Julia’s first TikTok to hit a million views came at a price—her job.
The video, from April 23, 2024, shows Julia working as a barista at Foxtrot—the “elevated” convenience store chain with dozens of locations in Chicago, Texas, and Washington, DC, and known for coffee, upscale groceries, wine, and its own delivery app. The caption says, “found out 2 hours before that our company was closing nationwide!!!” Julia shows herself clumsily making her last latte and pans the camera around the store, where customers are still sitting with their laptops. “There are all these people here. What do we tell them?”
For weeks, Julia had felt something was wrong. Days earlier, her Foxtrot location in Chicago’s upscale Lincoln Park neighborhood had failed a health inspection; the department cited “pink slime build up” dripping into “ice used for human consumption.” “ I was like, is anyone doing anything about this? Like, who’s cleaning the ice?” she says. Nobody had an answer. Two days later, management ordered a spending freeze. Employees couldn’t order any supplies—not even milk for coffee.
Then, a few days later Julia and around 1,000 employees at Outfox, Foxtrot’s parent company, came into work only to be informed that they wouldn’t be completing their shifts: The whole company was shutting down due to financial trouble and staff no longer had jobs, effective immediately.
Foxtrot also had millions in unpaid bills. But when vendors tried the company’s emails and phone numbers, they already had been disconnected. Former employees filed a lawsuit against the company for violating the WARN Act, which requires businesses to inform employees of mass layoffs in advance; their complaint demanded 60 days of backpay, the amount of notice they should legally have received. Some vendors also sued the company in an effort to get paid.
Now, two years later, most of these claims—the bills owed, the case from staffers, even equipment that Foxtrot rented and never paid for in full—are still outstanding. Despite that, Foxtrot stores are up and running again, opening shiny new locations in Chicago and Dallas, with the same CEO who started the original company, Mike LaVitola. That’s in part because LaVitola, along with one of Foxtrot’s early VC investors—a firm called Further Point Enterprises that no longer has a website and shares little publicly about its work—have been able to so far avoid paying debts thanks to the Chapter 7 bankruptcy process, all while resurrecting a new version of the company. Many of their actions raise questions about whether they followed proper bankruptcy procedure, and could be forced to pay those debts after all. Further Point, Foxtrot, and LaVitola did not respond to detailed requests for comment for this story.
Foxtrot’s story exemplifies a growing trend: Startups backed by venture capital and private equity firms are minimizing debt through bankruptcy and walking away from risky investments virtually scot-free. This practice appears to be rising: In 2024, a record 110 VC- and PE-backed companies filed for bankruptcy, according to data from S&P Global, marking a 205.5 percent increase since 2022, when there were only 36 such filings. For some of these companies, a specific corner of bankruptcy—Chapter 7, which is intended as a way for firms that are shutting down for good to settle their debts—is a growing tool to recover from investments gone wrong with few consequences.
The result is that bankruptcy serves as a kind of born-again baptism, erasing past sins and allowing companies to start with a blank slate. “I’ve read so many cases of these bankruptcies where they get the liabilities discharged and at the other end is a clean company,” says Martin Kenney, a professor at the University of California, Davis and coauthor of Private Equity and the Demise of the Local. The consequence is that everyone else ends up in hell. What happened at Foxtrot, he says, “is straight out of the PE playbook.”
Mike LaVitola launched Foxtrot in 2013, in collaboration with the University of Chicago’s Booth School of Business, where he was a graduate student.
It began as a food and alcohol delivery app, but within a year, Foxtrot was opening brick and mortar stores in Chicago. LaVitola had worked at a private equity firm while getting his MBA and now he turned to the industry for money to grow the convenience store chain. At first, Foxtrot expanded slowly and deliberately, receiving a few modest rounds of VC funding—$1 million in 2015 and $6 million in 2018—and opening a store or two a year. But after the company brought in $100 million in VC funding in 2022, its approach to business began to change.
