Executive Briefing
Two new Japanese boutique hotels that are doing it right
How to actually compete with Airbnb. Also: The Tokyo salad chain that publishes sales data — in real-time. And the truth about that Foxtrot deal.
By Dan Frommer on Saturday, December 2, 2023 at 8:00 am
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Hello hello! It’s Dan Frommer, back with The New Consumer. How’s the season looking?
Thank you to everyone who came to our little meetup in Tokyo! It was great to spend time in person, and I’m looking forward to doing more (and bigger) things there in the future. Grocery retreat 2024? Who’s in? (Thanks, also, to Perpetua for inviting me to speak at their Growth Labs Tokyo event.)
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Foxtrot, the Chicago-based modern convenience store chain — subject of my most popular article from 2022 — announced this week that it’s merging with Dom’s Kitchen & Market, a modern grocery store startup founded by Chicago grocery royalty. (Terms not disclosed.)
I’ve had a few people ask, so I’ll just say: This feels like a strange deal — one that I can’t imagine was anyone’s first idea, and perhaps is simply the best, or least-bad, among few options.
You just don’t tend to combine two distinct, ambitious startups under one corporate structure when neither is at scale, even if the businesses are sort-of similar. Foxtrot, which has 32 stores in four markets, and Dom’s, which has two in Chicago — nice grocery stores with lively cafés and in-house restaurants — both have far better things they could be doing than integrating a merger or operating multiple businesses.
But the capital markets are still tough right now, especially for a company like Foxtrot, which was one of the beneficiaries of probably too much cheap money during the ZIRP era; was probably still burning beaucoup de cash; and is probably a significantly less digitally-driven business than initially conceived.
I’ve heard several times that its stores do well. And over the long run, a beloved, modern, tasteful, vertically integrated, omnichannel convenience store, with popular cafés, makes total sense. But it’s different math — tech is expensive, stores are capital-intensive to open — and evidently not alluring in today’s environment.
Anyway, this feels more like a re-cap, with just enough potential strategic and synergistic sense to give investors some hope for long-term upside.
And if you squint, and things go right, there is a path forward that might just work.
- Liz Williams — Foxtrot’s newish CEO, a well-regarded operator who was previously the CEO of Drybar and CFO of Taco Bell — will run the group.
- The Dom’s team will bring serious grocery expertise. (Dom’s is a nod to Dominick’s, the legacy Chicago grocery chain that was acquired and ruined by Safeway. Dom’s co-founder Bob Mariano used to be the CEO of Dominick’s, then founded and ran Mariano’s, a popular chain.)
- Foxtrot will bring its brand and taste — assuming the right people can express it — and its excellent private-label work, under former longtime Whole Foods 365 exec Mitch Madoff. (Have you tried the spicy dill pickle popcorn yet? Try it.)
There is an opportunity to build a sort-of Midwestern Erewhon under the Foxtrot brand, with upscale grocery and a serious prepared foods and café business. (In 2019, Erewhon said prepared foods represented more than 40% of its business.) I even like the idea of having two different store-size concepts, the way, say, Carrefour and Tesco in Europe have their big flagships and then sub-brands for smaller, city markets.
But we’re a long way from there.
What’s the most famous hotel in Tokyo? The Park Hyatt? The Okura? Four Seasons? Maybe now the Aman?
As long as I’ve been visiting, you’ve had your choice among those super-luxurious chain hotels on the high end, and cheaper but boring business chain hotels on the mid-to-lower end, without many interesting alternatives.
That’s starting to change, thanks in large part to one group: Trunk, which recently opened its second Tokyo hotel in the Shibuya area, and is on the leading edge of a boutique hospitality renaissance in the city.
Trunk is the creation of Yoshitaka Nojiri, who grew up in the neighborhood and founded its parent company — an innovative, publicly traded wedding business — 25 years ago.
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Hi, I’m Dan Frommer and this is The New Consumer, a publication about how and why people spend their time and money.
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