The legendary Manhattan grocery store Fairway Market has declared bankruptcy, three years after private equity investors took the debt-laden chain public.
While the firm painted a rosy picture in a press release announcing the filing, the announcement is certain to send a chill across the Upper West Side, where the store is a bedrock local institution.
A crowded two-story maze of pushy shoppers and sawdust-covered floors, Fairway’s original location at Broadway and West 74th Street is the closest thing the Upper West Side has to a village square. Local politicians glad-hand on the sidewalk outside. Neighborhood gossip is traded in the cheese corner. Local boldface names eat lunch together at the café upstairs.
It does not appear that the bankruptcy will change any of that right away. But the future for Fairway Market is hazy.
Founded in the 1930s by Jewish grocers, the company began opening new locations in the mid-1990s, before its purchase in a 2007 leveraged buyout by Sterling Investment Partners, a private equity firm. When Sterling took Fairway public in 2013, it was carrying $250 million in debt, much of it left over from the buyout.
Despite an initial price surge, the IPO was a bust, and company’s financial results have been disastrous in recent years. Debt service has drained the company’s revenues, and competition from Whole Foods and Trader Joe’s has cut into profits at many of its locations. Initial plans for massive expansion were scrapped.
Fairway said May 3 that it has already reached a deal with its creditors, and that it could be out of bankruptcy in less than a month, with no disruption at any of its 15 stores.
Still, warning signs are rife throughout the filings. The firm reported that it had tried and failed to find a buyer in recent months before it filed for bankruptcy. And filings also acknowledge that Fairway faces stiff competition, particularly in New York, a problem that its restructuring won’t solve.
For now, the grocery chain’s locations are safe. But the court papers make clear that Fairway’s troubles are far from over.
Josh Nathan-Kazis is a staff writer for the Forward. He covers charities and politics, and writes investigations and longform.