Investors ranged from prominent names like chef David Chang and VC firm Monogram Capital, to relatively unknown contributors like Further Point Enterprises—the New York venture and private equity firm that would continue to work with LaVitola after Foxtrot’s first iteration shut down.
After this equity infusion, Foxtrot announced a huge, rapid expansion: 50 new stores in two years. They touted grand plans to triple the size of their engineering staff, to upgrade to high-tech cashier-less technology, and to become a national name.
Soon, though, under LaVitola’s management, multiple former staffers, including customer success senior manager Justin Flores and store manager Abby Stinson, saw the company overspend frequently: Stinson remembers the company spending thousands on custom tables—but when they arrived, nobody knew where to put them. Eight former store employees, including Stinson, said they’d have to throw out enormous amounts of spoiled food because the company didn’t adjust orders to align with sales. In the spring of 2023, Foxtrot announced it would replace LaVitola with Elizabeth Williams, the company’s CFO and a veteran of major brands like Taco Bell, and LaVitola became chairman of the company’s board. (Williams did not respond to a request for comment.)
Under Williams, the company turned to aggressive cost-cutting—and store conditions rapidly deteriorated. For instance, store employees’ $100 a month grocery stipend was taken away across all locations, and some employees reported that broken equipment, like refrigerators and dishwashers, wasn’t repaired, and that their hours were cut. In July 2023, Foxtrot’s flagship Gold Coast store had a sewage flood. According to assistant store manager Kyle Caito and two other former employees who shared store photos and staff text messages, a higher level manager didn’t authorize employees to immediately shut down the store, even as human feces began to flow across the floor from a drain behind the counter. After having to clean without rubber gloves and other protective equipment, they say they were instructed to wipe sewage off High Noon boxes stacked on the floor so that the popular hard seltzers could later be sold to customers.
“ We were told, ‘Don’t throw away that stuff because it’s high dollar and they are fast sellers.’ And they ended up keeping those boxes,” said Caito. At other Foxtrot locations, former employees recall that maggots sat in a sink for weeks. They also experienced pressure from management to sell expired food, including greyed meat. Twenty-one failed health inspections by Chicago’s health department confirm some of these problems.
In November 2023, Foxtrot announced that it would merge with Dom’s, a small Chicago-based grocery company, and that both would become affiliates of a new parent entity, Outfox Hospitality.
Amid the deteriorating store conditions, rumors began to swirl that Foxtrot was about to shut down. Another corporate employee said she started getting lots of emails from vendors whose bills hadn’t been paid: “That’s when I knew there’s something going on above my pay grade that I have no idea about.”
In March, Outfox replaced Williams with Foxtrot’s second new CEO in a year: Rob Twyman, formerly of Whole Foods Market—a sign of ongoing upheaval at the company. Weeks later, Foxtrot abruptly closed all of its stores. The company shut off its emails and phone numbers, and stopped covering employees health insurance. (Twyman did not respond to a list of questions from Mother Jones.)
For a few weeks, Foxtrot’s management was silent in the press, as former vendors and industry insiders speculated that the company was going to file for bankruptcy. Instead, Foxtrot held a virtual liquidation auction on May 10. Marc Nathan, an expert in the Consumer Packaged Goods space, observed the auction to find out what Foxtrot was selling and who was bidding. He said that it seemed that an “inside deal” had clearly been arranged before the auction began. Nobody had a chance to bid, and the facilitator simply announced that Further Point Enterprises—the same small private equity firm that had invested in Foxtrot early on, would be purchasing the assets.
Further Point bought Foxtrot’s assets for just $2.2 million. Nathan and other observers were surprised by this low price, but Nathan says it also wasn’t clear which assets were being sold. When Foxtrot declared Chapter 7 bankruptcy just a few days later, the filings valued Foxtrot’s assets at $10-$50 million. (It is unclear if what was sold at auction was included in that valuation. Neither Further Point nor Foxtrot responded to questions about the auction sale price.)
