S-1 1 a2211056zs-1.htm S-1

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As filed with the Securities and Exchange Commission on September 24, 2012

Registration No. 333-          

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Fairway Group Holdings Corp.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  5411
(Primary Standard Industrial
Classification Code Number)
  74-1201087
(I.R.S. Employer
Identification Number)

2284 12th Avenue
New York, New York 10027
(646) 616-8000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Herbert Ruetsch, Chief Executive Officer
Fairway Group Holdings Corp.
2284 12th Avenue
New York, New York 10027
(646) 616-8000
(Name, address, including zip code, and telephone number, including area code, of agent for service)



With copies to:

Paul Jacobs, Esq.
Roy L. Goldman, Esq.
Steven I. Suzzan, Esq.
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Telephone (212) 318-3000
Fax (212) 318-3400

 

Nathalie Augustin, Esq.
Senior Vice President—General Counsel
Fairway Group Holdings Corp.
2284 12th Avenue
New York, New York 10027
Telephone (646) 616-8070
Fax (212) 234-2603

 

Robert Evans III, Esq.
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Telephone (212) 848-4000
Fax (646) 848-8830



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.



          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.    o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

       
 
Title of Each Class of Securities
to be Registered

  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee

 

Class A common stock, par value $0.001 per share

  $150,000,000   $17,190

 

(1)
Estimated solely for the purpose of calculating the registration fee under Rule 457(o) of the Securities Act.

(2)
Includes the offering price of shares of common stock that may be sold if the over-allotment option granted by the company to the underwriters is exercised.



          The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 2012

[    •    ] Shares

LOGO

FAIRWAY GROUP HOLDINGS CORP.

Class A Common Stock



        This is the initial public offering of shares of our Class A common stock. Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price of our Class A common stock is expected to be between $             and $             per share. We will apply to list our Class A common stock on the NASDAQ Global Market under the symbol "FWM".

        We have two classes of common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except voting and conversion rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes and is convertible at any time into one share of Class A common stock. The holders of our outstanding shares of Class B common stock will hold approximately         % of the voting power of our outstanding capital stock following this offering, and investment funds affiliated with Sterling Investment Partners, through their ownership of Class B common stock, will hold approximately         % of the voting power of our outstanding capital stock following this offering.

        We are an "emerging growth company," as that term is used in the Jumpstart Our Business Startups Act.

        Investing in our common stock involves risks. See "Risk Factors" on page 16.

        The underwriters have an option to purchase up to an additional                           shares of Class A common stock at the initial public offering price less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments of shares.

 
  Initial public
offering price
  Underwriting
discount
  Proceeds, before
expenses, to
Fairway
 
Per Share   $     $     $    
Total   $     $     $    

        Delivery of the shares of Class A common stock will be made on or about                           , 2012.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse   BofA Merrill Lynch   Jefferies   William Blair

   

The date of this prospectus is                           , 2012


GRAPHIC


GRAPHIC


TABLE OF CONTENTS

 
  Page  

BASIS OF PRESENTATION

    ii  

TRADEMARKS AND TRADE NAMES

    ii  

TERMS USED IN THIS PROSPECTUS

    ii  

MARKET AND INDUSTRY DATA

    ii  

PROSPECTUS SUMMARY

    1  

RISK FACTORS

    16  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    42  

USE OF PROCEEDS

    44  

DIVIDEND POLICY

    45  

CAPITALIZATION

    46  

DILUTION

    49  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

    51  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    57  

BUSINESS

    83  

MANAGEMENT

    98  

EXECUTIVE COMPENSATION

    107  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

    116  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    118  

DESCRIPTION OF CERTAIN INDEBTEDNESS

    123  

DESCRIPTION OF CAPITAL STOCK

    125  

SHARES ELIGIBLE FOR FUTURE SALE

    130  

MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS TO NON-U.S. HOLDERS

    132  

UNDERWRITING

    136  

LEGAL MATTERS

    141  

EXPERTS

    141  

WHERE YOU CAN FIND MORE INFORMATION

    141  

INDEX TO FINANCIAL STATEMENTS

    F-1  



        We have not authorized anyone to provide you with information or to make any representations other than those contained in this prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.


Dealer Prospectus Delivery Obligation

        Until                                    , 2012 (25 days after the commencement of the offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

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BASIS OF PRESENTATION

        Our fiscal year is the 52- or 53-week period ending on the Sunday closest to March 31. Our last three completed fiscal years ended on March 28, 2010, April 3, 2011 and April 1, 2012. For ease of reference, we identify our fiscal years in this prospectus by reference to the calendar year in which the fiscal year ends. For example, "fiscal 2012" refers to our fiscal year ended April 1, 2012.


TRADEMARKS AND TRADE NAMES

        This prospectus includes our trademarks and service marks, FAIRWAY®, FAIRWAY "Like No Other Market"®, LIKE NO OTHER MARKET® and FAIRWAY WINES & SPIRITS®, which are protected under applicable intellectual property laws and are the property of Fairway. This prospectus also contains trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols. We do not intend our use or display of other parties' trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.


TERMS USED IN THIS PROSPECTUS

        As used in this prospectus, the term "Greater New York City metropolitan area" means New York City and the New York, New Jersey and Connecticut suburbs within a 50 mile radius of New York City. References to "stores in suburban areas" or similar expressions refer to stores located in the Greater New York City metropolitan area outside of the Borough of Manhattan in New York City. References to "Sterling Investment Partners" are to the investment funds managed by affiliates of Sterling Investment Partners that own shares of our common and preferred stock. The term "SKU" refers to inventory stock-keeping units. "Comparable store sales" refers to the percentage change in our same-store sales as compared to the prior comparable period. Our practice is to include sales from a store in same-store sales beginning on the first day of the fourteenth full month following the store's opening. This practice may differ from the methods that other food retailers use to calculate comparable or "same-store" sales. We define "store contribution margin" as gross profit less direct store expenses (excluding depreciation and amortization included in direct store expenses).


MARKET AND INDUSTRY DATA

        Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate is based on information from independent industry and research organizations, such as the Buxton Company, Willard Bishop Consulting LLC, the Food Marketing Institute and other third-party sources (including industry publications, surveys and forecasts), and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets, which we believe to be reasonable. Although we believe the data from these third-party sources are reliable, we have not independently verified any third-party information. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors." These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. You should read this entire prospectus, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," before deciding to invest in our Class A common stock. Some of the statements in this summary constitute forward-looking statements, with respect to which you should review the section of this prospectus entitled "Special Note Regarding Forward-Looking Statements." Except where the context otherwise requires or where otherwise indicated, (i) the terms "Fairway" "we," "us," "our," "our Company" and "our business" refer to Fairway Group Holdings Corp., together with its consolidated subsidiaries as a combined entity, and (ii) "issuer" refers to Fairway Group Holdings Corp. as the issuer of the Class A common stock in this offering, exclusive of any of its subsidiaries.

Our Company

        Fairway Market is a high-growth food retailer offering customers a differentiated one-stop shopping experience "Like No Other Market". Since beginning as a small neighborhood market in the 1930s, Fairway has established itself as a leading food retailing destination in the Greater New York City metropolitan area, an approximately $30 billion food retail market that is the largest in the United States. Our stores emphasize an extensive selection of fresh, natural and organic products, prepared foods and hard-to-find specialty and gourmet offerings, along with a full assortment of conventional groceries. Our prices typically are lower than natural / specialty stores and competitive with conventional supermarkets. We believe that the combination of our broad product selection, in-store experience and value pricing creates a premier food shopping experience that appeals to a broad demographic.

        We operate 11 high-volume locations in the Greater New York City metropolitan area, three of which include Fairway Wines & Spirits stores. Three of our food stores, which we refer to as our "urban stores," are located in Manhattan, and the remainder, which we refer to as our "suburban stores," are located in New York (outside of Manhattan), New Jersey and Connecticut. We expect to open an additional food store in Manhattan in November 2012.

        We believe our stores are among the most productive in the industry in net sales per store and net sales per square foot as a result of our distinctive merchandising strategies, value positioning and efficient operating structure. We have increased our net sales from $401.2 million in fiscal 2010 to $554.9 million in fiscal 2012, or 38.3%, and our Adjusted EBITDA from $23.9 million in fiscal 2010 to $35.8 million in fiscal 2012, or 49.8%, while significantly investing in corporate infrastructure to support our growth, including new store expansion. We increased our net sales from $122.5 million in the thirteen weeks ended July 3, 2011 to $154.7 million in the thirteen weeks ended July 1, 2012, or 26.3%, and our Adjusted EBITDA from $6.9 million in the thirteen weeks ended July 3, 2011 to $11.3 million in the thirteen weeks ended July 1, 2012, or 63.9%, due principally to new store openings and leveraging our infrastructure. We had net losses of $7.1 million, $18.6 million, $11.9 million, $3.2 million and $3.9 million in fiscal 2010, fiscal 2011 and fiscal 2012 and the thirteen weeks ended July 3, 2011 and July 1, 2012, respectively. For a discussion of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss, see note 5 to the tables included in "—Summary Historical Consolidated Financial and Other Data."

 

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        Fairway provides a highly differentiated one-stop shopping experience "Like No Other Market".

GRAPHIC


*
The companies shown are companies that we view as strong operators in the category listed.

Our Competitive Strengths

        We believe the following strengths contribute to our success as a premier destination food retailer and position us for sustainable growth:

        Iconic brand.    We believe our Fairway brand has a well established reputation for delivering high-quality, value-priced fresh, specialty and conventional groceries. Fairway has served millions of passionate customers in the Greater New York City metropolitan area for more than 75 years, recording approximately 12.7 million customer transactions in fiscal 2012. We believe the strength of the Fairway brand enhances our ability to: (i) attract a broad demographic of customers from a wider geographic radius than a conventional supermarket; (ii) source hard-to-find, unique gourmet and specialty foods; (iii) build a trusted connection with our customers that results in a high degree of loyalty; (iv) attract and retain highly talented employees; (v) secure attractive real estate locations; and (vi) successfully open new stores.

        Destination food shopping experience "Like No Other Market".    We provide our customers a differentiated one-stop shopping experience by offering a unique mix of product breadth, quality and value in a visually appealing in-store environment. Fairway creates a fun and engaging atmosphere in which customers select from an abundance of fresh foods and other high-quality products while interacting with our attentive and knowledgeable employees throughout the store. Customers will find in our stores a "specialty shop" orientation designed to recreate the best features of local specialty markets, such as a gourmet cheese purveyor, full service butcher shop, seafood market and bakery, all

 

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in one location. We believe the distinctive Fairway food shopping experience drives loyalty, referrals and repeat business.

        Distinctive merchandising strategy.    Our merchandising strategy is the foundation of our highly differentiated, one-stop shopping experience. We offer a unique product assortment generally not found in either conventional grocery stores or natural / specialty stores, consisting of a large variety of high-quality produce, meats and seafood, as well as gourmet, specialty and prepared foods and a full selection of everyday conventional groceries. High-quality perishables and prepared foods account for approximately 65% of our sales, compared to the more typical one-quarter to one-third of a conventional grocer's sales. We believe that our distinctive merchandising strategy has enabled us to build a trusted connection with our customers.

        Powerful store format with industry leading productivity.    We believe our stores are among the most productive in the industry in net sales per store, net sales per square foot and store contribution margin. During fiscal 2012, for food stores open more than 13 full months, our net sales per store and net sales per selling square foot averaged $64.8 million and $1,859, respectively. In addition, during fiscal 2012, the contribution margin of our food stores open more than 13 full months was 12.3%. Our highly productive store format delivers attractive returns on investment due to the following key characteristics:

    High-volume one-stop shopping destination.  Our high volumes result in operating efficiencies and generate high inventory turnover, which enables us to maintain a fresher selection of quality perishables than most of our competitors, in turn helping to drive customer traffic and sales.

    Attractive product mix.  Our broad assortment of high-quality fresh, natural and organic products and prepared foods, which account for approximately 65% of our sales, and specialty items, which account for approximately 7% of our sales, enhance gross margins and store productivity.

    Direct-store delivery.  We believe that our "farm-to-shelf" time is shorter than that of many of our competitors. The majority of our perishables are delivered directly to our stores and not stored in a warehouse during the transport period, reducing supply chain costs while enhancing product freshness.

    Strong vendor relationships.  We have built valued, long-standing relationships with both large and small vendors that enable us to achieve attractive pricing on our broad merchandise offering.

    Maximum merchandising flexibility.  We generally enable our merchandising teams to control our on-shelf product selection and positioning, rather than permitting vendors to do so through slotting fees.

        Proven ability to replicate store model.    Since March 2009, we have successfully opened seven new food stores, including three Fairway Wines & Spirits locations, more than doubling our store base.

        Our new suburban food store operating model is based primarily on a store size of approximately 60,000 gross square feet (approximately 40,000 selling square feet), a net cash investment, including store opening costs, of $15 million to $16 million, not all of which requires an immediate cash outlay, net sales after two years of $45 million to $55 million, a contribution margin at maturity of 10% to 13%, and an average payback period on our initial investment of 3 to 3.5 years. We anticipate that a majority of stores that we will open in the near term will be in suburban areas.

        Our new urban food store operating model is based primarily on a store size of approximately 40,000 gross square feet (approximately 25,000 selling square feet), a net cash investment, including store opening costs, of $17 million to $19 million, not all of which requires an immediate cash outlay, net sales after two years of $75 million to $85 million, a contribution margin at maturity of 17% to 20%, and an average payback period on our initial investment of less than two years.

 

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        Passionate and experienced management team.    We are led by a management team with a proven track record, complemented by hands-on senior merchants and store operations managers who have broad responsibility for merchandising and store operations. Our senior merchants have an average of 32 years in the food retailing industry and an average of 14 years at Fairway, and we believe they are widely recognized as authorities in their product categories.

Our Growth Strategy

        We plan to pursue the following growth strategies:

        Open stores in existing and new markets.    For the next several years, we intend to grow our store base in the Greater New York City metropolitan area, primarily in suburban locations, at a rate of three to four stores annually. Over time, we also plan to expand Fairway's presence into new, high-density metropolitan markets. Based on demographic research conducted for us by the Buxton Company, a customer analytics research firm, we believe, based on these demographics, we have the opportunity to more than triple the number of stores in our existing marketing region, that the Northeast market (from New England to the District of Columbia) can support up to 90 stores and the U.S. market can support more than 300 additional stores (including stores in the Northeast) operating under our current format.

        Capitalize on consumer trends.    We believe that our differentiated format positions us to capitalize on evolving consumer preferences and other key trends currently shaping the food retail industry, which include:

    Increasing focus on the customer shopping experience;

    Increasing consumer focus on healthy eating; and

    Increasing consumer interest in private label product offerings.

        Improve our operating margins.    We intend to improve our operating margins by leveraging our well-developed and scalable infrastructure and continuing to implement our key operating initiatives. We have made significant investments in management, information technology systems, infrastructure, compliance and marketing to enable us to pursue our growth plans without a significant increase in infrastructure spending.

Risks Affecting Our Business

        While we have set forth our competitive strengths above, food retail is a large and highly competitive industry, and our business involves many risks and uncertainties, including:

    our ability to open new stores on a timely basis or at all;

    our ability to achieve sustained sales and profitable operating margins at new stores;

    the availability of financing to pursue our new store openings on satisfactory terms or at all;

    our ability to compete effectively with other retailers;

    our ability to maintain price competitiveness;

    the geographic concentration of our stores;

    our ability to maintain or improve our operating margins;

    our history of net losses;

    ordering errors or product supply disruptions in the delivery of perishable products;

 

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    restrictions on our use of the Fairway name other than on the East Coast and in California;

    our ability to retain and attract senior management, key employees and qualified store-level employees;

    rising costs of providing employee benefits, including increased healthcare costs and pension contributions due to unfunded pension liabilities;

    our ability to satisfy our ongoing capital needs and unanticipated cash requirements;

    funds managed by affiliates of Sterling Investment Partners, which own common stock representing approximately 68.5% of the voting power of our outstanding common stock before this offering and the Exchange referred to below, will, upon completion of this offering, own shares of Class B common stock representing approximately [    •    ]% of our outstanding common stock and approximately [    •    ]% of the voting power of our common stock, enabling them to control all matters submitted to our stockholders and limiting or precluding other stockholders from influencing corporate matters for the foreseeable future;

    we will be a "controlled company" with less stringent requirements concerning the independence of our board of directors and its committees under the corporate governance rules of the NASDAQ Global Market;

    the market price of our Class A common stock may be volatile or may decline, and you may not be able to resell your shares at or above the initial public offering price; and

    we qualify as an "emerging growth company" under the JOBS Act, and as such will be permitted to, and intend to, rely on exemptions from certain accounting and executive compensation disclosure and stockholder advisory vote requirements that are applicable to other public companies.

Investing in our Class A common stock involves substantial risk. The factors that could adversely affect our results and performance, including those identified above, are discussed under the heading "Risk Factors" immediately following this summary. Before you invest in our Class A common stock, you should carefully consider all of the information in this prospectus, including matters set forth under the heading "Risk Factors."

Exchange

        Prior to the completion of this offering, we will complete an internal recapitalization pursuant to which we will effect a [    •    ]-for-one stock split and reclassify our outstanding common stock into shares of Class B common stock. As a result of the stock split and reclassification, our outstanding warrants will become warrants to purchase [    •    ] shares of Class B common stock. At the closing of this offering, we will issue [    •    ] shares of our Class B common stock, assuming an initial public offering price of $[    •    ] per share, which is the midpoint of the price range set forth on the cover of this prospectus, in exchange for the [    •    ] shares of our outstanding preferred stock that are not being redeemed with the proceeds of this offering. See "Use of Proceeds." For ease of reference, we collectively refer to the [    •    ]-for-one stock split, reclassification of our outstanding common stock into shares of Class B common stock and issuance of shares of Class B common stock in exchange for our preferred stock as the "Exchange." Upon completion of the Exchange, our authorized capital stock will consist of [    •    ] shares of Class A common stock, par value $0.001 per share, [    •    ] shares of Class B common stock, par value $0.001 per share, and 5,000,000 shares of undesignated preferred stock, par value $0.001 per share. See "Description of Capital Stock."

 

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Corporate Information

        The issuer was incorporated as a Delaware corporation on September 29, 2006. Our corporate headquarters is located at 2284 12th Avenue, New York, New York 10027. Our telephone number is (646) 616-8000. Our website address is http://www.fairwaymarket.com. The information on our website is not deemed, and you should not consider such information, to be part of this prospectus.

