ATTENTION FAIRWRAY SHOPPERS: THIS STORE IS FILING FOR BANKRUPTCY
No, you won’t be hearing this announcement while walking down the aisles of your local Fairway. However, if you were in Federal Bankruptcy Court, you could be hearing Fairway being called as the next case on the calendar. Fairway, an iconic NY supermarket filed bankruptcy again on January 23, 2019. This was not the first time that the store has been though the Chapter 11 process. The company previously filed in 2016. Attention Fairway shoppers, this time it may lead to liquidation or a sale of the business and a shutdown of its
Chapter 11 Bankruptcy is when a company attempts to reorganizes through restructuring their affairs: such as negotiation with their creditors for better terms on their debt, or in this case with Fairway, by closing off their locations and rejecting leases with their landlords. There are many options available to the Chapter 11 Debtor that outside of Bankruptcy are simply not an option.
It is possible that Fairway may sell the name or individuals stores to another investor or grocery store chain which may keep the Fairway name or chose to change the name of the store’s locations. It is also entirely possible that the stores will close for good.
FAIRWAY’S PRIOR BANKRUPTCIES
Fairway Market began as a small corner store on the Upper West Side of Manhattan in the early 1930’s and then rapidly expanded within NYC with approximately 15 locations throughout Harlem, Chelsea, Kips Bay, and far into the suburbs. Fairway’s downturn started in 2007 when the Glickberg family sold an 80% stake to private equity firm Sterling Investment for $140 million. Fairway quickly fell victim to Sterling’s aggressive expansion plan aimed at enticing suburban shoppers. This also burdened the company with a crushing $300 million in debt. Fairway first filed Bankruptcy in 2016. Some of the reasons contributed to their overexpansion and overhang of too much debt to service.
THE GM BANKRUPTCY AS A LEADING EXAMPLE OF OPERATING UNDER
Back in 2008 when the “Great Recession” hit the General Motor Company filed for bankruptcy. GM had many unprofitable factories in North America. Several of these were closed, which they were legally entitled to close and break leases which they would be unable to do outside of bankruptcy. Certain unprofitable car lines were discontinued, which would have been a more difficult step outside of bankruptcy.
Since the 2008 Bankruptcy filing, General Motors is back and profitable. The company and thousands of jobs were saved through its restructuring process. The system worked as intended. Fairway is a long-standing supermarket franchise in the New York City and suburban market. The Chapter 11 Process will allow your local Fairway to become another grocery store; depending on who ultimately purchases these locations. For now, they will continue to operate as grocery stores. While the proceeding is going on, it is also possible that some stores may close.
FAIRWAY’S DEBT PROBLEM
If Fairway’s financial situation sounds familiar, sadly, it is. In many cases, businesses overextend and take on too much debt which their cash flow cannot support . These circumstances force them to face default or file for Chapter 11 bankruptcy. This also happens to individuals who use credit cards or bank loans to overextend themselves. They are left with monthly payment, which given their currently cash flow and expenses to live in NYC, they are unable to maintain. This burden causes great personal stress, anxiety and general unpleasantness.
My practice has for over 20 years advised, helped restructure businesses and individuals in filing for Bankruptcy whether it be chapter 7 or 13 for individuals or Chapter 11 for businesses. If you are a business or individual that are experiencing such problems, please feel free to contact our office at (212)387-7880, or by emailing at Daniel@dmsilverlaw.com.
Noah Manskar and Lisa Fickenscher, L. Fairway Bags Sale: Legendary Grocer Unsure Name
Will Live On, New York Post, January 24, 2020. @ pg 31.