Less than a month later, Foxtrot reopened, with Further Point as its partner and LaVitola reinstalled as CEO.
The way the auction happened, and the collaboration that followed, could mean that Further Point and LaVitola could be held liable for the original Foxtrot’s debts in the future, according to two law professors specializing in bankruptcy, Rafael Pardo at Washington University and David Carlson at Yeshiva University.
Whether or not the new Foxtrot could be liable for the old debts would be a matter of interpretation for the courts, should any of the original Foxtrot’s creditors decide to sue the new company. But according to Pardo and Carlson, a judge might find that the auction was “collusive,” because the sale to Further Point appears to have been pre-arranged: It occurred less than a month before Further Point and LaVitola partnered again, and participants didn’t get a chance to bid. So a sale that should have tried to raise as much money as possible to pay Foxtrot’s creditors, instead seems to have benefited Further Point and LaVitola, enabling them to build a new version of Foxtrot, unencumbered by old debts.
Outfox’s decision to file for Chapter 7 bankruptcy also signaled that there was no way forward for Foxtrot or its other affiliates. Chapter 7 is designed for businesses that are shutting down for good—and therefore assumes companies have limited money to pay back debts. Businesses that want to continue operating while relieving some of their debts are supposed to file for Chapter 11 bankruptcy, a much more expensive and time-consuming process in which creditors and bankruptcy judges get more say in how the company will be run and how its remaining assets are divided.
Yet two weeks after Outfox and Foxtrot filed for Chapter 7 bankruptcy, Further Point obtained the leases for six of Foxtrot’s former stores—a quiet sign that Foxtrot’s old investors might be trying to revive the company. Doing that could raise questions under Chapter 7 rules, and might force them to eventually pay back the debts the bankruptcy had forgiven. A week later, LaVitola, who had been silent throughout these proceedings, announced exactly that: the arrival of Foxtrot 2.0.
In a June 5 interview with ModernRetail, LaVitola told the world that, with Further Point as a partner, he would be reviving Foxtrot as CEO. He also touted a version of events in which LaVitola was uninvolved with Foxtrot long before the trouble began. So he was just as blindsided as other employees left in the lurch when Outfox shut down. “I was, unfortunately… in a similar situation to a lot of our team members, kinda finding things out in real time,” he said, “It was really, really shocking and really just awful to see the way everything happened.”
He said by the time Foxtrot shut down, he’d been sidelined at the company and was no longer on the board.
LaVitola said that he hesitated to reopen the company when Further Point approached him about returning, but that he ultimately went with the deal for altruistic reasons; reopening “benefitted a heck of a lot more people than the company not existing.” LaVitola then posted a cryptic Instagram post with a sunset on Foxtrot’s old, now scrubbed account. “A new Foxtrot with some old friends,” he wrote.
As much as LaVitola insisted that the new Foxtrot would help mend the holes the original chain’s shutdown left in the community, he said nothing about the WARN Act lawsuit, or the employees left without health insurance, or the vendors still holding unpaid invoices. Instead, he continued to distance himself from the original Foxtrot.
But documents uncovered by Mother Jones suggest that LaVitola was much more involved with Foxtrot’s closure than he’s led the public to believe. His statements suggest that he was trying to minimize his role at the company when it shut down. LaVitola’s attempt to distance himself from the original Foxtrot could have been, in part, a move to manage his reputation as he moved to reinvent the company—many people in the Chicago community especially were livid about how Foxtrot handled the shutdown. But there may have been a legal motive as well. The depth and timing of LaVitola’s involvement with Foxtrot when it shut down could influence whether his new company can be held liable for the original Foxtrot’s debt, according to Calson and Pardo. (Neither Foxtrot nor LaVitola responded to questions about his company role when Foxtrot shut down.)