Implications of Being an Emerging Growth Company

        We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included only four, rather than five, years of selected financial data due to a change in our fiscal year, included detailed compensation information for only our three most highly compensated executive officers and not included a compensation discussion and analysis (CD&A) of our executive compensation programs in this prospectus. In addition, for so long as we are an emerging growth company, we will not be required to:

    have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act");

    comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (the "PCAOB") regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

    submit certain executive compensation matters to shareholder advisory votes, such as "say-on-pay", "say-on-frequency" and "say-on-golden parachutes"; and

    disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation.

        While we are an emerging growth company the JOBS Act also permits us to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to delay the adoption of new or revised accounting pronouncements applicable to public and private companies until such pronouncements become mandatory for private companies.

        We will remain an emerging growth company until the earliest to occur of: (i) our reporting $1 billion or more in annual gross revenues; (ii) the end of fiscal 2018; (iii) our issuance, in a three year period, of more than $1 billion in non-convertible debt; and (iv) the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter.

 

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THE OFFERING

Class A common stock offered by us

              shares.

Class A common stock to be outstanding immediately after this offering

 

            shares.

Class B common stock to be outstanding immediately after this offering

 

            shares.

Total Class A common stock and Class B common stock to be outstanding immediately after this offering

 

            shares.

Underwriters' option to purchase additional shares of Class A common stock from the issuer

 

            shares.

Use of proceeds

 

We estimate that our net proceeds from this offering will be approximately $[•] million, assuming an initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds that we receive from this offering for new store growth and other general corporate purposes, after (i) paying the accrued but unpaid dividends on our Series A preferred stock totaling approximately $[•] ($[•] per share of Series A preferred stock), (ii) paying the accrued but unpaid dividends on our Series B preferred stock totaling approximately $[•] ($[•] per share of Series B preferred stock), (iii)  redeeming [•] shares of our Series A preferred stock at an aggregate redemption price of $[•] ($1,300 per share), (iv) redeeming [•] shares of our Series B preferred stock at an aggregate redemption price of $[•] ($1,000 per share), and (v) paying $[•] to an affiliate of Sterling Investment Partners in connection with the termination of our management agreement with such affiliate.

 

Our preferred stock is redeemable at the option of our board of directors, which is controlled by the holders of our preferred stock, including affiliates of Sterling Investment Partners. We will determine the portion of the net proceeds of this offering to be used to pay accrued dividends on our preferred stock and to redeem preferred stock in consultation with the underwriters, based in part on the amount of cash we desire to retain on

   

 

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our balance sheet for new store growth and other general corporate purposes. The preferred stock that is not redeemed for cash will be exchanged for Class B common stock in connection with the offering. We received $43,058,000 in the aggregate, or $1,000 per share, upon the issuance of the Series A preferred stock, and $64,016,980 in the aggregate, or $1,000 per share, upon the issuance of the Series B preferred stock, including $12,739,980 representing the value of the Series B preferred stock issued to the sellers in connection with our acquisition of the four then existing Fairway stores in January 2007. See "Use of Proceeds."

Risk factors

 

Investing in shares of our Class A common stock involves a high degree of risk. See "Risk Factors" beginning on page 16 of this prospectus for a discussion of factors you should carefully consider before investing in shares of our Class A common stock.

Voting rights

 

Shares of Class A common stock are entitled to one vote per share.

 

Shares of Class B common stock are entitled to ten votes per share.

 

Holders of our Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by law. Investment funds affiliated with Sterling Investment Partners, which after our initial public offering will control more than [•]% of the voting power of our outstanding capital stock, will have the ability to control the outcome of all matters submitted to our stockholders for approval, including the election of our directors. See "Description of Capital Stock."

 

All outstanding shares of Class A common stock and Class B common stock will automatically convert into a single class of common stock when the number of outstanding shares of Class B common stock owned by Sterling Investment Partners represents less than 15% of the aggregate combined number of outstanding shares of Class A common stock and Class B common stock, and no additional shares of Class A common stock or Class B common stock will be issued thereafter.

Proposed symbol

 

"FWM".

 

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        Unless otherwise indicated, all information in this prospectus relating to the number of shares of capital stock outstanding immediately after this offering:

    gives effect to a [    •    ]-for-one stock split and the reclassification of our outstanding common stock into shares of Class B common stock, including the effect of the stock split and reclassification on our outstanding warrants;

    gives effect to the issuance of [    •    ] shares of our Class B common stock, assuming an initial public offering price of $[    •    ] per share, which is the midpoint of the price range set forth on the cover of this prospectus, in exchange for the [    •    ] shares of our outstanding preferred stock that are not being redeemed with a portion of the proceeds of this offering;

    assumes the effectiveness of our amended and restated certificate of incorporation and amended and restated bylaws;

    excludes an aggregate of [    •    ] shares of our Class A common stock reserved for future grants under our 2012 Long-Term Incentive Plan and [    •    ] shares of our Class B common stock reserved for issuance upon the exercise of outstanding warrants; and

    assumes (i) no exercise by the underwriters of their option to purchase up to [    •    ] additional shares of Class A common stock from the issuer; and (ii) an initial public offering price of $[    •    ] per share, the midpoint of the initial public offering price range indicated on the cover of this prospectus.

 

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Summary Historical Consolidated Financial and Other Data

        The following tables summarize our financial data as of the dates and for the periods indicated. We have derived the summary consolidated financial data for the fiscal years ended March 29, 2009, March 28, 2010, April 3, 2011 and April 1, 2012 from our audited consolidated financial statements for such years and for the thirteen weeks ended July 3, 2011 and July 1, 2012 from our unaudited consolidated financial statements for such periods. Our audited consolidated financial statements as of April 3, 2011 and April 1, 2012 and for the fiscal years ended March 28, 2010, April 3, 2011 and April 1, 2012 have been included in this prospectus. Our unaudited consolidated financial statements as of July 1, 2012 and for the thirteen weeks ended July 3, 2011 and July 1, 2012 have been included in this prospectus and, in the opinion of management, include all adjustments (inclusive only of normally recurring adjustments) necessary for a fair presentation. Results of operations for an interim period are not necessarily indicative of results for a full year. Each of our fiscal years ended March 29, 2009, March 28, 2010 and April 1, 2012 consists of 52 weeks; our fiscal year ended April 3, 2011 consists of 53 weeks. The differing length of certain fiscal years may affect the comparability of certain data.

        Since March 2009, we have opened seven food stores (one urban and six suburban) in the Greater New York City metropolitan area, three of which include Fairway Wines & Spirits locations, bringing our total stores open to 11 (our latest store in Westbury, New York was opened in August 2012 and is not presented in the following tables). We expect to open an additional food store in Manhattan in November 2012. Our income (loss) from operations in each period shown has been affected by the number of stores open and the number of stores in the process of being opened in each period.

        We believe our food stores are among the most productive in the industry in net sales per store and net sales per square foot as a result of our distinctive merchandising strategies, value proposition and efficient operating structure. As the Selected Operating Data table reflects, however, our average net sales per store and average net sales per gross square foot have declined as we have increased the number of suburban stores that we operate. Our suburban stores are larger in size (average of 65,000 gross square feet (39,000 selling square feet)) than our urban stores that have greater real estate constraints (average of 51,000 gross square feet (23,000 selling square feet)) and generate comparatively lower sales and contribution margin.

        While we have increased our net sales from $401.2 million in fiscal 2010 to $554.9 million in fiscal 2012, or 38.3%, and our Adjusted EBITDA from $23.9 million in fiscal 2010 to $35.8 million in fiscal 2012, or 49.8%, our comparable store sales have been impacted by sales transfer from our existing stores to our newly opened stores that are in closer proximity to some of our customers and by our price optimization initiative. As we open new stores in closer proximity to our customers who currently travel longer distances to shop at our stores, we expect some of these customers to take advantage of the convenience of our new locations. As a result, we have experienced in the past, and expect to experience in the future, some sales volume transfer from our existing stores to our new stores as some of our existing customers switch to new, closer locations. However, we believe that by making shopping at our stores for those customers who travel longer distances more convenient, our overall sales to these customers will increase as they increase the frequency and amount of purchases from our stores. We launched our price optimization initiative across our store network late in fiscal 2011 to refine the pricing and balance of our promotional activities across our mix of higher-margin perishable items and everyday value-oriented conventional grocery items. Our price optimization initiative has resulted in an increase in our gross margins.

        The summary historical consolidated data presented below should be read in conjunction with the sections entitled "Risk Factors," "Selected Historical Consolidated Financial and Other Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the related notes and other financial data included elsewhere in this prospectus.

 

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Statement of Income Data

 
  Fiscal Year Ended   Thirteen Weeks Ended  
 
  March 29, 2009(1)   March 28, 2010   April 3, 2011   April 1, 2012   July 3, 2011   July 1, 2012  
 
   
   
   
   
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands, except for per share data)
 

Net sales

  $ 343,106   $ 401,167   $ 485,712   $ 554,858   $ 122,484   $ 154,683  

Cost of sales and occupancy costs(2)

    230,912     271,599     326,207     368,728     81,838     103,996  
                           

Gross profit

    112,194     129,568     159,505     186,130     40,646     50,687  

Direct store expenses

    70,371     85,840     109,867     132,446     29,356     34,484  

General and administrative expenses

    28,998     34,676     40,038     44,331     9,348     11,717  

Store opening costs(3)

    3,066     3,949     10,006     12,688     3,263     6,478  
                           

Income (loss) from operations

    9,759     5,103     (406 )   (3,335 )   (1,321 )   (1,992 )

Interest expense, net

    10,279     13,787     19,111     16,918     4,174     4,584  

Loss on early extinguishment of debt(4)

        2,837     13,931              
                           

Loss before income taxes

    (520 )   (11,521 )   (33,448 )   (20,253 )   (5,495 )   (6,576 )

Income tax (benefit)

    (851 )   (4,426 )   (14,860 )   (8,304 )   (2,249 )   (2,695 )
                           

Net income (loss)

  $ 331   $ (7,095 ) $ (18,588 ) $ (11,949 ) $ (3,246 ) $ (3,881 )
                           

Net (loss) attributable to common stockholders(5)

  $ (10,836 ) $ (23,750 ) $ (39,021 ) $ (36,677 ) $ (9,114 ) $ (10,563 )
                           

Net (loss) per share attributable to common stockholders(5)

                                     

Basic and diluted loss per common share(5)

                                     

Pro forma basic and diluted per common share(5)

  $     $     $     $     $     $    
                           

Other Financial Data

 
  Fiscal Year Ended   Thirteen Weeks Ended  
 
  March 29, 2009   March 28, 2010   April 3, 2011   April 1, 2012   July 3, 2011   July 1, 2012  
 
  (dollars in thousands)
 

Adjusted EBITDA(6)

  $ 21,785   $ 23,874   $ 29,309   $ 35,775   $ 6,920   $ 11,342  

Depreciation and amortization

  $ 7,175   $ 10,233   $ 14,588   $ 19,202   $ 4,213   $ 4,495  

Capital expenditures

  $ 21,650   $ 21,658   $ 27,797   $ 44,528   $ 11,569   $ 16,338  

Gross margin(7)

    32.7 %   32.3 %   32.8 %   33.5 %   33.2 %   32.8 %

Adjusted EBITDA margin(8)

    6.3 %   6.0 %   6.0 %   6.4 %   5.6 %   7.3 %

 

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Selected Operating Data

 
  Fiscal Year Ended   Thirteen Weeks Ended
 
  March 29,
2009
  March 28,
2010
  April 3,
2011
  April 1,
2012
  July 3,
2011
  July 1,
2012

Locations at end of period(9)

  5   5   7   9   7   10

Total gross square feet at end of period

  297,551   297,551   458,923   557,677   458,923   621,168

Change in square footage for period(10)

  20.3%     54.2%   21.5%   23.1%   35.4%

Average store size

                       

Gross square feet

  59,510   59,510   65,560   61,964   65,560   62,117

Selling square feet(11)

  31,157   31,157   36,348   34,976   36,348   35,624

Average net sales per square foot

                       

Gross square foot(12)

  $1,381   $1,348   $1,286   $1,018   $268   $270

Selling square foot(12)

  $2,774   $2,575   $2,457   $1,859   $489   $484

Average net sales per store per week ($000)(13)

  $1,642   $1,543   $1,472   $1,246   $1,312   $1,259

Comparable store sales growth (decrease) per period(14)

  10.1%   0.5%   (5.0)%   (7.0)%   (6.5)%   (7.0)%

New stores opened in period (location/date)  
 
 
    

  Paramus, NJ
(3/2009)  
  
    
  —  
  
  
    
  Pelham Manor, NY
(4/2010);
Stamford, CT
(11/2010)
  Upper East Side, NY
(7/2011);
Douglaston, NY
(11/2011)
      Woodland Park, NJ
(6/2012)  
  
    

Balance Sheet Data

 
  As of July 1, 2012  
 
  Actual   Pro Forma(15)   Pro Forma
as Adjusted(16)
 
 
  (dollars in thousands)
 

Cash and cash equivalents

  $ 11,370   $ 55,523   $  

Total assets

    326,100     371,830      

Total debt(17)

    203,148     263,433     263,433  

Redeemable preferred stock

    211,105     211,105      

Total stockholders' deficit(18)

    (151,901 )   (166,004 )    

(1)
Amounts have been reclassified to match presentation of subsequent years.

(2)
Excludes depreciation and amortization.

(3)
Costs (principally payroll, rent expense and real estate taxes) incurred in opening new stores are expensed as incurred. During fiscal 2009, we incurred $3.1 million of store opening costs related to the store we opened during fiscal 2009. During fiscal 2010 and fiscal 2011, we incurred $3.9 million and $6.8 million, respectively, of store opening costs related to the two stores we opened during fiscal 2011. During fiscal 2011 and fiscal 2012, we incurred $3.2 million and $11.9 million, respectively, of store opening costs related to the two stores we opened during fiscal 2012. During fiscal 2012, we incurred $0.7 million of store opening costs related to the store we opened in the first quarter of fiscal 2013. During the thirteen weeks ended July 3, 2011, we incurred $3.3 million of store opening costs related to the two stores we opened during fiscal 2012 and during the thirteen weeks ended July 1, 2012, we incurred $5.0 million and $1.4 million of store opening costs related to the store we opened in that period and the two stores opening after that date, one of which opened in August 2012 and the other we expect to open in November 2012, respectively.

(4)
In fiscal 2010, we incurred a loss on early extinguishment of debt in connection with the refinancing of our then existing first and second lien credit agreements. In fiscal 2011, we incurred a loss on early extinguishment of debt in

 

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    connection with the refinancing of our then existing credit agreement with our senior credit facility that we subsequently refinanced in August 2012.

(5)
Common stockholders do not share in net income unless earnings exceed the unpaid dividends on our preferred stock. Accordingly, prior to this offering, there were no earnings available for common stockholders because in fiscal 2010, fiscal 2011, fiscal 2012 and the thirteen weeks ended July 3, 2011 and July 1, 2012 we reported a net loss and in fiscal 2009 unpaid dividends exceeded our net income. During any period in which we had a net loss, the loss was attributed only to the common stockholders. Pro forma net income (loss) per share and the pro forma weighted average number of shares gives effect to the redemption of a portion of our preferred shares with the proceeds of this offering and the exchange of the remaining shares of preferred stock for [    •    ] shares of our Class B common stock, assuming an initial public offering price of $[    •    ] per share, which is the midpoint of the price range set forth on the cover of this prospectus. We will not have any preferred stock outstanding after the completion of this offering.

A reconciliation of the denominator used in the calculation of pro forma basic and diluted net income (loss) per common share is as follows:

 
  Fiscal Year Ended   Thirteen Weeks
Ended
 
 
  March 29, 2009   March 28, 2010   April 3, 2011   April 1, 2012   July 3, 2011   July 1, 2012  

Weighted average number of common shares outstanding, basic and diluted

                                     

Issuance of shares in the Exchange

                                     

Weighted average number of common shares outstanding, pro forma basic and diluted

                                     

    Our Class A common stock and Class B common stock will share equally on a per share basis in our net income or net loss.

(6)
We present Adjusted EBITDA, a non-GAAP measure, in this prospectus to provide investors with a supplemental measure of our operating performance. We believe that Adjusted EBITDA is a useful performance measure and is used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than GAAP measures can provide alone. Our board of directors and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for employees, including our senior executives. In addition, the financial covenants in our senior credit facility are based on Adjusted EBITDA, subject to dollar limitations on certain adjustments.

We define Adjusted EBITDA as earnings before interest expense, income taxes, depreciation and amortization expense, amortization of deferred financing costs, store opening costs, loss on early extinguishment of debt, non-recurring expenses and management fees. Omitting interest, taxes and the other items provides a financial measure that facilitates comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness and tax structures that other companies have are different from ours, we omit these amounts to facilitate investors' ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of owned property, and because in our experience, whether a store is new or one that is fully or mostly depreciated does not necessarily correlate to the contribution that such store makes to operating performance. We will not be paying management fees following the consummation of this offering. We also believe that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA as an important measure of our operating performance and that of other companies in our industry. Adjusted EBITDA should not be considered as an alternative to net income for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

The use of Adjusted EBITDA has limitations as an analytical tool and you should not consider this performance measure in isolation from, or as an alternative to, GAAP measures such as net income (loss). Adjusted EBITDA is not a measure of liquidity under GAAP or otherwise, and is not an alternative to cash flow from continuing operating activities. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or by unusual or non-recurring items. The limitations of Adjusted EBITDA include: (i) it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) it does not reflect changes in, or cash requirements for, our working capital needs; (iii) it does not reflect income tax payments we may be required to make; (iv) it does not reflect the cash requirements necessary to service

 

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    interest or principal payments associated with indebtedness; and (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

    To properly and prudently evaluate our business, we encourage you to review our consolidated financial statements included elsewhere in this prospectus and the reconciliation to Adjusted EBITDA from net income (loss), the most directly comparable financial measure presented in accordance with GAAP, set forth in the following table. All of the items included in the reconciliation from net income to Adjusted EBITDA are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items that management does not consider in assessing our on-going operating performance, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact may not reflect on-going operating performance.

 
  Fiscal Year Ended   Thirteen Weeks
Ended
 
 
  March 29, 2009   March 28, 2010   April 3, 2011   April 1, 2012   July 3, 2011   July 1, 2012  
 
  (dollars in thousands)
 

Net income (loss)

  $ 331   $ (7,095 ) $ (18,588 ) $ (11,949 ) $ (3,246 ) $ (3,881 )

Interest expense, net(a)

    10,279     13,787     19,111     16,918     4,174     4,584  

Depreciation and amortization expense

    7,175     10,233     14,588     19,202     4,213     4,495  

Income tax benefit

    (851 )   (4,426 )   (14,860 )   (8,304 )   (2,249 )   (2,695 )

Store opening costs(b)

    3,066     3,949     10,006     12,688     3,263     6,478  

Loss on early extinguishment of debt(c)

        2,837     13,931              

Non-recurring items(d)

    1,285     3,378     3,541     4,573     263     1,609  

Management fees(e)

    500     1,211     1,580     2,647     502     752  
                           

Adjusted EBITDA

  $ 21,785   $ 23,874   $ 29,309   $ 35,775   $ 6,920   $ 11,342  
                           

(a)
Includes amortization of deferred financing costs.

