased to its lowest level since July 2022, according to The Conference Board. Its Consumer Confidence Index came in at 97.0 in April, down from 103.1 in March. This also represents the third monthly decline. Consumers became “less positive about future business conditions, job availability and income,” per a Conference Board spokesperson.
• Real gross domestic product increased by 1.6% in the first quarter of 2024, per the advance estimate from the U.S. Bureau of Economic Analysis. This was less than the 4% many economists had projected and less than the 3.4% increase from the fourth quarter of 2023. The personal consumption expenditures price index increased 3.4%, compared with an increase of 1.8% in the previous period.
• Personal income increased 0.5% in March, according to estimates released by the U.S. Bureau of Economic Analysis. Disposable personal income also increased by 0.5%.  Personal consumption expenditures increased 0.8%.
• New orders for manufactured durable goods increased by 2.6% in March from the previous month, per the U.S. Census Bureau. This follows a 0.7% February increase. Up 7.7%, transportation equipment led the increase.
• Initial jobless claims decreased 5,000 to a level of 207,000 for the week ending April 20, 2024, per data from the Department of Labor. This is the lowest level of job claims in nine weeks, per published reports. The 4-week moving average was 213,250, a decrease of 1,250 from the previous week.
• Compensation costs for civilian workers increased 1.2% for the 3-month period ending in March 2024, the U.S. Bureau of Labor Statistics reported. This was 0.2% greater than the increase economists had projected, per a Yahoo! Finance story. Wages and salaries increased 1.1% and benefit costs increased 1.1% from December 2023.