Sweetgreen, Momofuku Founders Join $42 Million Bet on Mini-Marts
(Bloomberg) -- The contemporary convenience store chain Foxtrot—known for 60-minute delivery guarantee of organic wine, hard seltzer, and locally made ice cream—has raised $42 million in Series B funding, the company announced Monday.
The new investment round is led by the food-tech venture capital firm Almanac Insights, whose founder is David Barber, co-owner of the celebrated restaurant Blue Hill at Stone Barns, in Tarrytown, N.Y. (His brother, Dan, is the chef.) Other investors include chef David Chang, founder of Momofuku, and Nicolas Jammet, Sweetgreen Inc.’s co-founder and co-chief executive officer. Monogram Capital Partners and former Whole Foods Market Inc. CEO Walter Robb have also contributed funds. The company has raised $65 million to date.
“This is the corner store reimagined,” says Barber. “No one is going into bricks and mortar with this digital strategy.”
Foxtrot, which started in 2014 and has 10 stores in Chicago and Dallas, is planning to open nine more this year, starting with Washington, D.C., on March 1. That opening had been planned for 2020, but was delayed because of the pandemic.
Foxtrot distinguishes itself with its hybrid, locavore model vs. your typical 7-Eleven. The shelves are stocked with products made by local artisans in addition to major consumer brands. In Chicago that will include coffee from Metric, Do-Rite’s old-fashioned doughnuts, and IPAs from Pipeworks Brewing. Customers order via an app.
The chain also specializes in private label products, notably candy gummies. The best-selling online items are wine and ice cream; the average order is $50. “We sell a lot of bottles of small producer wine, with cans of White Claw. Customers know we have both of those things,” says Foxtrot CEO Mike LaVitola.
In 2020, a 55% increase in store sales combined with a 200%-plus increase in e-commerce led to an overall revenue increase of more than 100% year over year, according to Foxtrot, although they declined to disclose exact sales figures.
LaVitola says the pandemic has given his company an opportunity to speed up expansion plans. Because of their hybrid retail and delivery guarantee, store location is especially key to Foxtrot’s business plan.
“From a retail view, there were places that weren’t available that now are, and at much better economic terms,” he says. It’s estimated that 17% of restaurants in the U.S., around 110,000, have closed permanently or long term, leaving plenty of empty storefronts. Many are in or near high-density areas that work for his business model, from residential neighborhoods to mixed-use office spaces.
For upcoming locations, the company is prioritizing spaces with seating areas, to expand the opportunity for in-store dining. LaVitola projects Foxtrot’s expansion rate to be 50% faster than it otherwise might have been.
“We’re seeing leases around 30% lower, and there’s most flexibility in making percentage rent,” he says, about leases that are based on percentage of sales rather than a fixed monthly fee.
LaVitola says they find spaces by a combination of “pretty deep analytics, looking at data sources and then walking the neighborhoods and vetting.” Foxtrot’s goal is to find a balance between being a coffee hub for morning drinkers and a happy hour hangout at night, while still being no more than 60 minutes away from the audience that’s ordering from their couches.
Future expansion plans include other Texas markets such as Houston and Austin. LaVitola says that Washington opens up a pathway to more locations in the Northeast. “There’s a small chance we’ll open in [additional] new markets in 2021,” he says, and “a large chance in 2022.”
Foxtrot has also installed a new executive team that includes COO Sumi Ghosh, formerly the CEO of Tata Starbucks Private Ltd., and senior vice president Caroline Barry, who was vice president for strategy at Sweetgreen.
Jammet believes there will be opportunity to integrate Sweetgreen products into Foxtrot shelves. He’s also advising them on expansion.
“We have a robust outpost program, shelves in other places. That could work at Foxtrot,” says Jammet. “We can help them look at real estate locations. There are Sweetgreen locations that are close to each other. I’m sure you’ll see lots of Foxtrots near Sweetgreen in the future.”
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