(b)
See note 3 above.

(c)
See note 4 above.

(d)
Consists principally of recruiting costs relating to the strengthening of our management team, severance costs associated with the termination of employment of certain executives and, in fiscal 2011 and fiscal 2012, bringing our systems and procedures into compliance with the Sarbanes-Oxley Act.

(e)
Represents management fees paid to an affiliate of Sterling Investment Partners pursuant to an agreement that will terminate upon the consummation of this offering in exchange for a payment of $[    •    ].
(7)
We calculate gross margin by subtracting cost of sales and occupancy costs from net sales and dividing by our net sales for each of the applicable periods.

(8)
We calculated Adjusted EBITDA margin by dividing our Adjusted EBITDA by our net sales for each of the applicable periods. We present Adjusted EBITDA margin because it is used by management as a performance measure of Adjusted EBITDA generated from net sales. See note 6 above for further information regarding how we calculate Adjusted EBITDA, which is a non-GAAP measure.

(9)
The food stores and adjacent Fairway Wines & Spirits locations in Pelham Manor and Stamford, respectively, are considered as one store location in the number of stores and square footage. This table does not include the food store opened in Westbury, New York in August 2012.

(10)
For the thirteen week periods, represents the percentage change since the end of the comparable period in the prior fiscal year.

(11)
Excludes the square footage of the kitchen, bakery, meat department, produce coolers and storage in our stores.

 

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(12)
The amount for fiscal 2011 has been decreased (by subtracting one week of average weekly net sales) to reflect a 52-week year so as to be comparable to fiscal 2009, 2010 and 2012. Stores not open for the entire fiscal period have been excluded. Does not include net sales from our Fairway Wines & Spirits locations.

(13)
We calculated average net sales per store per week by dividing net sales by the number of stores open during the entire fiscal period and then dividing by the number of weeks in the fiscal period. Does not include net sales from our Fairway Wines & Spirits locations.

(14)
Represents the percentage change in our same-store sales as compared to the prior comparable period. Our practice is to include sales from a store in same-store sales beginning on the first day of the fourteenth full month following the store's opening. This practice may differ from the methods that other food retailers use to calculate comparable or "same-store" sales. As a result, data in this prospectus regarding our same-store sales may not be comparable to similar data made available by other food retailers. Comparable same store sales for fiscal 2011 has been adjusted (by subtracting one week of average weekly net sales) to reflect a 52-week year so as to be comparable to fiscal 2009, 2010 and 2012. Does not include net sales from our Fairway Wines & Spirits locations.

(15)
Gives effect to our entry into a new senior credit facility on August 17, 2012, consisting of a $260 million term loan facility and a $40 million revolving credit facility, with the proceeds of the term loan facility being used to repay $210.1 million of outstanding borrowings under our prior senior credit facility, pay fees and expenses and provide us with $44.2 million for new store growth and other general corporate purposes, as if such transactions had occurred on July 1, 2012. Pro forma and pro forma as adjusted cash and cash equivalents do not reflect $10 million that we borrowed under our prior senior credit facility subsequent to July 1, 2012 and repaid with proceeds from our new senior credit facility or the payment of accrued interest from July 2, 2012 through August 17, 2012 of approximately $2 million on the outstanding borrowings under the prior senior credit facility upon the closing of the refinancing of that senior credit facility.

(16)
Gives effect to: (i) the Exchange; (ii) the closing of our new senior credit facility described in note 15 above; (iii) our receipt of estimated net proceeds from our issuance and sale of [    •    ] shares of Class A common stock in this offering at an assumed initial public offering price of $[    •    ] per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us; and (iv) the use of the net proceeds that we receive from this offering to pay accrued dividends on our preferred stock of $[    •    ], redeem [    •    ] shares of our outstanding preferred stock at an aggregate redemption price of approximately $[    •    ], and pay $[    •    ] to an affiliate of Sterling Investment Partners in connection with the termination of our management agreement with such affiliate, in each case as if such transactions had occurred on July 1, 2012.

(17)
Net of unamortized original issue discount of $1.8 million actual and $3.9 million pro forma and pro forma as adjusted and accrued pay-in-kind interest of $167,161 actual, pro forma and pro forma as adjusted.

(18)
The pro forma and pro forma as adjusted amounts reflect the loss on early extinguishment of debt resulting from the refinancing of our prior senior credit facility, which we expect will be approximately $13.1 million, and other fees and expenses associated with the financing of approximately $1.0 million, but do not reflect the payment of accrued interest from July 2, 2012 through August 17, 2012 of approximately $2 million on the outstanding borrowings under our prior senior credit facility upon the closing of the refinancing of that senior credit facility.

 

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RISK FACTORS

        Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below, together with the financial and other information contained in this prospectus, before you decide to purchase shares of our Class A common stock. If any of the following risks actually occur, our business, financial condition, results of operations, cash flow and prospects could be materially and adversely affected. As a result, the trading price of our Class A common stock could decline and you could lose all or part of your investment in our Class A common stock. Before deciding whether to invest in our Class A common stock, you should also refer to the other information contained in this prospectus, including our consolidated financial statements and related notes.

Risks Relating to Our Business

         Our continued growth depends on new store openings and on increasing same store sales, and our failure to achieve these goals could negatively impact our results of operations and financial condition.

        Our growth strategy depends, in large part, on opening new stores in existing and new areas and operating those stores successfully. Successful implementation of this strategy is dependent on finding suitable locations and negotiating acceptable lease terms for store sites, and we face competition from other retailers for such sites. There can be no assurance that we will continue to grow through new store openings. We may not be able to open new stores timely or within budget or operate them successfully. New stores, particularly those we open outside the Greater New York metropolitan area, may not achieve sustained sales and operating levels consistent with our mature store base on a timely basis or at all. Lower contribution margins from new stores, along with the impact of related store opening and store management relocation costs, may have an adverse effect on our financial condition and operating results. In addition, if we acquire stores in the future, we may not be able to successfully integrate those stores into our existing store base and those stores may not be as profitable as our existing stores.

        Also, we may not be able to successfully hire, train and retain new store employees or integrate those employees into the programs, policies and culture of Fairway. We, or our third party vendors, may not be able to adapt our distribution, management information and other operating systems to adequately supply products to new stores at competitive prices so that we can operate the stores in a successful and profitable manner. We may not have the level of cash flow or financing necessary to support our growth strategy.

        Additionally, our opening of new stores will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our existing business less effectively, which in turn could cause a deterioration in the financial performance of our existing stores. If we experience a decline in performance, we may slow or discontinue store openings, or we may decide to close stores that we are unable to operate in a profitable manner.

        Additionally, some of our new stores may be located in areas where we have little experience or a lack of brand recognition. Those markets may have different competitive conditions, market conditions, consumer tastes and discretionary spending patterns than our existing markets, which may cause these new stores to be less successful than stores in our existing markets.

        Our operating results may be materially impacted by fluctuations in our same store sales, which have fluctuated in the past and will likely fluctuate in the future. A variety of factors affect our same-store sales, including:

    our openings of new stores that cannibalize store sales in existing stores;

    our price optimization initiative;

    our competition, including competitor store openings or closings near our stores;

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    the number and dollar amount of customer transactions in our stores;

    overall economic trends and conditions in our markets;

    consumer preferences, buying trends and spending levels;

    the pricing of our products, including the effects of inflation or deflation and promotions;

    our ability to provide product offerings that generate new and repeat visits to our stores;

    the level of customer service that we provide in our stores;

    our in-store merchandising-related activities;

    our ability to source products efficiently; and

    the number of stores we open in any period.

Adverse changes in these factors may cause our same-store sales results to be materially lower than in recent periods, which would harm our business and could result in a decline in the price of our Class A common stock. Further, we have experienced in the past, and expect to experience in the future, some sales volume transfer from our existing stores to our new stores as some of our existing customers switch to new, closer locations.

        Our operating results and stock price will be adversely affected if we fail to implement our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful.

         Our newly opened stores may negatively impact our financial results in the short-term and may not achieve sales and operating levels consistent with our mature store base on a timely basis or at all.

        We have actively pursued new store growth and plan to continue doing so in the future. We cannot assure you that our new store openings will be successful or result in greater sales and profitability. New store openings may negatively impact our financial results in the short-term due to the effect of store opening costs and lower sales and contribution margin during the initial period following opening. New stores build their sales volume and their customer base over time and, as a result, generally have lower margins and higher operating expenses, as a percentage of net sales, than our more mature stores. A new store can take more than a year to achieve a level of operating performance comparable to our similarly existing stores. Stores that we have opened in higher density urban markets typically have generated higher sales volumes and margins than stores in suburban areas. We anticipate that a majority of stores that we will open in the near term will be in suburban areas due to the relative availability of attractive new store sites. Further, we have experienced in the past, and expect to experience in the future, some sales volume transfer from our existing stores to our new stores as some of our existing customers switch to new, closer locations.

         All of our existing stores are located in the Greater New York City metropolitan area and, as a result, new store openings can cannibalize sales in our stores in close proximity to the new store and our financial results can be effected by economic and competitive conditions in this area.

        All of our existing stores are located in a concentrated market area in the Greater New York City metropolitan area, and we intend to grow our store base in this area in the near term at a rate of three to four stores annually. As we open new stores in closer proximity to our customers who currently travel longer distances to shop at our stores, we expect some of these customers to take advantage of the convenience of our new locations. As a result, we have experienced in the past, and expect to experience in the future, some sales volume transfer from our existing stores to our new stores as some of our existing customers switch to these new, closer locations. Consequently, our new stores will adversely impact sales at our existing stores in close proximity.

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        In addition, since substantially all of our revenues are derived from stores in the Greater New York City metropolitan area, any material change in economic and competitive conditions in this area or in legislation or regulation in the States of New York, New Jersey or Connecticut and in the local jurisdictions in which we operate within those states could adversely affect our business or financial performance.

        Part of our growth strategy is to expand our stores into new markets outside the Greater New York City metropolitan area. We do not have experience opening and operating stores in other areas and there can be no assurance we can successfully open Fairway stores in other markets or that Fairway stores will be successful in other markets.

         We operate in a highly competitive industry.

        The food retail industry as a whole, particularly in the Greater New York City metropolitan area, is highly competitive. Because we offer a full assortment of fresh, natural and organic products, prepared foods and hard-to-find specialty and gourmet offerings, along with a full assortment of conventional groceries, we compete with various types of retailers, including alternative food retailers, such as natural foods stores, smaller specialty stores and farmers' markets, conventional supermarkets, supercenters and membership warehouse clubs. Our principal competitors include alternative food retailers such as Whole Foods and Trader Joe's, traditional supermarkets such as Stop & Shop, ShopRite, Food Emporium and A&P, retailers with "big box" formats such as Target and Wal-Mart and warehouse clubs such as Costco and BJ's Wholesale Club. These businesses compete with us for customers, products and locations. In addition, some are expanding aggressively in marketing a range of natural and organic foods, prepared foods and quality specialty grocery items. Some of these potential competitors have more experience operating multiple store locations or have greater financial or marketing resources than we do and are able to devote greater resources to sourcing, promoting and selling their products. Due to the competitive environment in which we operate, our operating results may be negatively impacted through a loss of sales, reduction in margin from competitive price changes and/or greater operating costs such as marketing. We also face limited competition from restaurants and fast-food chains. In addition, other established food retailers could enter our markets, increasing competition for market share.

         We rely on a combination of product offerings, customer service, store format, location and pricing to compete.

        We compete with other food retailers on a combination of factors, primarily product selection and quality, customer service, store format, location and price. Our success depends on our ability to offer products that appeal to our customers' preferences. Failure to offer such products, or to accurately forecast changing customer preferences, could lead to a decrease in the number of customer transactions at our stores and in the amount customers spend at our stores. We also attempt to create a convenient and appealing shopping experience for our customers in terms of customer service, store format and location.

        Pricing in particular is a significant driver of consumer choice in our industry and we expect competitors to continue to apply pricing and other competitive pressures. To the extent that our competitors lower prices, our ability to maintain gross profit margins and sales levels may be negatively impacted. Some of our competitors have greater resources than we do and do not have unionized work forces, which may result in lower labor and benefit costs. These competitors could use these advantages to take measures, including reducing prices, which could adversely affect our competitive position, financial condition and results of operations.

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        If we do not succeed in offering attractively priced products that consumers want to buy or are unable to provide a convenient and appealing shopping experience, our sales, operating margins and market share may decrease, resulting in reduced profitability.

         Economic conditions that impact consumer spending could materially affect our business.

        Ongoing economic uncertainty continues to negatively affect consumer confidence and discretionary spending. Our operating results may be materially affected by changes in economic conditions nationwide or in the regions in which we operate that impact consumer confidence and spending, including discretionary spending. This risk may be exacerbated if customers choose lower-cost alternatives to our product offerings in response to economic conditions. In particular, a decrease in discretionary spending could adversely impact sales of certain of our higher margin product offerings. Future economic conditions affecting disposable consumer income, such as employment levels, business conditions, changes in housing market conditions, the availability of consumer credit, interest rates, tax rates and fuel and energy costs, could reduce overall consumer spending or cause consumers to shift their spending to lower-priced competitors. In addition, inflation or deflation can impact our business. Food deflation could reduce sales growth and earnings, while food inflation, combined with reduced consumer spending, could reduce gross profit margins. As a result, our results of operations could be materially adversely affected.

        The geographic concentration of our stores creates an exposure to the Greater New York City metropolitan area economy and any downturn in this region could materially adversely affect our financial condition and results of operations.

         We reported net losses in fiscal 2010, fiscal 2011 and fiscal 2012 and the thirteen weeks ended July 3, 2011 and July 1, 2012, and we expect to incur net losses through at least fiscal 2014.

        We reported a net loss of $7.1 million in fiscal 2010, $18.6 million in fiscal 2011, $11.9 million in fiscal 2012, $3.2 million for the thirteen weeks ended July 3, 2011 and $3.9 million for the thirteen weeks ended July 1, 2012, and we expect to incur net losses through at least fiscal 2014. Our net losses are primarily attributable to the costs associated with new store openings, increased production and corporate overhead and associated costs of capital and, in fiscal 2010 and fiscal 2011, losses on the early extinguishment of debt. For example, we typically incur higher than normal employee costs at the time of a new store opening associated with set-up and other opening costs. Operating margins are also affected by promotional discounts and other marketing costs and strategies associated with new store openings, as well as higher shrink, primarily due to overstocking, and costs related to hiring and training new employees. Additionally, a new store builds its sales volume and its customer base over time and, as a result, generally has lower margins and higher operating expenses, as a percentage of sales, than our more mature stores. A new store can take more than a year to achieve a level of operating performance comparable to our similarly existing stores. Our growth strategy depends, in large part, on opening new stores in existing and new areas and, as a result, our results of operations will continue to be materially affected by the timing and number of new store openings and the amount of new store opening costs. Other factors that have affected and may in the future affect our results of operations include general economic conditions and changes in consumer behavior that can affect our sales, inflation and deflation trends, the extent of our infrastructure investments in the applicable period, the effectiveness of our price optimization and productivity initiatives, competitive developments and the extent of our debt service obligations. While we believe that we will generate future taxable income sufficient to utilize all prior years' net operating losses, we cannot assure you that we will not continue to incur net losses or if and when we will report net income.

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         We may be unable to improve our operating margins, which could adversely affect our financial condition and ability to grow.

        We intend to improve our operating margins in an environment of increased competition through various initiatives, including increased sales of perishables and prepared foods and continued cost discipline focused on improving labor productivity and reducing shrink. Some of our competitors do not have unionized work forces, which may result in lower labor and benefit costs. If competitive pressures cause us to lower our prices, our operating margins may decrease. If the percentage of our net sales represented by perishables decreases, our operating margins may be adversely affected. Any failure to achieve gains in labor productivity, particularly the reduction of overtime, or to reduce inventory shrink may adversely impact our operating margins. If our operating margins stagnate or decline, our financial condition and ability to generate cash to fund our growth could be adversely affected.

         Perishable products make up a significant portion of our sales, and ordering errors or product supply disruptions may have an adverse effect on our profitability and operating results.

        We have a significant focus on perishable products. Sales of perishable products accounted for approximately 65% of our sales in fiscal 2012. We rely on various suppliers and vendors to provide and deliver our product inventory on a continuous basis. We could suffer significant perishable product inventory losses in the event of the loss of a major supplier or vendor, disruption of our supply chain, extended power outages, natural disasters or other catastrophic occurrences. While we have implemented certain systems to ensure our ordering is in line with demand, we cannot assure you that our ordering systems will always work efficiently, in particular in connection with the opening of new stores, which have no, or a limited, ordering history. If we were to over-order, we could suffer inventory losses, which would negatively impact our operating results.

         Disruption of significant supplier relationships could negatively affect our business.

        White Rose, Inc. is our single largest third-party supplier, accounting for approximately 13% of our total purchases in fiscal 2012. Under our agreement with White Rose, we are obligated to purchase all our requirements for specified products, principally warehouse conventional grocery, dairy, frozen food and ice cream products, for our existing stores. In addition, United Natural Foods, Inc. ("UNFI"), which is our primary supplier of specified natural and organic products, principally dry grocery, frozen food, vitamins/supplements and health, beauty and wellness, accounted for approximately 9% of our total purchases in fiscal 2012. Due to this concentration of purchases from White Rose and UNFI, the cancellation of our supply arrangement with either White Rose or UNFI or the disruption, delay or inability of White Rose or UNFI to deliver product to our stores may materially and adversely affect our operating results while we establish alternative distribution channels. We also depend on third-party suppliers for our private label products, and the cancellation of our supply arrangement with any of these suppliers or the disruption, delay or inability of these suppliers to provide our private label products, particularly private label organic products, could adversely affect our private label sales. If our suppliers fail to comply with food safety or other laws and regulations, or face allegations of non-compliance, their operations may be disrupted. We cannot assure you that we would be able to find replacement suppliers on commercially reasonable terms.

         Our success depends upon our ability to source and market new products that meet our high standards and customer preferences and our ability to offer our customers an aesthetically pleasing shopping environment.