LaVitola’s efforts to minimize his role at Foxtrot are contained in filings from Foxtrot’s bankruptcy and in a lawsuit where a food supplier sued Foxtrot and LaVitola for $700,000 in losses.
In a statement filed as part of that case, LaVitola says he was still serving on Foxtrot Ventures’s board as “non executive chairman,” a position that would have required him to know the company’s financial state. Bankruptcy documents support this, showing that LaVitola was paid as a “director”—a term that is synonymous with “board member”—at Foxtrot right up until the company shut down in April 2024. Interviews with former corporate employees also suggest that LaVitola remained on Foxtrot’s board after it became part of Outfox.
“We had to be in the office for three days a week. And of those days he was there, like he was in the office regularly. He was taking meetings. He was talking to the merchants. He was still involved,” said a former Outfox employee who was also in the office three days a week. The employee said there was a window that allowed everyone to see into the conference room, and that LaVitola continued to attend executive meetings even after the merger in late 2023. Flores confirmed “he was in that office all the time.”
Another way that judges determine whether a new company is liable for the debts of a former company is to monitor whether the new company too closely resembles one that filed for Chapter 7—for example, because it has some of the same executives at the top, the same assets, and some of the same locations—it could lose Chapter 7 bankruptcy’s get-out-of-debt-free card and can be held liable for the previous company’s debts and other legal claims. The financial viability of the new Foxtrot, then, potentially hinges on creating distance from the work LaVitola did at the old Foxtrot.
But that distance is minimal: Many of the new Foxtrot’s first stores were in old Foxtrot locations and used the old Foxtrot’s assets purchased in auctions. Foxtrot also kept its same name and both of the original founders on its executive team—LaVitola and his co-founder, Taylor Bloom. At the new Foxtrot locations in Chicago, business is booming. Further Point appears to be capitalizing on the assets it purchased at auction without having to compete against other bidders. (Bloom did not respond to a request for comment.)
The company has reopened ten of its old locations, two in Dallas and eight in Chicago, as well as a new build location in Chicago’s Lincoln Park. The stores are full of well dressed folks sipping wine and coffee and working on laptops. LaVitola is giving interviews about values and teamwork, and promising to take a more measured, methodical approach to running his company.
Most of Foxtrot’s old vendors, though, still haven’t been paid. Bankruptcy filings showed Foxtrot owed nearly $25 million to creditors at the time it shut down. The bankruptcy also paused the lawsuit filed by former employees, which means they have yet to receive backpay.
LaVitola is not the only food CEO to attempt to use Chapter 7 to help himself. The CEO of Massachusetts-based start-up Next Level Pizza formed a new company to buy his old company’s assets in a liquidation sale before filing for bankruptcy. When Underground Cellar, a wine startup, declared Chapter 7, its founder tried to transfer his company’s key assets—in the form of half a million bottles of wine—back to himself. In both of these cases, courts stopped these transfers from going ahead. In Foxtrot’s case, judges haven’t said anything about the asset sale to Further Point, or the fact that the new Foxtrot may be too similar to the old one. That means that its many creditors who still hold unpaid bills could still try to claw back money from the new Foxtrot. (The CEOs of Next Level Pizza and Underground Cellar both did not respond to a request for comment.)
Some bankruptcy judges are becoming more aware of companies that attempt to use the system to stave off big debts. The Ninth Circuit Court of Appeals did recently issue a ruling that is meant to expand bankruptcy court powers to stop some asset transfers that help bankrupt companies avoid paying back creditors. Private equity firms appear to be catching on to this enhanced scrutiny: Last year the number of PE-backed firms that filed for bankruptcy dipped slightly, as more firms have opted to handle financial distress through private restructurings and lines of credit to avoid the bankruptcy courts—and the publicity that comes with talking about company finances in open court.
For now, LaVitola is free to open more stores—with the same name, in the same city, and unburdened by the money problems that threatened the old company. But, LaVitola might be looking over his shoulder for a long time, to see if any creditors try to retrieve those debts.
