Chicago-based grocery startups Foxtrot and Dom’s Kitchen & Market, which looked to carve a niche in Chicago’s competitive grocery market with upscale, small-format stores, will merge.

The merged companies will be helmed by Foxtrot CEO Liz Williams under a new entity, Outfox Hospitality. The deal is expected to close in the fourth quarter, the companies said in a news release Monday. Financial terms of the transaction were not disclosed.

Foxtrot has 15 stores in Chicago and another 17 across D.C., Dallas and Austin. Dom’s, which is also known for its upscale, downsized concept, has two Chicago stores, one in Lincoln Park and one in Old Town. The company announced plans in September to open a third location in River North next summer.

Foxtrot stores straddle the line between upscale convenience store and cafe, while Dom’s, launched in 2021 by Chicago grocery scion Bob Mariano and former Dominick’s executives, is known for fuller grocery offerings and a wide range of prepared meal options.

In an interview, Williams said the merger was an opportunity to create “a modern food retailer that is going to disrupt this category.”

Dom’s co-founder and board Chairman Jay Owen said the two brands have similar customer bases.

“We think one of the real great powers of bringing these two companies together is that we can serve that customer in so many different ways,” he said. “Whether it’s more of a full shop, whether it’s something more oriented toward grab and go.”

Amanda Lai, director of food industry practice at retail consultancy McMillan Doolittle, said grocery and convenience operators such as Foxtrot and Dom’s are facing high operating expenses from elevated food prices to the rising cost of labor.

“We’re seeing a lot of independents and regional companies — retailers and grocers — banding together to be able to have more leverage to create efficiencies to drive cost savings to compete against the national players,” she said.

“There’s market overlap between the two,” Lai said. “I think both of them, fundamentally, are looking to become more efficient.”

Dom’s is likely to benefit from Foxtrot’s private label program, Lai said, while Foxtrot could benefit from the strong experience in grocery and retail operations at Dom’s. Chicago shoppers will likely see some blending of offerings at both brands post-merger, Lai said.

Williams said she expected some of Foxtrot’s private label offerings would be available at Dom’s, and that some of Dom’s prepared foods would be sold at Foxtrot stores.

Both companies have previously discussed ambitious growth plans. Dom’s said in September it had a working plan to open 15 stores by 2025. In 2021, Foxtrot said it planned to have more than 60 locations by the end of 2022, about double the number of stores it currently has open.

Foxtrot launched as an online delivery startup in 2014 but later expanded to open bricks-and-mortar retail locations. The company grew during the COVID-19 pandemic, finding opportunities in empty storefronts left vacant by struggling retailers, co-founder and then-CEO Mike LaVitola told the Tribune in 2021.

Williams said the companies would be putting together a long-term growth plan over the next couple of months. That could include the growth of the Dom’s brand outside of the Chicago area, she said.

“I think there’s a day that that will happen,” Williams said. “We’re going to look really carefully at where would be the right markets for Dom’s.”

Owen, along with Mariano and LaVitola, will hold adviser and board roles at the new company. Dom’s CEO Don Fitzgerald will serve as Dom’s president and chief operating officer during a transition period, the companies said.

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