        Our success depends on our ability to source and market new products that meet our standards for quality and appeal to our customers' preferences. Failure to source and market such products, or to accurately forecast changing customer preferences, could lead to a decrease in the number of customer transactions at our stores and in the amount customers spend at our stores. In addition, the sourcing of

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our products is dependent, in part, on our relationships with our vendors. We rely on a large number of small vendors in order to offer a broad array of products, and as we expand it may become more difficult to manage and maintain these relationships. If we are unable to maintain these relationships we may not be able to continue to source products at competitive prices that both meet our standards and appeal to our customers. We also attempt to create a pleasant and appealing shopping experience. If we are not successful in creating a pleasant and appealing shopping experience, we may lose customers to our competitors. If we do not succeed in maintaining good relationships with our vendors, introducing and sourcing new products that consumers want to buy or are unable to provide a pleasant and appealing shopping environment or maintain our level of customer service, our sales, operating margins and market share may decrease, resulting in reduced profitability.

         We may experience negative effects to our brand and reputation from real or perceived quality or health issues with our food products, which could lead to product liability claims or have an adverse effect on our operating results.

        We believe that our reputation for providing our customers with fresh, high-quality food products is an important component of our customer value proposition and that maintaining our brand is critical to our success. Brand value is based in large part on perceptions of subjective qualities, and even isolated incidents can erode trust and confidence, particularly if they result in adverse publicity, especially in social media outlets, governmental investigations or litigation, which can have an adverse impact on these perceptions and lead to adverse effects on our business. Concerns regarding the safety or quality of our food products or of our food supply chain could cause consumers to avoid purchasing certain products from us, or to seek alternative sources of food, even if the basis for the concern is unfounded, has been addressed or is outside of our control. Food products containing contaminants or allergens could be inadvertently manufactured, prepared or distributed by us and, if processing at the consumer level does not eliminate them, these contaminants could result in illness or death. Adverse publicity about these concerns, whether or not ultimately based on fact, and whether or not involving products sold at our stores, could discourage consumers from buying our products, which could have an adverse effect on our brand, reputation and operating results. In addition, our stores are subject to unscheduled inspections on a regular basis, which, if violations are found, could result in the assessment of fines, suspension of one or more needed licenses and, in the case of repeated "critical" violations, closure of the store until a re-inspection demonstrates that we have remediated the problem.

        Furthermore, the sale of food products entails an inherent risk of product liability claims, product recall and the resulting negative publicity. Any such claims, recalls or adverse publicity with respect to our private-label products may have an even greater negative effect on our sales and operating results, in addition to generating adverse publicity for our brand. Moreover, product liability claims of this sort may not be covered by insurance or any rights to indemnity or contribution we have against others.

        Any lost confidence in us on the part of our customers would be difficult and costly to re-establish. Any such adverse effect could significantly reduce our brand value. Issues regarding the safety of any food items sold by us, regardless of the cause, could have a substantial and adverse effect on our sales and operating results.

         We may be unable to protect or maintain our intellectual property, which could result in customer confusion, a negative perception of our brand and adversely affect our business.

        We believe that our intellectual property has substantial value and has contributed significantly to the success of our business. In particular, our trademarks and servicemarks, including our FAIRWAY®, FAIRWAY "Like No Other Market"®, LIKE NO OTHER MARKET® and FAIRWAY WINES & SPIRITS® trademarks, are valuable assets that reinforce our customers' favorable perception of our stores.

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        From time to time, third parties have used names similar to ours, have applied to register trademarks similar to ours and, we believe, have infringed or misappropriated our intellectual property rights. We respond to these actions on a case-by-case basis, including, where appropriate, by sending cease and desist letters and commencing opposition actions and litigation. The outcomes of these actions have included both negotiated out-of-court settlements as well as litigation. We are currently party to a settlement with a midwestern grocery company, "Fareway," with respect to the use of the Fairway name and trademarks which prohibits us from using the Fairway name other than on the East Coast, California and certain parts of Michigan and Ohio, and prohibits that company from using the Fareway name on the East Coast, California and certain parts of Michigan and Ohio. Our inability to use the Fairway name in these prohibited areas could adversely affect our growth strategy. We are also party to a settlement agreement that prohibits us from opening any new stores under the Fairway name in certain parts of the New Jersey counties of Bergen, Essex, Hudson and Passaic. We believe this agreement will preclude us from opening one store that we otherwise might have opened in this territory.

        We cannot assure you that the steps we have taken to protect our intellectual property rights are adequate, that our intellectual property rights can be successfully defended and asserted in the future or that third parties will not infringe upon or misappropriate any such rights. In addition, our trademark rights and related registrations may be challenged in the future and could be canceled or narrowed. Failure to protect our trademark rights could prevent us in the future from challenging third parties who use names and logos similar to our trademarks, which may in turn cause consumer confusion or negatively affect consumers' perception of our brand and products, which could, in turn, adversely affect our sales and profitability. Moreover, intellectual property disputes and proceedings and infringement claims may result in a significant distraction for management and significant expense, which may not be recoverable regardless of whether we are successful. Such proceedings may be protracted with no certainty of success, and an adverse outcome could subject us to liabilities, force us to cease use of certain trademarks or other intellectual property or force us to enter into licenses with others. Any one of these occurrences may have a material adverse effect on our business, results of operations and financial condition.

         We rely on information technology and administrative systems and any inadequacy, failure, interruption or security breach of those systems may harm our ability to effectively operate our business.

        We rely extensively on our information technology and administrative systems to effectively manage our business data, communications, supply chain, order entry and fulfillment and other business processes. The failure of our information technology or administrative systems to perform as we anticipate could disrupt our business and result in transaction errors, processing inefficiencies and the loss of sales and customers, causing our business to suffer. In addition, our information technology and administrative systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, systems failures, cyber-attacks, viruses and security breaches, including breaches of our transaction processing or other systems that could result in the compromise of confidential customer data. Any such damage or interruption could have a material adverse effect on our business, cause us to face significant fines, customer notice obligations or costly litigation, harm our reputation with our customers, require us to expend significant time and expense developing, maintaining or upgrading our information technology or administrative systems, or prevent us from paying our suppliers or employees, receiving payments from our customers or performing other information technology or administrative services on a timely basis. Any material interruption in our information systems may have a material adverse effect on our operating results.

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         If we experience a data security breach and confidential customer information is disclosed, we may be subject to penalties and experience negative publicity, which could affect our customer relationships and have a material adverse effect on our business.

        We and our customers could suffer harm if customer information were accessed by third parties due to a security failure in our systems. The collection of data and processing of transactions require us to receive, transmit and store a large amount of personally identifiable and transaction related data. This type of data is subject to legislation and regulation in various jurisdictions. Recently, data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting state and federal legislative proposals addressing data privacy and security. If some of the current proposals are adopted, we may be subject to more extensive requirements to protect the customer information that we process in connection with the purchases of our products. We may become exposed to potential liabilities with respect to the data that we collect, manage and process, and may incur legal costs if our information security policies and procedures are not effective or if we are required to defend our methods of collection, processing and storage of personal data. Future investigations, lawsuits or adverse publicity relating to our methods of handling personal data could adversely affect our business, results of operations, financial condition and cash flows due to the costs and negative market reaction relating to such developments. Additionally, if we suffer data breaches one or more of the credit card processing companies that we rely on may refuse to allow us to continue to participate in their network, which would limit our ability to accept credit cards at our stores and could adversely affect our business, results of operations, financial condition and cash flows.

        Data theft, information espionage or other criminal activity directed at the retail industry or computer or communications systems may materially adversely affect our business by causing us to implement costly security measures in recognition of actual or potential threats, by requiring us to expend significant time and expense developing, maintaining or upgrading our information technology systems and by causing us to incur significant costs to reimburse third parties for damages. Such activities may also materially adversely affect our financial condition, results of operations and cash flows by reducing consumer confidence in the marketplace and by modifying consumer spending habits.

         The landlord for a portion of our Broadway store has the right to terminate the lease at any time after June 30, 2017, which could adversely affect our business.

        Our Broadway store is one of our most important stores. The store is located in two properties with two different landlords. The landlord for the building in which approximately half of this store is located has the right, at any time after June 30, 2017, to terminate the lease, upon at least 18 months' prior notice, in order to make substantial renovations to the existing building or construct a new building. If the landlord elects to terminate the lease, then we have the option to enter into a new lease for space on the lower level, ground floor and second level of the renovated or new building constructed on those premises with no less than the current square footage. However, during the renovation or construction, the portion of the Broadway store located in this building will be closed, and we expect that the remaining portion of the store will need to be closed for at least a portion of such period. If we are not able to find a suitable replacement location nearby for this store or if we are not able to operate at least a portion of the store during this period of renovation or construction, our business and results of operations would be adversely affected.

         We lease certain of our stores and related properties from a related party.

        Howard Glickberg, one of our directors and executive officers, owns a one-third interest in entities which lease to us the premises at which a portion of our Broadway store is located, the premises at which our Harlem store, Harlem bakery and Harlem warehouse are located and the premises at which the parking lot for our Harlem store is located. The remainder of these entities is owned by Mr. Glickberg's former business partners (the "Former Partners"). Mr. Glickberg also owns a 16.67%

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interest in the landlord for the premises where our Red Hook store is located. During fiscal 2010, fiscal 2011 and fiscal 2012 and the thirteen weeks ended July 1, 2012, rental payments (excluding maintenance and taxes that we are obligated to pay) under the leases for the Harlem properties and portion of the Broadway store aggregated $2,519,755, $2,525,583, $2,569,403 and $660,978, respectively, of which, based on his ownership and before giving effect to any expenses, Mr. Glickberg is entitled to $839,918, $841,861, $856,468 and $220,326, respectively. During fiscal 2010, fiscal 2011 and fiscal 2012 and the thirteen weeks ended July 1, 2012, rental payments (excluding maintenance and taxes that we are obligated to pay) under the lease for the Red Hook store aggregated $1,461,595, $1,421,151, $1,421,151 and $355,288, respectively, of which, based on his ownership and before giving effect to any expenses, Mr. Glickberg is entitled to $243,599, $236,859, $236,859 and $59,215, respectively. The leases for each of these properties provides for a periodic reset of base rent to fair market rent based upon the highest and best retail use of the premises (without reference to the lease). The leases provide that if we and these entities cannot agree on the fair market rent, the fair market rent will be determined by arbitration. We and the landlord for each of these entities are currently in discussions regarding the reset of base rent to the fair market rent. The landlords' proposed annual fair market base rent for the Harlem properties and portion of the Broadway store aggregates $4.8 million, while our proposal aggregates $3.7 million. Our landlord for the Red Hook store has not yet provided us with its proposed fair market rent for the property. We cannot predict the outcome of any arbitration; however, if the arbitrator chooses the amounts proposed by our landlord, it could have an adverse effect on our results of operations and gross margin. In addition, our Red Hook store is required to obtain its electricity, heated/chilled water, hot and cold potable water and sewer services from an entity owned by the owners of the premises where our Red Hook store is located. We believe that the owner of the co-generation plant has overcharged us for utilities since our initial occupancy of the premises in December 2005. Since November 2008, we have not fully paid the utility invoices, but instead remitted lesser amounts based on the methodology that we believe represents the parties' original intentions with respect to the utility charge calculations. There can be no assurance that we will not be required to pay the amounts we withheld. See "Certain Relationships and Related Party Transactions—Transactions with Howard Glickberg—Real Estate Leases."

         Failure to retain our senior management and other key personnel may adversely affect our operations.

        Our success is substantially dependent on the continued service of our senior management and other key personnel. These executives have been primarily responsible for determining the strategic direction of our business and for executing our growth strategy and are integral to our brand and culture, and the reputation we enjoy with suppliers and consumers. The loss of the services of any of these executives and other key personnel could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all. In addition, any such departure could be viewed in a negative light by investors and analysts, which may cause our stock price to decline. The loss of key employees could negatively affect our business.

         If we are unable to attract, train and retain employees, we may not be able to grow or successfully operate our business.

        The food retail industry is labor intensive, and our success depends in part upon our ability to attract, train and retain a sufficient number of employees who understand and appreciate our culture and are able to represent our brand effectively and establish credibility with our business partners and consumers. Our ability to meet our labor needs, while controlling wage and labor-related costs, is subject to numerous external factors, including the availability of a sufficient number of qualified persons in the work force in the markets in which we are located, unemployment levels within those markets, unionization of the available work force, prevailing wage rates, changing demographics, health and other insurance costs and changes in employment legislation. In the event of increasing wage rates, if we fail to increase our wages competitively, the quality of our workforce could decline, causing our

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customer service to suffer, while increasing our wages could cause our earnings to decrease. If we are unable to hire and retain employees capable of meeting our business needs and expectations, our business and brand image may be impaired. Any failure to meet our staffing needs or any material increase in turnover rates of our employees may adversely affect our business, results of operations and financial condition.

         Changes in and enforcement of immigration laws could increase our costs and adversely affect our ability to attract and retain qualified store-level employees.

        Federal and state governments from time to time implement laws, regulations or programs that regulate our ability to attract or retain qualified employees. Some of these changes may increase our obligations for compliance and oversight, which could subject us to additional costs and make our hiring process more cumbersome, or reduce the availability of potential employees. Although we have implemented, and are in the process of enhancing, procedures to ensure our compliance with the employment eligibility verification requirements, there can be no assurance that these procedures are adequate and some of our employees may, without our knowledge, be unauthorized workers. The employment of unauthorized workers may subject us to fines or civil or criminal penalties, and if any of our workers are found to be unauthorized we could experience adverse publicity that negatively impacts our brand and makes it more difficult to hire and keep qualified employees. We have from time to time been required to terminate the employment of certain of our employees who were determined to be unauthorized workers. For example, following an audit by the Department of Homeland Security of the work authorization documents of our employees in our Pelham Manor, NY store that began in February 2011, we were notified in May 2012 that approximately 55 employees may not have had valid employment authorization documents, and we then terminated the approximately 35 employees still working for us who could not then provide valid documentation, resulting in a temporary increase in labor costs and disruption of our operations as we hired and trained new employees. We may be subject to fines or other penalties as a result of this audit. There can be no assurance that any future audit will not require us to terminate employees and pay fines or other penalties. The termination of a significant number of employees may disrupt our operations, cause temporary increases in our labor costs as we train new employees and result in additional adverse publicity. Our financial performance could be materially harmed as a result of any of these factors.

         Prolonged labor disputes with unionized employees and increases in labor costs could adversely affect our business.

        Our largest operating costs are attributable to labor costs and, therefore, our financial performance is greatly influenced by increases in wage and benefit costs, including pension and health care costs. As a result, we are exposed to risks associated with a competitive labor market and, more specifically, to any disruption of our unionized work force. As of July 1, 2012, approximately 82% of our employees were represented by unions and covered by collective bargaining agreements that are subject to periodic renegotiation. Two of our current collective bargaining agreements expire in March 2014; the third expires in February 2013.

        In the renegotiation of our current contracts and the negotiation of our new contracts, rising health care and pension costs and the nature and structure of work rules will be important issues. The terms of the renegotiated collective bargaining agreements could create either a financial advantage or disadvantage for us as compared to our major competitors and could have a material adverse effect on our results of operations and financial condition. Our labor negotiations may not conclude successfully or may result in a significant increase in labor costs, and work stoppages or labor disturbances could occur. A prolonged work stoppage could have a material adverse effect on our financial condition, results of operations and cash flows. We also expect that in the event of a work stoppage or labor disturbance, we could incur additional costs and face increased competition.

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         The cost of providing employee benefits continues to increase and is subject to factors outside of our control.

        We provide health benefits to substantially all of our full-time employees and, under our collective bargaining agreements, contribute to the cost of health benefits provided by the unions. Even though employees generally pay a portion of the cost, our cost of providing these benefits has increased steadily over the last several years. We anticipate future increases in the cost of health benefits, partly, but not entirely, as a result of the implementation of federal health care reform legislation. We currently pay all of the healthcare insurance premiums for our unionized employees. However, the healthcare insurance coverage for most of our part-time employees currently offered by our union does not meet the minimum coverage requirements of the Patient Protection and Affordable Care Act, or PPACA. If the union amends its plan covering part-time employees to meet the minimum requirements of PPACA, it is likely to require a meaningful increase in the amount of such health insurance premiums that we pay. If the union plan is not amended to meet the minimum requirements of PPACA beginning January 1, 2014, we will either be required to provide healthcare insurance meeting the minimum requirements or pay an annual penalty of $2,000 (and/or $3,000 in certain circumstances) for each of our part-time unionized employee that works more than 30 hours per week. At July 1, 2012, we had approximately 3,100 unionized employees. We cannot at this time predict the financial impact of PPACA on our financial condition and results of operations, as it will depend in large part on whether the union amends its healthcare plan for part-time employees who work at least 30 hours per week to comply with PPACA and, if so, the cost of such plan, as well as the number of part-time unionized employees we have, although the financial impact could be material. If we are unable to control healthcare costs, we will experience increased operating costs, which may adversely affect our financial condition and results of operations.

        We participate in one underfunded multiemployer pension plan on behalf of most of our union-affiliated employees, and we are required to make contributions to this plan under our collective bargaining agreement. This multiemployer pension plan is currently underfunded in part due to increases in the costs of benefits provided or paid under the plan as well as lower returns on plan assets. The unfunded liabilities of this plan may require increased future payments by us and other participating employers. In 2012, this multiemployer plan was deemed by its plan actuary to be "endangered" because the plan is less than 80% funded. As a result, the plan has adopted a funding improvement plan to increase the plan's funding percentage. In the future, our required contributions to this multiemployer plan could increase as a result of many factors, including the outcome of collective bargaining with the union, actions taken by trustees who manage the plan, government regulations, the actual return on assets held in the plan and the payment of a withdrawal liability if we choose to exit the plan. Our risk of future increased payments may be greater if other participating employers withdraw from the plan and are not able to pay the total liability assessed as a result of such withdrawal, or if the pension plan adopts surcharges and/or increased pension contributions as part of a rehabilitation plan. Increased pension costs may adversely affect our financial condition and results of operations. See note 12 to our consolidated financial statements included elsewhere in this prospectus.

         Various aspects of our business are subject to federal, state and local laws and regulations. Our compliance with these regulations may require additional capital expenditures and could materially adversely affect our ability to conduct our business as planned.

        We are subject to federal, state and local laws and regulations relating to zoning, land use, environmental protection, workplace safety, food safety, public health, community right-to-know and alcoholic beverage and tobacco sales. In particular, the states in which we operate and several local jurisdictions regulate the licensing of supermarkets and the sale of alcoholic beverages. In addition, certain local regulations may limit our ability to sell alcoholic beverages at certain times. We are also subject to laws governing our relationship with employees, including minimum wage requirements,

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overtime, working conditions, immigration, disabled access and work permit requirements. Compliance with new laws in these areas, or with new or stricter interpretations of existing requirements, could reduce the revenue and profitability of our stores and could otherwise materially adversely affect our business, financial condition or results of operations. Our new store openings could be delayed or prevented or our existing stores could be impacted by difficulties or failures in our ability to obtain or maintain required approvals or licenses. Our stores are subject to unscheduled inspections on a regular basis, which, if violations are found, could result in the assessment of fines, suspension of one or more needed licenses and, in the case of repeated "critical" violations, closure of the store until a re-inspection demonstrates that we have remediated the problem. Certain of our parking lots and warehouses either have only temporary certificates of occupancy or are awaiting a certificate of occupancy which, if not granted, would require us to stop using such property. Our central bakery does not have a certificate of occupancy and, due to the age and structure of the building, we do not believe we would be able to obtain one without substantial modifications to the building. We are in the process of relocating the central bakery; however, until we do so, if we are not permitted to continue our central bakery operations at our current facility, our results of operations could be adversely affected. The buildings in which our Broadway and Harlem stores are located are old and therefore require greater maintenance expenditures by us in order to maintain them in compliance with applicable building codes. If we are unable to maintain these stores in compliance with applicable building codes, we could be required by the building department to close them. Additionally, a number of federal, state and local laws impose requirements or restrictions on business owners with respect to access by disabled persons. Our compliance with these laws may result in modifications to our properties, or prevent us from performing certain further renovations. We cannot predict the nature of future laws, regulations, interpretations or applications, or determine what effect either additional government regulations or administrative orders, when and if promulgated, or disparate federal, state and local regulatory schemes would have on our business in the future.

         The terms of our senior credit facility may restrict our current and future operations, which could adversely affect our ability to respond to changes in our business and to manage our operations.

        Our senior credit facility includes a number of customary restrictive covenants that could impair our financing and operational flexibility and make it difficult for us to react to market conditions and satisfy our ongoing capital needs and unanticipated cash requirements. Specifically, such covenants may restrict our ability and, if applicable, the ability of our subsidiaries to, among other things:

    incur additional debt;

    make certain investments;

    enter into certain types of transactions with affiliates;

    limit dividends or other payments by our restricted subsidiaries to us;

    use assets as security in other transactions;

    pay dividends on our common stock or repurchase our equity interests;

    sell certain assets or merge with or into other companies;

    guarantee the debts of others;

    enter into new lines of business;

    make capital expenditures;

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    prepay, redeem or exchange our other debt; and

    form any joint ventures or subsidiary investments.

In addition, our senior credit facility requires us to maintain specified financial ratios.

        Our ability to comply with the covenants and other terms of our senior credit facility will depend on our future operating performance and, in addition, may be affected by events beyond our control, and we cannot assure you that we will meet them. If we fail to comply with such covenants and terms, we would be required to obtain waivers from our lenders or agree with our lenders to an amendment of the facility's terms to maintain compliance under such facility. If we are unable to obtain any necessary waivers and the debt under our senior credit facility is accelerated, it would have a material adverse effect on our financial condition and future operating performance.

        Our senior credit facility requires us to use 50% of our annual adjusted excess cash flow (which percentage will decrease upon achievement and maintenance of specified leverage ratios) to prepay our outstanding term loans. This requirement will reduce the funds available to us for new store growth and working capital.

        Our senior credit facility limits the amount of capital expenditures that we can make in any fiscal year that are not financed with proceeds from the sale of our equity securities. This limitation may adversely affect our ability to open new stores or result in additional dilution if we issue additional equity securities.

        Our senior credit facility provides that if any person other than Sterling Investment Partners owns, directly or indirectly, beneficially or of record, shares representing more than 35% of the voting power of our outstanding common stock, the lenders can declare all borrowings under the senior credit facility to be immediately due and payable.

         We have significant debt service obligations and may incur additional indebtedness in the future which could adversely affect our financial health and our ability to react to changes to our business.

        As of September 2, 2012, we had total debt of approximately $267.5 million (including unamortized original issue discount of approximately $3.9 million on our senior debt and approximately $200,000 of accrued pay-in-kind interest on our subordinated note). We will continue to have significant debt service obligations following the completion of this offering. Our indebtedness, or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we will be able to take any of such actions on a timely basis, on terms satisfactory to us or at all. Our level of indebtedness has important consequences to you and your investment in our Class A common stock.

        For example, our level of indebtedness may:

    require us to use a substantial portion of our cash flow from operations to pay interest and principal on our debt, which would reduce the funds available to us for working capital, new store growth and other general corporate purposes;

    limit our ability to pay future dividends;

    limit our ability to obtain additional financing for working capital, new store growth, capital expenditures and other investments, which may limit our ability to implement our business strategy;

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    heighten our vulnerability to downturns in our business, the food retail industry or the general economy and limit our flexibility in planning for, or reacting to, changes in our business and the food retail industry;

    expose us to the risk of increased interest rates as our borrowings under our senior credit facility are at variable rates; or

    prevent us from taking advantage of business opportunities as they arise or successfully carrying out our plans to expand our store base and product offerings.

        We and our subsidiaries may incur substantial additional indebtedness in the future, subject to the restrictions contained in our senior credit facility. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.

        We cannot assure you that our business will generate sufficient cash flow from operations or that future financing will be available to us in amounts sufficient to enable us to make payments on our indebtedness or to fund our operations.

         Our plans to open new stores require us to spend capital, which must be allocated among various projects. Failure to use our capital efficiently could have an adverse effect on our profitability.

        Our growth strategy depends on our opening new stores, which will require us to use cash generated by our operations and a portion of the net proceeds of this offering, as well as borrowings under our senior credit facility. We cannot assure you that cash generated by our operations, the net proceeds of this offering and borrowings under our senior credit facility will be sufficient to allow us to implement our growth strategy. If this cash is not allocated efficiently among our various projects, or if any of these initiatives prove to be unsuccessful, we may experience reduced profitability and we could be required to delay, significantly curtail or eliminate planned store openings, which could have a material adverse effect on our financial condition and future operating performance and the price of our Class A common stock.

         Litigation may materially adversely affect our business, financial condition and results of operations.

        Our operations are characterized by a high volume of customer traffic and by transactions involving a wide variety of product selections. These operations carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in many other industries. Consequently, we may be a party to individual personal injury, product liability and other legal actions in the ordinary course of our business, including litigation arising from food-related illness. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend future litigation may be significant. There may also be adverse publicity associated with litigation that may decrease consumer confidence in our businesses, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may materially adversely affect our businesses, financial condition, results of operations and cash flows.

         Increased commodity prices and availability may impact profitability.

        Many of our products include ingredients such as wheat, corn, oils, milk, sugar, cocoa and other commodities. Commodity prices worldwide have been increasing. While commodity price inputs do not typically represent the substantial majority of our product costs, any increase in commodity prices may cause our vendors to seek price increases from us. Although we typically are able to mitigate vendor efforts to increase our costs, we may be unable to continue to do so, either in whole or in part. In the event we are unable to continue mitigating potential vendor price increases, we may in turn consider

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raising our prices, and our customers may be deterred by any such price increases. Our profitability may be impacted through increased costs to us which may impact gross margins, or through reduced revenue as a result of a decline in the number and average size of customer transactions.

         Severe weather, natural disasters and adverse climate changes may materially adversely affect our financial condition and results of operations.

        Severe weather conditions and other natural disasters in areas where we have stores or from which we obtain the products we sell may materially adversely affect our retail operations or our product offerings and, therefore, our results of operations. Such conditions may result in physical damage to, or temporary or permanent closure of, one or more of our stores, an insufficient work force in our markets and/or temporary disruption in the supply of products, including delays in the delivery of goods to our stores or a reduction in the availability of products in our stores. In addition, adverse climate conditions and adverse weather patterns, such as drought or flood, that impact growing conditions and the quantity and quality of crops may materially adversely affect the availability or cost of certain products within our supply chain. Any of these factors may disrupt our businesses and materially adversely affect our financial condition, results of operations and cash flows.

         The occurrence of a widespread health epidemic may materially adversely affect our financial condition and results of operations.

        Our business may be severely impacted by wartime activities, threats or acts of terror or a widespread regional, national or global health epidemic, such as pandemic flu. Such activities, threats or epidemics may materially adversely impact our business by disrupting production and delivery of products to our stores, by affecting our ability to appropriately staff our stores and by causing customers to avoid public gathering places or otherwise change their shopping behaviors.

         Proposed changes to financial accounting standards could require our store leases to be recognized on the balance sheet.

        In addition to our significant level of indebtedness, we have significant obligations relating to our current operating leases. Proposed changes to financial accounting standards could require such leases to be recognized on the balance sheet. All of our existing stores are subject to leases, which have remaining terms of up to 27 years, and as of July 1, 2012, we had undiscounted operating lease commitments of approximately $564 million, scheduled through 2039, related primarily to our stores, including two stores that are not yet open. These commitments represent the minimum lease payments due under our operating leases, excluding common area maintenance, insurance and taxes related to our operating lease obligations, and do not reflect fair market value rent reset provisions in the leases. These leases are classified as operating leases and disclosed in note 14 to our consolidated financial statements included elsewhere in this prospectus, but are not reflected as liabilities on our consolidated balance sheets. During fiscal 2012 and the thirteen weeks ended July 1, 2012, our operating lease expense was approximately $23.1 million and $7.0 million, respectively.

        In August 2010, the Financial Accounting Standards Board ("FASB") and the International Accounting Standards Board ("IASB") issued a joint discussion paper highlighting proposed changes to financial accounting standards for leases. Currently, Accounting Standards Codification 840 ("ASC 840"), Leases (formerly Statement of Financial Accounting Standards 13, Accounting for Leases) requires that operating leases are classified as an off-balance sheet transaction and only the current year operating lease expense is accounted for in the income statement. In order to determine the proper classification of our stores as either operating leases or capital leases, we must make certain estimates at the inception of the lease relating to the economic useful life and the fair value of an asset as well as select an appropriate discount rate to be used in discounting future lease payments. These

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estimates are utilized by management in making computations as required by existing accounting standards that determine whether the lease is classified as an operating lease or a capital lease. All of our store leases have been classified as operating leases, which results in rental payments being charged to expense over the terms of the related leases. Additionally, operating leases are not reflected in our consolidated balance sheets, which means that neither a leased asset nor an obligation for future lease payments is reflected in our consolidated balance sheets. The proposed changes to ASC 840 would require that substantially all operating leases be recognized as assets and liabilities on our balance sheet. The right to use the leased property would be capitalized as an asset and the present value of future lease payments would be accounted for as a liability. The proposed changes are currently being reviewed by FASB, IASB and others, and are currently expected to be finalized in late 2012 or early 2013. The effective date, which has not been determined, could be as early as 2013 and may require retrospective adoption. While we have not quantified the impact this proposed standard would have on our financial statements, if our current operating leases are instead recognized on the balance sheet, it will result in a significant increase in the liabilities reflected on our balance sheet and in the interest expense and depreciation and amortization expense reflected in our income statement, while reducing the amount of rent expense. This could potentially decrease our net income.

         Our high level of fixed lease obligations could adversely affect our financial performance.

        Our high level of fixed lease obligations will require us to use a significant portion of cash generated by our operations to satisfy these obligations, and could adversely impact our ability to obtain future financing to support our growth or other operational investments. We will require substantial cash flows from operations to make our payments under our operating leases, all of which provide for periodic increases in rent. If we are not able to make the required payments under the leases, the lenders or owners of the stores may, among other things, repossess those assets, which could adversely affect our ability to conduct our operations. In addition, our failure to make payments under our operating leases could trigger defaults under other leases or under agreements governing our indebtedness, which could cause the counterparties under those agreements to accelerate the obligations due thereunder. Certain of our leases are with entities affiliated with our vice chairman of development and are currently the subject of negotiation to reset the annual base rent for these leases to fair market rent. See "—We lease certain of our stores and other properties from a related party" and "Certain Relationships and Related Party Transactions—Transactions with Howard Glickberg—Real Estate Leases."

         If our goodwill becomes impaired, we may be required to record a significant charge to earnings.

        We have a significant amount of goodwill. As of July 1, 2012, we had goodwill of approximately $95.4 million, which represented approximately 29.3% of our total assets as of such date. Goodwill is reviewed for impairment on an annual basis in the fourth fiscal quarter or whenever events occur or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount. Fair value is determined based on the discounted cash flows and comparable market values of our single reporting unit. If the fair value of the reporting unit is less than its carrying value, the fair value of the implied goodwill is calculated as the difference between the fair value of our reporting unit and the fair value of the underlying assets and liabilities, excluding goodwill. In the event an impairment to goodwill is identified, an immediate charge to earnings in an amount equal to the excess of the carrying value over the implied fair value would be recorded, which would adversely affect our operating results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Goodwill and Other Intangible Assets."

        Determining market values using a discounted cash flow method requires that we make significant estimates and assumptions, including long-term projections of cash flows, market conditions and appropriate market rates. Our judgments are based on historical experience, current market trends and

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other information. In estimating future cash flows, we rely on internally generated forecasts for operating profits and cash flows, including capital expenditures. Based on our annual impairment test during fiscal 2010, 2011 and 2012, no goodwill impairment charge was required to be recorded. Changes in estimates of future cash flows caused by items such as unforeseen events or changes in market conditions could negatively affect our reporting unit's fair value and result in an impairment charge. Factors that could cause us to change our estimates of future cash flows include a prolonged economic crisis, successful efforts by our competitors to gain market share in our core markets, our inability to compete effectively with other retailers or our inability to maintain price competitiveness. An impairment of a significant portion of our goodwill could materially adversely affect our financial condition and results of operations.

Risks Relating to this Offering and Ownership of Our Class A Common Stock

         Upon completion of this offering, we will be controlled by investment funds managed by affiliates of Sterling Investment Partners, whose interests in our business may be different from yours.

        Our Class B common stock has ten votes per share, and our Class A common stock, which is the stock we are offering in our initial public offering, has one vote per share. Upon completion of this offering, Sterling Investment Partners will own approximately [    •    ] shares of Class B common stock, or [    •    ]% of our outstanding common stock, representing approximately [    •    ]% of the voting power of our outstanding common stock, and approximately [    •    ]%, of our outstanding common stock, representing approximately [    •    ]% of the voting power of our outstanding common stock, if the underwriters exercise their over-allotment option in full. In addition, Sterling Investment Partners will own warrants to purchase [    •    ] shares of Class B common stock which, if exercised, would result in them owning approximately [    •    ]% of our outstanding common stock, representing approximately [    •    ] of the voting power of our outstanding common stock, and approximately [    •    ]% of our outstanding common stock, representing approximately [    •    ]% of the voting power of our outstanding common stock, if the underwriters exercise their over-allotment option in full. As such, Sterling Investment Partners will have significant influence over our reporting and corporate management and affairs, and, because of the ten-to-one voting ratio between our Class B and Class A common stock, Sterling Investment Partners will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval so long as the shares of Class B common stock owned by Sterling Investment Partners represent at least 15% of all outstanding shares of our Class A and Class B common stock. Sterling Investment Partners will, for so long as the shares of Class B common stock represent at least 15% of all outstanding shares of our Class A and Class B common stock, effectively control actions to be taken by us and our board of directors, including the election of directors, amendments to our certificate of incorporation and bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. These actions may be taken even if other stockholders oppose them. Sterling Investment Partners' control may have the effect of delaying or preventing a change in control of our company or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future.

        Our amended and restated certificate of incorporation provides that the doctrine of "corporate opportunity" will not apply to Sterling Investment Partners, or any of our directors who are associates of, or affiliated with, Sterling Investment Partners, in a manner that would prohibit them from investing in competing businesses. It is possible that the interests of Sterling Investment Partners and their affiliates may in some circumstances conflict with our interests and the interests of our other stockholders, including you, and Sterling Investment Partners may act in a manner that advances its best interests and not necessarily those of our other stockholders.

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        Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. All outstanding shares of Class A common stock and Class B common stock will automatically convert into a single class of common stock when the number of outstanding shares of Class B common stock owned by Sterling Investment Partners represents less than 15% of the aggregate combined number of outstanding shares of Class A common stock and Class B common stock, and no additional shares of Class A common stock or Class B common stock will be issued thereafter. For a description of the dual class structure, see "Description of Capital Stock—Anti-Takeover Provisions."

        Sterling Investment Partners is not subject to any contractual obligation to retain its controlling interest, except that it has agreed, subject to certain exceptions, not to sell or otherwise dispose of any shares of our common stock or other securities exercisable or convertible into our common stock for a period of at least 180 days after the date of this prospectus without the prior written consent of Credit Suisse Securities (USA) LLC. There can be no assurance as to the period of time during which Sterling Investment Partners will in fact maintain its ownership of our common stock following the offering.

         We have elected to take advantage of the "controlled company" exemption to the corporate governance rules for publicly-listed companies, which could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

        Because we qualify as a "controlled company" under the corporate governance rules for publicly-listed companies, we are not required to have a majority of our board of directors be independent, nor are we required to have a compensation committee or an independent nominating function. In light of our status as a controlled company, our board of directors has determined not to have a majority of our board of directors be independent, have a compensation committee composed solely of independent directors or have an independent nominating function and has chosen to have the full board of directors be directly responsible for nominating members of our board. Accordingly, should the interests of Sterling Investment Partners, as our controlling stockholder, differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for publicly-listed companies. Our status as a controlled company could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

        Although we qualify as a "controlled company", we must have an independent audit committee consisting of three members. The rules of the NASDAQ Global Market, the exchange on which we will apply to list our Class A common stock, permit the composition of our audit committee to be phased-in as follows: (i) one independent committee member at the time of this offering; (ii) a majority of independent committee members within 90 days of this offering; and (iii) all independent committee members within one year of the effective date of the registration statement of which this prospectus is a part. We currently have two independent directors. If we cannot satisfy or continue to satisfy the phase-in requirement for our audit committee under the applicable listing rules, our Class A common stock will be delisted, which would negatively impact the price of, and your ability to sell, our Class A common stock.

         Conflicts of interest may arise because some of our directors are representatives of our controlling stockholders.

        Messrs. Santoro, Selden and Barr, who are representatives of Sterling Investment Partners, serve on our board of directors, and Mr. Santoro serves as our executive Chairman. Sterling Investment

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Partners and affiliated funds may hold equity interests in entities that directly or indirectly compete with us, and companies in which they currently invest may begin competing with us. As a result of these relationships, when conflicts between the interests of Sterling Investment Partners and its affiliates, on the one hand, and the interests of our other stockholders, on the other hand, arise, these directors may not be disinterested. Although our directors and officers have a duty of loyalty to us under Delaware law and our certificate of incorporation, transactions that we enter into in which a director or officer has a conflict of interest are generally permissible so long as (i) the material facts relating to the director's or officer's relationship or interest as to the transaction are disclosed to our board of directors and a majority of our disinterested directors, or a committee consisting solely of disinterested directors, approves the transaction, (ii) the material facts relating to the director's or officer's relationship or interest as to the transaction are disclosed to our stockholders and a majority of our disinterested stockholders approves the transaction or (iii) the transaction is otherwise fair to us. Under our amended and restated certificate of incorporation, representatives of Sterling Investment Partners are not required to offer to us any transaction opportunity of which they become aware and could take any such opportunity for themselves or offer it to other companies in which they have an investment, unless such opportunity is offered to them solely in their capacity as a director of ours.

         An active, liquid trading market for our Class A common stock may not develop following this offering, which could limit your ability to sell your shares of our Class A common stock at an attractive price, or at all.

        Prior to this offering, there has been no public market for our Class A common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market in our Class A common stock or how liquid that market might become. An active public market for our Class A common stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of Class A common stock at a price that is attractive to you, or at all. The initial public offering price for the shares of our common stock will be determined by negotiations among us, Sterling Investment Partners and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price for shares of our Class A common stock may decline below the initial public offering price, and you may not be able to resell your shares of Class A common stock at or above the initial public offering price.

         Our stock price may be volatile or may decline regardless of our operating performance, and you may lose part or all of your investment.

        Following the completion of this offering, the market price for our Class A common stock is likely to be volatile, in part because our shares have not been previously traded publicly. In addition, the market price of our Class A common stock may fluctuate significantly in response to a number of factors, most of which we cannot predict or control, including:

    announcements of new store openings or initiatives, commercial relationships, acquisitions or other events by us or our competitors;

    failure of any of our initiatives to achieve commercial success;

    fluctuations in stock market prices and trading volumes of securities of similar companies;

    general market conditions and overall fluctuations in U.S. equity markets;

    variations in our operating results, or the operating results of our competitors;

    actual or anticipated growth rates relative to our competitors;

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    changes in our financial guidance to investors and analysts or our failure to achieve such expectations;

    delays in, or our failure to provide, financial guidance;

    changes in securities analysts' estimates of our financial performance or our failure to achieve such estimates;

    sales of large blocks of our Class A common stock, including sales by Sterling Investment Partners or by our executive officers or directors;

    additions or departures of any of our key personnel;

    changes in accounting principles or methodologies;

    economic, legal and regulatory factors unrelated to our performance;

    changing legal or regulatory developments in the U.S.; and

    discussion of us or our stock price by the financial press and in online investor forums.

        In addition, the stock market in general has experienced substantial price and volume volatility that is often seemingly unrelated to the operating performance of particular companies. These broad market fluctuations may cause the trading price of our Class A common stock to decline. In the past, securities class action litigation has often been brought against a company after a period of volatility in the market price of its common stock. We may become involved in this type of litigation in the future. Any securities litigation claims brought against us could result in substantial expenses and the diversion of our management's attention from our business.

         If you purchase shares of Class A common stock sold in this offering, you will incur immediate and substantial dilution.

        If you purchase shares of Class A common stock in this offering, you will incur immediate and substantial dilution in the amount of $[    •    ] per share, because the initial public offering price of $[    •    ] per share is substantially higher than the pro forma net tangible book value per share of our outstanding common stock. This means that you will pay a higher price per share than the amount of our total tangible assets, less our total liabilities, divided by the number of shares of common stock outstanding. In addition, you may also experience additional dilution upon future equity issuances or the exercise of stock options to purchase common stock granted to our employees, executive officers, consultants and directors under our stock option and equity incentive plans. For additional information, see "Dilution."

         Because we have no current plans to pay cash dividends on our Class A common stock for the foreseeable future, you may not receive any return on investment unless you sell your Class A common stock for a price greater than you paid.

        We have never declared or paid cash dividends on our common stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our Class A common stock if the market price of our Class A common stock increases. In addition, our senior credit facility contains restrictions on our ability to pay dividends.

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         Future sales of our Class A common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

        The price of our Class A common stock could decline if there are substantial sales of our Class A common stock, particularly sales by our directors, executive officers, employees and significant stockholders, or when there is a large number of shares of our Class A common stock available for sale. These sales, or the perception that these sales might occur, could depress the market price of our Class A common stock and might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

        Upon completion of this offering, there will be [    •    ] shares of our common stock outstanding. Of these, the [    •    ] shares of Class A common stock being sold in this offering (or [    •    ] shares of Class A common stock if the underwriters exercise their over-allotment option in full) will be freely tradable immediately after this offering (except for any shares purchased by our affiliates, if any) and [    •    ] shares will be subject to lock-up agreements for 180 days after the date of this prospectus. A large portion of our shares are held by Sterling Investment Partners. Moreover, Sterling Investment Partners has rights, subject to some conditions, to require us to file registration statements covering the shares they and our other existing stockholders currently hold, or to include these shares in registration statements that we may file for ourselves or other stockholders. See "Certain Relationships and Related-Party Transactions—Registration Rights Agreement."

        Credit Suisse Securities (USA) LLC may, in its sole discretion, permit our executive officers, our directors, Sterling Investment Partners and our other stockholders to sell shares prior to the expiration of the restrictive provisions contained in the lock-up agreements with the underwriters.

        We also intend to register all common stock that we may issue under our 2012 Long-Term Incentive Plan. Effective upon the completion of this offering, an aggregate of [    •    ] shares of our common stock will be reserved for future issuance under the 2012 Long-Term Incentive Plan. Once we register these shares, which we plan to do shortly after the completion of this offering, they can be freely sold in the public market upon issuance, subject to the lock-up agreements referred to above. If a large number of these shares are sold in the public market, the sales could reduce the trading price of our Class A common stock.

        Also, in the future, we may issue shares of our Class A common stock in connection with investments or acquisitions. The amount of shares of our Class A common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock.

        The market price of the shares of our Class A common stock could decline as a result of the sale of a substantial number of our shares of Class A common stock in the public market or the perception in the market that the holders of a large number of shares intend to sell their shares.

         Our future operating results may fluctuate significantly and our current operating results may not be a good indication of our future performance. Fluctuations in our quarterly financial results could affect our stock price in the future.

        Our operating results have historically varied from period-to-period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control. If our quarterly financial results or our forecasts of future financial results fail to meet the expectations of securities analysts and investors, our Class A common stock price could be negatively affected. Any volatility in our quarterly financial results may make it more difficult for us to raise capital in the future or pursue acquisitions that involve issuances of our stock. Our operating results for prior periods may not be effective predictors of our future performance.

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        Factors associated with our industry, the operation of our business and the markets for our products may cause our quarterly financial results to fluctuate, including:

    our ability to open new stores on a timely basis or at all;

    our ability to achieve sustained sales and profitable operating margins at new stores;

    the availability of financing to pursue our new store openings on satisfactory terms or at all;

    our ability to compete effectively with other retailers;

    our ability to maintain price competitiveness;

    the geographic concentration of our stores;

    ongoing economic uncertainty;

    our ability to maintain or improve our operating margins;

    ordering errors or product supply disruptions in the delivery of perishable products;

    negative effects to our reputation from real or perceived quality or health issues with our food products;

    our ability to protect or maintain our intellectual property;

    the failure of our information technology or administrative systems to perform as anticipated;

    data security breaches and the release of confidential customer information;

    our ability to retain and attract senior management, key employees and qualified store-level employees;

    rising costs of providing employee benefits, including increased healthcare costs and pension contributions due to unfunded pension liabilities;

    our ability to renegotiate expiring collective bargaining agreements and new collective bargaining agreements;

    changes in law;

    additional indebtedness incurred in the future;

    our ability to satisfy our ongoing capital needs and unanticipated cash requirements;

    claims made against us resulting in litigation;

    increases in commodity prices;

    severe weather and other natural disasters in areas in which we have stores;

    wartime activities, threats or acts of terror or a widespread regional, national or global health epidemic;

    changes to financial accounting standards regarding store leases;

    our high level of fixed lease obligations; and

    impairment of our goodwill.

        Any one of the factors above or the cumulative effect of some of the factors referred to above may result in significant fluctuations in our quarterly financial and other operating results, including fluctuations in our key metrics. This variability and unpredictability could result in our failing to meet our internal operating plan or the expectations of securities analysts or investors for any period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our shares could fall substantially and we could face costly lawsuits, including securities class action suits. In addition, a significant percentage of our operating expenses are fixed in nature and based on forecasted revenue trends. Accordingly, in the event of revenue shortfalls, we are generally unable to mitigate the negative impact on margins in the short term.

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         The supervoting rights of our Class B common stock and other anti-takeover provisions in our organizational documents and Delaware law might discourage or delay attempts to acquire us that you might consider favorable.

        Our amended and restated certificate of incorporation and bylaws that will be in effect at the closing of our initial public offering will contain provisions that may make the acquisition of our company more difficult, including the following:

    any transaction that would result in a change in control of our company will require the approval of a majority of our outstanding Class B common stock voting as a separate class;

    we have a dual class common stock structure, which provides Sterling Investment Partners with the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock;

    when we no longer have outstanding shares of our Class B common stock, certain amendments to our amended and restated certificate of incorporation or bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock;

    when we no longer have outstanding shares of our Class B common stock, vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders;

    our board of directors will be classified into three classes of directors with staggered three-year terms so that not all members of our board of directors are elected at one time and directors will only be able to be removed from office for cause;

    when we no longer have outstanding shares of our Class B common stock, our stockholders will only be able to take action at a meeting of stockholders and not by written consent;

    only our chairman or a majority of our board of directors will be authorized to call a special meeting of stockholders;

    advance notice procedures will apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders;

    our board of directors is expressly authorized to make, alter or repeal our amended and restated bylaws;

    our amended and restated certificate of incorporation will authorize undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; and

    certain litigation against us can only be brought in Delaware.

        In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (the "DGCL"), which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

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        These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

        For information regarding these and other provisions, see "Description of Capital Stock—Anti-Takeover Provisions."

         Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

        We are not currently required to comply with the rules of the Securities and Exchange Commission (the "SEC") implementing Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC's rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. Though we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. However, as an "emerging growth company," as defined in the JOBS Act, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.

        To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff. Testing and maintaining internal control can divert our management's attention from other matters that are important to the operation of our business. In addition, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.

         We are an "emerging growth company" and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.

        We qualify as an "emerging growth company" under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. Accordingly, we have included only four, rather than five, years of selected financial data due to a change in our fiscal year, included detailed compensation information for only our three most highly compensated executive officers and have not

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included a compensation discussion and analysis (CD&A) of our executive compensation programs in this prospectus. For so long as we are an emerging growth company, we will not be required to:

    have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

    comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

    submit certain executive compensation matters to shareholder advisory votes, such as "say-on-pay," "say-on-frequency" and "say-on-golden parachutes"; and

    disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation.

In addition, while we are an emerging growth company the JOBS Act will permit us to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to delay the adoption of new or revised accounting pronouncements applicable to public and private companies until such pronouncements become mandatory for private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public and private companies.

        We will remain an emerging growth company until the earliest to occur of: (i) our reporting $1 billion or more in annual gross revenues; (ii) the end of fiscal 2018; (iii) our issuance, in a three year period, of more than $1 billion in non-convertible debt; and (iv) the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter.

        We cannot predict if investors will find our Class A common stock less attractive because we may rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

         We will incur significant increased costs as a result of operating as a public company, and our management will be required to divert attention from operational and other business matters to devote substantial time to public company requirements.

        We have operated as a private company. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be required to comply with the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the rules and regulations of the NASDAQ Global Market and the requirements of the Sarbanes-Oxley Act, as well as rules and regulations subsequently implemented by the SEC and the NASDAQ Global Market, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In that regard, we currently have a limited internal audit function, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and provide significant management oversight.

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We may not be successful in implementing these requirements, and implementing them could materially adversely affect our business, results of operations and financial condition. If we do not implement or comply with such requirements in a timely manner, we might be subject to sanctions or investigation by regulatory authorities. Any such action could harm our reputation and the confidence of investors and customers in our company, and could materially adversely affect our business and cause our Class A common stock price to decline. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors and our board committees or as executive officers.

         Our business and stock price may suffer as a result of our lack of public company operating experience. In addition, if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

        We have been a privately-held company, and our lack of public company operating experience may make it difficult to forecast and evaluate our future prospects. If we are unable to execute our business strategy, either as a result of our inability to effectively manage our business in a public company environment or for any other reason, our business, prospects, financial condition and results of operations may be harmed.

        The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. As a new public company we do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this prospectus are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "forecast," "continue," "plan," "intend," "believe," "may," "will," "should," "can have," "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected store openings, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

    our ability to open new stores on a timely basis or at all;

    our ability to achieve sustained sales and profitable operating margins at new stores;

    the availability of financing to pursue our new store openings on satisfactory terms or at all;

    our ability to compete effectively with other retailers;

    our ability to maintain price competitiveness;

    the geographic concentration of our stores;

    ongoing economic uncertainty;

    our ability to maintain or improve our operating margins;

    our history of net losses;

    ordering errors or product supply disruptions in the delivery of perishable products;

    negative effects to our reputation from real or perceived quality or health issues with our food products;

    restrictions on our use of the Fairway name other than on the East Coast and in California;

    our ability to protect or maintain our intellectual property;

    the failure of our information technology or administrative systems to perform as anticipated;

    data security breaches and the release of confidential customer information;

    our ability to retain and attract senior management, key employees and qualified store-level employees;

    rising costs of providing employee benefits, including increased healthcare costs and pension contributions due to unfunded pension liabilities;

    our ability to renegotiate expiring collective bargaining agreements and new collective bargaining agreements;

    changes in law;

    additional indebtedness incurred in the future;

    our ability to satisfy our ongoing capital needs and unanticipated cash requirements;

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    claims made against us resulting in litigation;

    increases in commodity prices;

    severe weather and other natural disasters in areas in which we have stores;

    wartime activities, threats or acts of terror or a widespread regional, national or global health epidemic;

    changes to financial accounting standards regarding store leases;

    our high level of fixed lease obligations; and

    impairment of our goodwill; and

    other factors discussed under "Risk Factors."

        We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this prospectus in the context of these risks and uncertainties, and you should not rely upon forward-looking statements as predictions of future events.

        We caution you that the important factors described in the sections in this prospectus entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" may not be all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially and adversely from those contained in any forward-looking statements we may make. The forward-looking statements included in this prospectus are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

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USE OF PROCEEDS

        We estimate that the net proceeds to us from our issuance and sale of [    •    ] shares of Class A common stock in this offering will be approximately $[    •    ] million, assuming an initial public offering price of $[    •    ] per share, which is the midpoint of the price range listed on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

        A $1.00 increase (decrease) in the assumed initial public offering price of $[    •    ] per share would increase (decrease) our net proceeds from this offering by approximately $[    •    ] million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

        We intend to use the net proceeds that we receive from this offering for new store growth and other general corporate purposes, after (i) paying the accrued but unpaid dividends on our Series A preferred stock totaling approximately $[    •    ] ($[    •    ] per share of Series A preferred stock), (ii) paying the accrued but unpaid dividends on our Series B preferred stock totaling approximately $[    •    ] ($[    •    ] per share of Series B preferred stock), (iii) redeeming [    •    ] shares of our Series A preferred stock at an aggregate redemption price of $[    •    ] ($1,300 per share), (iv) redeeming [    •    ] shares of our Series B preferred stock at an aggregate redemption price of $[    •    ] ($1,000 per share), and (v) paying $[    •    ] to an affiliate of Sterling Investment Partners in connection with the termination of our management agreement with such affiliate.

        Our preferred stock is redeemable at the option of our board of directors, which is controlled by the holders of our preferred stock, including affiliates of Sterling Investment Partners. We will determine the portion of the net proceeds of this offering to be used to pay accrued dividends on our preferred stock and to redeem preferred stock in consultation with the underwriters, based in part on the amount of cash we desire to retain on our balance sheet for new store growth and other general corporate purposes. The preferred stock that is not redeemed for cash will be exchanged for Class B common stock in connection with the offering. We received $43,058,000 in the aggregate, or $1,000 per share, upon the issuance of the Series A preferred stock, and $64,016,980 in the aggregate, or $1,000 per share, upon the issuance of the Series B preferred stock, including $12,739,980 representing the value of the Series B preferred stock issued to the sellers in connection with our acquisition of the four then existing Fairway stores in January 2007.

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DIVIDEND POLICY

        We have never declared or paid cash dividends on our common stock. We currently intend to retain any future earnings for use in the operation of our business and do not intend to declare or pay any cash dividends in the foreseeable future. Any further determination to pay dividends on our capital stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors considers relevant. In addition, the terms of our senior credit facility contains restrictions on our ability to pay dividends.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our consolidated capitalization as of July 1, 2012 on:

    an actual basis;

    a pro forma basis to give effect to our entry into a new senior credit facility on August 17, 2012, consisting of a $260 million term loan facility and a $40 million revolving credit facility, with the proceeds of the term loan facility being used to repay $210.1 million of outstanding borrowings under our prior senior credit facility, pay fees and expenses and provide us with $44.2 million for new store growth and other general corporate purposes, as if such transactions had occurred on July 1, 2012; and

    a pro forma as adjusted basis to give effect to (i) our entry into a new senior credit facility, as described above, (ii) our issuance and sale of [    •    ] shares of Class A common stock in this offering at an assumed initial public offering price of $[    •    ] per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the proceeds from the offering as described under "Use of Proceeds" and (iii) our issuance of [    •    ] shares of Class B common stock in exchange for the shares of our outstanding preferred stock that are not being redeemed with the proceeds of this offering, based on an aggregate liquidation value of $[    •    ] for the Series A preferred stock and $[    •    ] for the Series B preferred stock and an assumed initial public offering price of $[    •    ] per share, which is the midpoint of the price range listed on the cover page of this prospectus, as if such transactions had occurred on July 1, 2012.

        You should read the following table in conjunction with the sections entitled "Use of Proceeds," "Selected Historical Consolidated Financial and Other Data," "Management's Discussion and Analysis

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of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

 
  As of July 1, 2012    
 
 
  Pro Forma
As Adjusted
 
 
  Actual   Pro Forma  
 
  (unaudited)
   
 
 
  (dollars in thousands)
 

Cash and cash equivalents(1)

  $ 11,370   $ 55,523   $    
               

Long-term debt (including current maturities):

                   

Senior credit facility(2)

  $ 195,815   $ 256,100   $ 256,100  

Subordinated note(3)

    7,333     7,333     7,333  
               

Total debt

    203,148     263,433     263,433  

Redeemable preferred stock

                   

Series A preferred stock, $0.001 par value, 52,982 shares authorized, 43,058 shares issued and outstanding actual and pro forma, no shares issued and outstanding pro forma as adjusted (inclusive of cumulative deemed dividends of $19,908)

    75,902     75,902      

Series B preferred stock, $0.001 par value, 64,018 shares authorized, 64,016.98 shares issued and outstanding actual and pro forma, no shares issued and outstanding pro forma as adjusted (inclusive of cumulative deemed dividends of $71,186)

    135,203     135,203      
               

Total redeemable preferred stock

    211,105     211,105      

Stockholders' equity

                   

Common stock, $0.001 par value, 150,000 shares authorized, 105,473 shares issued and outstanding actual and pro forma, no shares authorized, issued or outstanding pro forma as adjusted

             

Class A common stock, $0.001 par value per share; no shares authorized, issued or outstanding, actual and pro forma; [•] shares authorized and [•] shares issued and outstanding pro forma as adjusted

               

Class B common stock, $0.001 par value per share; no shares authorized, issued or outstanding, actual and pro forma; [•] shares authorized and [•] shares issued and outstanding pro forma as adjusted

               

Preferred stock, $0.001 par value per share; no shares authorized, issued or outstanding, actual and pro forma; 5,000,000 shares authorized, no shares issued and outstanding pro forma as adjusted

               

Additional paid-in capital(4)

               

Accumulated deficit(5)

    (151,901 )   (166,004 )      
               

Total stockholders' (deficit) equity(5)

    (151,901 )   (166,004 )      
               

Total capitalization(5)

  $ 262,352   $ 308,534   $    
               

(1)
Pro forma and pro forma as adjusted amounts do not reflect $10 million that we borrowed under our prior senior credit facility subsequent to July 1, 2012 and repaid with proceeds from our new

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    senior credit facility or the payment of accrued interest from July 2, 2012 through August 17, 2012 of approximately $2 million on the outstanding borrowings under our prior senior credit facility upon the closing of the refinancing of that senior credit facility.

(2)
Net of unamortized original issue discount of approximately $1.8 million actual and $3.9 million pro forma and pro forma as adjusted.

(3)
Net of $167,161 of accrued pay-in-kind interest, actual, pro forma and pro forma as adjusted.

(4)
On a pro forma as adjusted basis, additional paid-in capital includes adjustments for our (i) issuance of [    •    ] shares of Class B common stock in exchange for the shares of our outstanding preferred stock that are not being redeemed with the proceeds of this offering, based on an aggregate liquidation value of $[    •    ] for the Series A preferred stock and $[    •    ] for the Series B preferred stock and an assumed initial public offering price of $[    •    ] per share, which is the midpoint of the price range listed on the cover page of this prospectus and (ii) issuance and sale of [    •    ] shares of Class A common stock in this offering at an assumed initial public offering price of $[    •    ] per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

(5)
The pro forma and pro forma as adjusted amounts reflect the loss on early extinguishment of debt resulting from the refinancing of our prior senior credit facility, which we expect will be approximately $13.1 million, and other fees and expenses associated with the financing of approximately $1.0 million, but do not reflect the payment of accrued interest from July 2, 2012 through August 17, 2012 of approximately $2 million on the outstanding borrowings under our prior senior credit facility upon the closing of the refinancing of that senior credit facility.

        A $1.00 increase (decrease) in the assumed initial public offering price of $[    •    ] per share, the midpoint of the price range set forth on the cover page of this prospectus, would decrease (increase) the number of shares of Class B common stock issued by us in exchange for the shares of our outstanding preferred stock that are not being redeemed with the proceeds of this offering by approximately [    •    ] shares and would increase (decrease) the pro forma as adjusted amount of additional paid-in capital and total stockholders' equity by the same amount, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        The number of shares of common stock to be outstanding after this offering is based on shares outstanding as of July 1, 2012. This number excludes shares of our Class A common stock reserved for future grants under the 2012 Long-Term Incentive Plan, which we expect to adopt in connection with this offering, and [    •    ] shares of our Class B common stock reserved for issuance upon the exercise of outstanding warrants.

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DILUTION

        After giving effect to the Exchange, our pro forma net tangible book value as of July 1, 2012 would have been approximately $[    •    ] million, or approximately $[    •    ] per share. Pro forma net tangible book value per share represents the amount of our total tangible assets less the amount of our total liabilities, divided by the number of shares of common stock outstanding at July 1, 2012, prior to the sale of [    •    ] shares of our Class A common stock offered in this offering, but assuming the completion of our Exchange. Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by investors in this offering and the net tangible book value per share of our common stock outstanding immediately after this offering.

        After giving effect to the completion of the Exchange and the sale of [    •    ] shares of our Class A common stock in this offering, based upon an assumed initial public offering price of $[    •    ] per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated expenses payable by us in connection with this offering, our pro forma as adjusted net tangible book value as of July 1, 2012 would have been approximately $[    •    ] million, or $[    •    ] per share of common stock. This represents an immediate increase in pro forma net tangible book value of $[    •    ] per share to existing stockholders and immediate dilution of $[    •    ] per share to new investors purchasing shares of Class A common stock in this offering at the initial public offering price.

        The following table illustrates this per share dilution:

 
   
   

Assumed initial public offering price per share

       

Pro forma net tangible book value (deficit) per share as of July 1, 2012 (which gives effect to the Exchange)

       

Increase in net tangible book value per share attributable to new investors

       

Pro forma as adjusted net tangible book value (deficit) per share as of July 1, 2012 (which gives effect to the Exchange and this offering)

       

Dilution per share to new investors

       

        The following table summarizes, as of July 1, 2012, on a pro forma as adjusted basis giving effect to the Exchange and the sale of [    •    ] shares of Class A common stock in this offering, the number of shares of our Class A common stock purchased from us, the aggregate cash consideration paid to us and the average price per share paid to us by existing stockholders and to be paid by new investors purchasing shares of our Class A common stock from us in this offering. The table assumes an initial public offering price of $[    •    ] per share, the midpoint of the price range set forth on the cover of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering.

 
  Shares Purchased   Total Consideration    
 
 
  Average Price
Per Share
 
 
  Number   Percentage   Amount   Percentage  

Existing stockholders(1)

                               

New investors

                               
                       

Total

          100 %         100 %      
                       

(1)
Gives effect to our issuance of [    •    ] shares of our Class B common stock, assuming an initial public offering price of $[    •    ] per share, which is the midpoint of the price range set forth on

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    the cover of this prospectus, in exchange for the [    •    ] shares of our outstanding preferred stock that are not being redeemed with the proceeds of this offering.

            A $1.00 increase (decrease) in the assumed initial public offering price of $[    •    ] per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering by $[    •    ] million, or increase (decrease) the percentage of total consideration paid by investors participating in this offering by [    •    ]%, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

            Except as otherwise indicated, the discussion and tables above assume no exercise of the underwriters' option to purchase additional shares. If the underwriters' option to purchase additional shares is exercised in full, our existing stockholders would own approximately [    •    ]% and our new investors would own approximately [    •    ]% of the total number of shares of our common stock outstanding after this offering.

            The tables and calculations above are based on shares of common stock outstanding as of July 1, 2012 (after giving effect to the Exchange) and exclude shares of our Class A common stock reserved for future grants under the 2012 Long-Term Incentive Plan, and [    •    ] shares of our Class B common stock reserved for issuance upon the exercise of outstanding warrants.

            To the extent that any options or other equity incentive grants are issued in the future with an exercise price or purchase price below the initial public offering price, new investors will experience further dilution.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

        The following tables summarize our financial data as of the dates and for the periods indicated. We have derived the selected consolidated financial data for the fiscal years ended March 29, 2009, March 28, 2010, April 3, 2011 and April 1, 2012 from our audited consolidated financial statements for such years and for the thirteen weeks ended July 3, 2011 and July 1, 2012 from our unaudited consolidated financial statements for such periods. Our audited consolidated financial statements as of April 3, 2011 and April 1, 2012 and for the fiscal years ended March 28, 2010, April 3, 2011 and April 1, 2012 have been included in this prospectus. Our unaudited consolidated financial statements as of July 1, 2012 and for the thirteen weeks ended July 3, 2011 and July 1, 2012 have been included in this prospectus and, in the opinion of management, include all adjustments (inclusive only of normally recurring adjustments) necessary for a fair presentation. Results of operations for an interim period are not necessarily indicative of results for a full year. Each of our fiscal years ended March 29, 2009, March 28, 2010 and April 1, 2012 consists of 52 weeks; our fiscal year ended April 3, 2011 consists of 53 weeks. The differing length of certain fiscal years may affect the comparability of certain data.

        Since March 2009, we have opened seven food stores (one urban and six suburban) in the Greater New York City metropolitan area, three of which include Fairway Wines & Spirits locations, bringing our total stores open to 11 (our latest store in Westbury, New York was opened in August 2012, and is not presented in the following tables). We expect to open an additional food store in Manhattan in November 2012. Our income (loss) from operations in each period shown has been affected by the number of stores open and the number of stores in the process of being opened in each period.

        We believe our food stores are among the most productive in the industry in net sales per store and net sales per square foot as a result of our distinctive merchandising strategies, value proposition and efficient operating structure. As the Selected Operating Data table reflects, however, our average net sales per store and average net sales per gross square foot have declined as we have increased the number of suburban stores that we operate. Our suburban stores are larger in size (average of 65,000 gross square feet (39,000 selling square feet)) than our urban stores that have greater real estate constraints (average of 51,000 gross square feet (23,000 selling square feet)) and generate comparatively lower sales and contribution margin.

        While we have increased our net sales from $401.2 million in fiscal 2010 to $554.9 million in fiscal 2012, or 38.3%, and our Adjusted EBITDA from $23.9 million in fiscal 2010 to $35.8 million in fiscal 2012, or 49.8%, our comparable store sales have been impacted by sales transfer from our existing stores to our newly opened stores that are in closer proximity to some of our customers and by our price optimization initiative that we launched across our store network late in fiscal 2011 to refine the pricing and balance of our promotional activities across our mix of higher-margin perishable items and everyday value-oriented conventional grocery items. Our price optimization initiative has resulted in an increase in our gross margins. We had net losses of $7.1 million, $18.6 million and $11.9 million in fiscal 2010, fiscal 2011 and fiscal 2012, respectively. For a discussion of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss, see note 5 below.

        The selected historical consolidated data presented below should be read in conjunction with the sections entitled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the related notes thereto and other financial data included elsewhere in this prospectus.

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Statement of Income Data

 
  Fiscal Year Ended   Thirteen Weeks Ended  
 
  March 29,
2009(1)
  March 28,
2010
  April 3,
2011
  April 1,
2012
  July 3,
2011
  July 1,
2012
 
 
   
   
   
   
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands, except for per share data)
 

Net sales

  $ 343,106   $ 401,167   $ 485,712   $ 554,858   $ 122,484   $ 154,683  

Cost of sales and occupancy costs(2)

    230,912     271,599     326,207     368,728     81,838     103,996  
                           

Gross profit

    112,194     129,568     159,505     186,130     40,646     50,687  

Direct store expenses

    70,371     85,840     109,867     132,446     29,356     34,484  

General and administrative expenses

    28,998     34,676     40,038     44,331     9,348     11,717  

Store opening costs(3)

    3,066     3,949     10,006     12,688     3,263     6,478  
                           

Income (loss) from operations

    9,759     5,103     (406 )   (3,335 )   (1,321 )   (1,992 )

Interest expense, net

    10,279     13,787     19,111     16,918     4,174     4,584  

Loss on early extinguishment of debt(4)

        2,837     13,931              
                           

Loss before income taxes

    (520 )   (11,521 )   (33,448 )   (20,253 )   (5,495 )   (6,576 )

Income tax (benefit)

    (851 )   (4,426 )   (14,860 )   (8,304 )   (2,249 )   (2,695 )
                           

Net income (loss)

  $ 331   $ (7,095 ) $ (18,588 ) $ (11,949 ) $ (3,246 ) $ (3,881 )
                           

Net (loss) attributable to common stockholders(5)

  $ (10,836 ) $ (23,750 ) $ (39,021 ) $ (36,677 ) $ (9,114 ) $ (10,563 )
                           

Net (loss) per share attributable to common stockholders(5)

                                     

Basic and diluted loss per common share(5)

                                     

Pro forma basic and diluted per common share(5)

  $     $     $     $     $     $    
                           

Other Financial Data

 
  Fiscal Year Ended   Thirteen Weeks Ended  
 
  March 29,
2009
  March 28,
2010
  April 3,
2011
  April 1,
2012
  July 3,
2011
  July 1,
2012
 
 
  (dollars in thousands)
 

Adjusted EBITDA(6)

  $ 21,785   $ 23,874   $ 29,309   $ 35,775   $ 6,920   $ 11,342  

Depreciation and amortization

  $ 7,175   $ 10,233   $ 14,588   $ 19,202   $ 4,213   $ 4,495  

Capital expenditures

  $ 21,650   $ 21,658   $ 27,797   $ 44,528   $ 11,569   $ 16,338  

Gross margin(7)

    32.7 %   32.3 %   32.8 %   33.5 %   33.2 %   32.8 %

Adjusted EBITDA margin(8)

    6.3 %   6.0 %   6.0 %   6.4 %   5.6 %   7.3 %

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Selected Operating Data

 
  Fiscal Year Ended   Thirteen Weeks Ended
 
  March 29,
2009
  March 28,
2010
  April 3,
2011
  April 1,
2012
  July 3,
2011
  July 1,
2012

Locations at end of period(9)

  5   5   7   9   7   10

Total gross square feet at end of period

  297,551   297,551   458,923   557,677   458,923   621,168

Change in square footage for period(10)

  20.3%     54.2%   21.5%   23.1%   35.4%

Average store size

                       

Gross square feet

  59,510   59,510   65,560   61,964   65,560   62,117

Selling square feet(11)

  31,157   31,157   36,348   34,976   36,348   35,624

Average net sales per square foot

                       

Gross square foot(12)

  $1,381   $1,348   $1,286   $1,018   $268   $270

Selling square foot(12)

  $2,774   $2,575   $2,457   $1,859   $489   $484

Average net sales per store per week ($000)(13)

  $1,642   $1,543   $1,472   $1,246   $1,312   $1,259

Comparable store sales growth (decrease) per period(14)

  10.1%   0.5%   (5.0)%   (7.0)%   (6.5)%   (7.0)%

New stores opened in period (location/date) 
  
  
    

  Paramus, NJ
(3/2009)  
  
    
  — 
 
 
    
  Pelham Manor, NY
(4/2010);
Stamford, CT
(11/2010)
  Upper East Side, NY
(7/2011);
Douglaston, NY
(11/2011)
      Woodland Park, NJ
(6/2012)  
  
    

Balance Sheet Data

 
  March 29,
2009(1)
  March 28,
2010
  April 3,
2011
  April 1,
2012
  July 1,
2012
 
 
  (dollars in thousands)
 

Cash and cash equivalents

  $ 15,816   $ 22,594   $ 58,067   $ 30,172   $ 11,370  

Total assets

    209,293     242,206     313,665     321,590     326,100  

Total debt(15)

    93,747     122,544     194,297     203,552     203,148  

Redeemable preferred stock

    120,730     146,794     179,695     204,423     211,105  

Total stockholders' deficit

    (41,792 )   (65,542 )   (104,562 )   (141,364 )   (151,901 )

(1)
Amounts have been reclassified to match presentation of subsequent years.

(2)
Excludes depreciation and amortization.

(3)
Costs (principally payroll, rent expense and real estate taxes) incurred in opening new stores are expensed as incurred. During fiscal 2009, we incurred $3.1 million of store opening costs related to the store we opened during fiscal 2009. During fiscal 2010 and fiscal 2011, we incurred $3.9 million and $6.8 million, respectively, of store opening costs related to the two stores we opened during fiscal 2011. During fiscal 2011 and fiscal 2012, we incurred $3.2 million and $11.9 million, respectively, of store opening costs related to the two stores we opened during fiscal 2012. During fiscal 2012, we incurred $0.7 million of store opening costs related to the store we opened in the first quarter of fiscal 2013. During the thirteen weeks ended July 3, 2011 we incurred $3.3 million of store opening costs related to the two stores we opened during fiscal 2012 and during the thirteen weeks ended July 1, 2012 we incurred $5.0 million and $1.4 million of store opening costs related to the store we opened in that period and the two stores opening after that date, one of which opened in August 2012 and the other we expect to open in November 2012, respectively.

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(4)
In fiscal 2010, we incurred a loss on early extinguishment of debt in connection with the refinancing of our then existing first and second lien credit agreements. In fiscal 2011, we incurred a loss on early extinguishment of debt in connection with the refinancing of our then existing credit agreement with our current senior credit facility.

(5)
Common stockholders do not share in net income unless earnings exceed the unpaid dividends on our preferred stock. Accordingly, prior to this offering, there were no earnings available for common stockholders because in fiscal 2010, fiscal 2011, fiscal 2012 and the thirteen weeks ended July 3, 2011 and July 1, 2012 we reported a net loss and in fiscal 2009 unpaid dividends exceeded our net income. During any period in which we had a net loss, the loss was attributed only to the common stockholders. Pro forma net income (loss) per share and the pro forma weighted average number of shares gives effect to the redemption of a portion of our preferred shares with the proceeds of this offering and the exchange of the remaining shares of preferred stock for [    •    ] shares of our Class B common stock, assuming an initial public offering price of $[    •    ] per share, which is the midpoint of the price range set forth on the cover of this prospectus.

    A reconciliation of the denominator used in the calculation of pro forma basic and diluted net income (loss) per common share is as follows:

 
  Fiscal Year Ended   Thirteen Weeks Ended  
 
  March 29,
2009
  March 28,
2010
  April 3,
2011
  April 1,
2012
  July 3,
2011
  July 1,
2012
 

Weighted average number of common shares outstanding, basic and diluted

                                     

Issuance of shares in the Exchange

                                     

Weighted average number of common shares outstanding, pro forma basic and diluted

                                     

Our Class A common stock and Class B common stock will share equally on a per share basis in our net income or net loss.

(6)
We present Adjusted EBITDA, a non-GAAP measure, in this prospectus to provide investors with a supplemental measure of our operating performance. We believe that Adjusted EBITDA is a useful performance measure and is used by us to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than GAAP measures can provide alone. Our board of directors and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for employees, including our senior executives. In addition, the financial covenants in our senior credit facility are based on Adjusted EBITDA, subject to dollar limitations on certain adjustments.

    We define Adjusted EBITDA as earnings before interest expense, income taxes, depreciation and amortization expense, amortization of deferred financing costs, store opening costs, loss on early extinguishment of debt, non-recurring expenses and management fees. Omitting interest, taxes and the other items provides a financial measure that facilitates comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness and tax structures that other companies have are different from ours, we omit these amounts to facilitate investors' ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of owned property, and because in our experience, whether a store is new or one that is fully or mostly depreciated does not necessarily correlate to the contribution that such store makes to operating

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    performance. We will not be paying management fees following the consummation of this offering. We also believe that investors, analysts and other interested parties view our ability to generate Adjusted EBITDA as an important measure of our operating performance and that of other companies in our industry. Adjusted EBITDA should not be considered as an alternative to net income for the periods indicated as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

    The use of Adjusted EBITDA has limitations as an analytical tool and you should not consider this performance measure in isolation from, or as an alternative to, GAAP measures such as net income (loss). Adjusted EBITDA is not a measure of liquidity under GAAP or otherwise, and is not an alternative to cash flow from continuing operating activities. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or by unusual or non-recurring items. The limitations of Adjusted EBITDA include: (i) it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) it does not reflect changes in, or cash requirements for, our working capital needs; (iii) it does not reflect income tax payments we may be required to make; (iv) it does not reflect the cash requirements necessary to service interest or principal payments associated with indebtedness; and (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

    To properly and prudently evaluate our business, we encourage you to review our consolidated financial statements included elsewhere in this prospectus and the reconciliation to Adjusted EBITDA from net income (loss), the most directly comparable financial measure presented in accordance with GAAP, set forth in the table below. All of the items included in the reconciliation from net income to Adjusted EBITDA are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items that management does not consider in assessing our on-going operating performance, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact may not reflect on-going operating performance.

 
  Fiscal Year Ended   Thirteen Weeks Ended  
 
  March 29,
2009
  March 28,
2010
  April 3,
2011
  April 1,
2012
  July 3,
2011
  July 1,
2012
 
 
  (dollars in thousands)
 

Net income (loss)

  $ 331   $ (7,095 ) $ (18,588 ) $ (11,949 ) $ (3,246 ) $ (3,881 )

Interest expense, net(a)

    10,279     13,787     19,111     16,918     4,174     4,584  

Depreciation and amortization expense

    7,175     10,233     14,588     19,202     4,213     4,495  

Income tax benefit

    (851 )   (4,426 )   (14,860 )   (8,304 )   (2,249 )   (2,695 )

Store opening costs(b)

    3,066     3,949     10,006     12,688     3,263     6,478  

Loss on early extinguishment of debt(c)

        2,837     13,931              

Non-recurring items(d)

    1,285     3,378     3,541     4,573     263     1,609  

Management fees(e)

    500     1,211     1,580     2,647     502     752  
                           

Adjusted EBITDA

  $ 21,785   $ 23,874   $ 29,309   $ 35,775   $ 6,920   $ 11,342  
                           

(a)
Includes amortization of deferred financing costs.

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(b)
See note 3 above.

(c)
See note 4 above.

(d)
Consists principally of recruiting costs relating to the strengthening of our management team, severance costs associated with the termination of employment of certain executives and, in fiscal 2011 and fiscal 2012, bringing our systems and procedures into compliance with the Sarbanes-Oxley Act.

(e)
Represents management fees paid to an affiliate of Sterling Investment Partners pursuant to an agreement that will terminate upon the consummation of this offering in exchange for a payment of $[    •    ].
(7)
We calculate gross margin by subtracting cost of sales and occupancy costs from net sales and dividing by our net sales for each of the applicable periods.

(8)
We calculated Adjusted EBITDA margin by dividing our Adjusted EBITDA by our net sales for each of the applicable periods. We present Adjusted EBITDA margin because it is used by management as a performance measure of Adjusted EBITDA generated from net sales. See note 6 above for further information regarding how we calculate Adjusted EBITDA, which is a non-GAAP measure.

(9)
The food stores and adjacent Fairway Wines & Spirits locations in Pelham Manor and Stamford, respectively, are considered as one store location in the number of stores and square footage. This table does not include the food store opened in Westbury, New York in August 2012.

(10)
For the thirteen week periods, represents the percentage change since the end of the comparable period in the prior fiscal year.

(11)
Excludes the square footage of the kitchen, bakery, meat department, produce coolers and storage in our stores.

(12)
The amount for fiscal 2011 has been decreased (by subtracting one week of average weekly net sales) to reflect a 52-week year so as to be comparable to fiscal 2009, 2010 and 2012. Stores not open for the entire fiscal period have been excluded. Does not include net sales from our Fairway Wines & Spirits locations.

(13)
We calculated average net sales per store per week by dividing net sales by the number of stores open during the entire fiscal period and then dividing by the number of weeks in the fiscal period. Does not include net sales from our Fairway Wines & Spirits locations.

(14)
Represents the percentage change in our same-store sales as compared to the prior comparable period. Our practice is to include sales from a store in same-store sales beginning on the first day of the fourteenth full month following the store's opening. This practice may differ from the methods that other food retailers use to calculate comparable or "same-store" sales. As a result, data in this prospectus regarding our same-store sales may not be comparable to similar data made available by other food retailers. Comparable same store sales for fiscal 2011 has been adjusted (by subtracting one week of average weekly net sales) to reflect a 52-week year so as to be comparable to fiscal 2009, 2010 and 2012. Does not include net sales from our Fairway Wines & Spirits locations.

(15)
Net of (i) unamortized original issue disount of $1.5 million, $4.2 million, $2.7 million, $1.9 million and $1.8 million at March 29, 2009, March 28, 2010, April 3, 2011, April 1, 2012 and July 1, 2012, respectively, and (ii) accrued pay-in-kind interest of $0, $0, $443,617, $130,595 and $167,161 at March 29, 2009, March 28, 2010, April 3, 2011, April 1, 2012 and July 1, 2012, respectively.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis in conjunction with the information set forth under "Selected Historical Consolidated Financial and Other Data" and our consolidated financial statements and the notes to those statements included elsewhere in this prospectus. The statements in this discussion regarding our expectations of future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under "Risk Factors" and "Special Note Regarding Forward-Looking Statements." Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

        Fairway Market is a high-growth food retailer offering customers a differentiated one-stop shopping experience "Like No Other Market". Since beginning as a small neighborhood market in the 1930s, Fairway has established itself as a leading food retailing destination in the Greater New York City metropolitan area, an approximately $30 billion food retail market that is the largest in the United States. Our stores emphasize an extensive selection of fresh, natural and organic products, prepared foods and hard-to-find specialty and gourmet offerings, along with a full assortment of conventional groceries. Our prices typically are lower than natural / specialty stores and competitive with conventional supermarkets. We believe that the combination of our broad product selection, in-store experience and value pricing creates a premier food shopping experience that appeals to a broad demographic.

        We operate 11 locations in New York, New Jersey and Connecticut, three of which include Fairway Wines & Spirits stores. Three of our food stores, which we refer to as "urban stores," are located in Manhattan, and the remainder, which we refer to as "suburban stores," are located in New York (outside of Manhattan), New Jersey and Connecticut.

        We believe our stores are among the most productive in the industry in net sales per store and net sales per square foot as a result of our distinctive merchandising strategies, value positioning and efficient operating structure. Through our focused efforts on expanding our store base, enhancing our customers' shopping experience and improving the value proposition we offer our customers, we have increased our net sales from $401.2 million in fiscal 2010 to $554.9 million in fiscal 2012, or 38.3%, and our Adjusted EBITDA from $23.9 million in fiscal 2010 to $35.8 million in fiscal 2012, or 49.8%, while significantly investing in corporate infrastructure to support our growth, including new store expansion. We increased our net sales from $122.5 million in the thirteen weeks ended July 3, 2011 to $154.7 million in the thirteen weeks ended July 1, 2012, or 26.3%, and our Adjusted EBITDA from $6.9 million in the thirteen weeks ended July 3, 2011 to $11.3 million in the thirteen weeks ended July 1, 2012, or 63.9%, due principally to new store openings and leveraging our infrastructure. For a discussion of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss, see note 5 to the tables included in "Selected Historical Consolidated Financial and Other Data." While our net sales and Adjusted EBITDA have grown significantly over the last three fiscal years, our comparable store sales have been impacted by sales transfer from our existing stores to our newly opened stores that are in closer proximity to some of our customers and by our price optimization initiative that we launched across our store network late in fiscal 2011. Our price optimization initiative has resulted in an increase in our gross margins.

        Since Sterling Investment Partners acquired Fairway in January 2007, we have made significant additions to our company's personnel, including experienced industry executives and the next generation management and merchandising teams to support our long-term growth objectives. We have upgraded our systems and enhanced our new store development and training processes. We have also developed a robust, proprietary daily reporting portal that enables us to effectively manage our growing

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number of new stores and have implemented initiatives to reduce shrink and improve labor productivity throughout our operations. We believe we can leverage these investments to improve our operating margins as we grow our store base. Since March 2009, we have opened seven food stores, three of which include Fairway Wines & Spirits locations.

Outlook

        We intend to continue our strong growth by expanding our store base in our existing and new markets, capitalizing on consumer trends and improving our operating margins. We opened an additional food store and integrated Fairway Wines & Spirits location in Woodland Park, New Jersey in June 2012 and an additional food store in Westbury, New York in August 2012, and we expect to open an additional food store in Manhattan in November 2012. For the next several years, we intend to grow our store base in the Greater New York City metropolitan area at a rate of three to four stores annually, primarily in suburban locations. Over time, we also plan to expand Fairway's presence into new, high-density metropolitan markets. Based on demographic research conducted for us by the Buxton Company, a customer analytics research firm, we believe, based on these demographics, we have the opportunity to more than triple the number of stores in our existing marketing region of the Greater New York City metropolitan area, that the Northeast market (from New England to the District of Columbia) can support up to 90 stores and the U.S. market can support more than 300 additional stores (including stores in the Northeast) operating under our current format.

        We believe that we are well positioned to capitalize on evolving consumer preferences and other key trends currently shaping the food retail industry. These trends include an increasing consumer focus on the shopping experience and on healthy eating choices and fresh, quality offerings, including locally sourced products, as well as growing interest in high-quality, value-oriented private label product offerings.

        We intend to improve our operating margins through scale efficiencies, improved systems, continued cost discipline and enhancements to our merchandise offerings. We expect store growth will also permit us to benefit from economies of scale in sourcing products and will enable us to leverage our existing infrastructure.

Factors Affecting Our Operating Results

        Various factors affect our operating results during each period, including:

    Store Openings

        We expect the new stores we open to be the primary driver of our sales, operating profit and market share gains. Our results of operations have been and will continue to be materially affected by the timing and number of new store openings and the amount of new store opening costs. For example, we typically incur higher than normal employee costs at the time of a new store opening associated with set-up and other opening costs. Operating margins are also affected by promotional discounts and other marketing costs and strategies associated with new store openings, as well as higher shrink, primarily due to overstocking, and costs related to hiring and training new employees. Additionally, promotional activities may result in higher than normal net sales in the first several weeks following a new store opening. A new store builds its sales volume and its customer base over time and, as a result, generally has lower margins and higher operating expenses, as a percentage of sales, than our more mature stores. A new store can take more than a year to achieve a level of operating performance comparable to our similarly existing stores. Stores that we have opened in higher density urban markets typically have generated higher sales volumes and margins than stores in suburban areas. We anticipate that a majority of stores that we will open in the near term will be in suburban areas due to the relative availability of attractive new store sites.

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        We believe our differentiated format and destination one-stop shopping appeal attracts customers from as far as 25 miles away. As we open new stores in closer proximity to our customers who currently travel longer distances to shop at our stores, we expect some of these customers to take advantage of the convenience of our new locations. As a result, we have experienced in the past, and expect to experience in the future, some sales volume transfer from our existing stores to our new stores as some of our existing customers switch to these new, closer locations. Consequently, while we expect our new stores will impact sales at our existing stores in close proximity, we believe that by making shopping at our stores for those customers who travel longer distances more convenient, our overall sales to these customers will increase as they increase the frequency and amount of purchases from our stores.

    General Economic Conditions and Changes in Consumer Behavior

        The overall economic environment in the Greater New York City metropolitan area and related changes in consumer behavior have a significant impact on our business. In general, positive conditions in the broader economy promote customer spending in our stores, while economic weakness results in a reduction in customer spending. Macroeconomic factors that can affect customer spending patterns, and thereby our results of operations, include employment rates, business conditions, changes in the housing market, the availability of consumer credit, interest rates, tax rates and fuel and energy costs.

        Although continuing economic weakness has decreased overall consumer spending, we believe, based on information from the Food Marketing Institute, that many consumers are spending less of their overall food budget on meals away from home and more at food retailers. As a result, we believe that the impact of the current economic slowdown on our recent operating results has at least been partially mitigated by increased consumer preferences for meals at home.

    Inflation and Deflation Trends

        Inflation and deflation can impact our financial performance. During inflationary periods, our financial results can be positively impacted in the short term as we sell lower-priced inventory in a higher price environment. Over the longer term, the impact of inflation is largely dependent on our ability to pass through inventory price increases to our customers, which is subject to competitive market conditions. In recent inflationary periods, we have generally been able to pass through most cost increases. In fiscal 2010, the food retail sector began experiencing deflation, as input costs declined and price competition among retailers intensified, pressuring sales across the industry. While food deflation moderated in fiscal 2011, we began to experience inflation starting in early fiscal 2012, particularly in some commodity driven categories, although we were generally able to pass through the effect of these higher prices. Food inflation moderated in early fiscal 2013, although inflation may begin to increase again due to a number of factors such as the current drought in the midwest United States.

    Infrastructure Investment

        Our historical operating results reflect the impact of our ongoing investments in infrastructure to support our growth. Since Sterling Investment Partners acquired Fairway in January 2007, we have made significant investments in management, information technology systems, infrastructure, compliance and marketing. These investments include significant additions to our company's personnel, including experienced industry executives and the next generation management and merchandising teams to support our long-term growth objectives.

    Pricing Strategy

        Our strategy is to price our broad selection of fresh, natural and organic foods, hard-to-find specialty and gourmet items and prepared foods at prices typically lower than those of natural / specialty stores. We price our full assortment of conventional groceries at prices competitive with those

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of conventional supermarkets. Beginning late in fiscal 2011, we launched a comprehensive price optimization initiative across our store network to refine the pricing and balance of our promotional activities across our mix of higher-margin perishable items and everyday value-oriented traditional grocery items. Our price optimization initiative involves determining prices that will improve our operating margins based upon our analysis of how demand varies at different price levels, as well as our costs and inventory levels. This initiative has resulted in an increase in our gross margins.

    Productivity Initiatives

        In addition to our price optimization initiative, we have undertaken a number of other initiatives to improve our gross margin and operating costs. We are focused on a number of initiatives to control and reduce product shrink (e.g., spoiled, damaged, stolen or out-of-date inventory). We have also developed a robust, proprietary daily reporting portal that enables us to improve store labor productivity and effectively manage our growing number of new stores.

    Developments in Competitive Landscape

        The food retail industry as a whole, particularly in the Greater New York City metropolitan area, is highly competitive. Because we offer a full assortment of fresh, natural and organic products, prepared foods and hard-to-find specialty and gourmet offerings, along with a full assortment of conventional groceries, we compete with various types of retailers, including alternative food retailers such as natural foods stores, smaller specialty stores and farmers' markets, conventional supermarkets, supercenters and membership warehouse clubs. Our principal competitors include alternative food retailers such as Whole Foods and Trader Joe's, traditional supermarkets such as Stop & Shop, ShopRite, Food Emporium and A&P, retailers with "big box" formats such as Target and Wal-Mart and warehouse clubs such as Costco and BJ's Wholesale Club. These businesses compete with us for customers, products and locations. In addition, some are expanding aggressively in marketing a range of natural and organic foods, prepared foods and quality specialty grocery items. Some of these potential competitors have more experience operating multiple store locations or have greater financial or marketing resources than we do and are able to devote greater resources to sourcing, promoting and selling their products. Due to the competitive environment in which we operate, our operating results may be negatively impacted through a loss of sales, reduction in margin from competitive price changes, and/or greater operating costs such as marketing. In addition, other established food retailers could enter our markets, increasing competition for market share.

    Changes in Interest Expense and Loss on Debt Extinguishment

        Our interest expense in any particular period is impacted by our overall level of indebtedness during that period and changes in the interest rates payable on such indebtedness. In connection with Sterling Investment Partners' acquisition of Fairway in 2007, we entered into first and second lien credit facilities providing us with $81 million of term debt and a $6 million revolving credit facility, and issued $22 million aggregate principal amount of subordinated debt to the sellers. In December 2009, we refinanced our existing first and second lien credit facilities with a new credit facility providing us with $105 million of term debt (which we subsequently increased to $115 million in November 2010) and a $9 million revolving credit facility, and in connection therewith we incurred a loss on early extinguishment of debt of $2.8 million in fiscal 2010. In March 2011, we refinanced our $124 million credit facility with a new senior credit facility, providing us with $175 million of term debt (which we subsequently increased to $200 million in December 2011) and a revolving credit facility of $25 million (which we subsequently increased to $35 million in July 2012), and in connection therewith we incurred a loss on early extinguishment of debt of $13.9 million. In fiscal 2012, we used a portion of the proceeds from the borrowing under our senior credit facility to repay $22.0 million of subordinated debt. In May 2011, we issued $7.3 million of subordinated debt. In August 2012, we refinanced our $235 million credit facility with our current senior credit facility, providing us with $260 million of term

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debt and a revolving credit facility of $40 million, and in connection therewith we incurred a loss on early extinguishment of debt, which we expect will be approximately $13.1 million.

How We Assess the Performance of Our Business

        In assessing performance, we consider a variety of performance and financial measures, principally growth in net sales, gross profit and Adjusted EBITDA. The key measures that we use to evaluate the performance of our business are set forth below:

    Net Sales

        We evaluate sales because it helps us measure the impact of economic trends and inflation or deflation, the effectiveness of our merchandising, marketing and promotional activities, the impact of new store openings and the effect of competition over a given period. Our net sales comprise gross sales net of coupons and discounts. We do not record sales taxes as a component of retail revenues as we consider ourselves a pass-through conduit for collecting and remitting sales taxes.

        We do not consider same store sales, which controls for the effects of new store openings, to be as meaningful a measure for us as it may be for other retailers because as a destination food retailer in a concentrated market area we have in the past experienced, and in the future expect to experience, sales transfer from our existing stores to our newly opened stores that are in closer proximity to some of our customers. Our practice is to include sales from a store in same-store sales beginning on the first day of the fourteenth full month following the store's opening. This practice may differ from the methods that our competitors use to calculate same-store or "comparable" sales. As a result, data in this prospectus regarding our same-store sales may not be comparable to similar data made available by our competitors.

        Various factors may affect our same-store sales, including:

    our opening of new stores in the vicinity of our existing stores;

    our price optimization initiative;

    our competition, including competitor store openings or closings near our stores;

    the number and dollar amount of customer transactions in our stores;

    overall economic trends and conditions in our markets;

    consumer preferences, buying trends and spending levels;

    the pricing of our products, including the effects of inflation or deflation and promotions;

    our ability to provide product offerings that generate new and repeat visits to our stores;

    the level of customer service that we provide in our stores;

    our in-store merchandising-related activities; and

    our ability to source products efficiently.

As we continue to pursue our growth strategy, we expect that a significant percentage of our net sales will continue to come from new stores not included in comparable store sales.

        The food retail industry and our sales are affected by general economic conditions and seasonality, as well as the other factors discussed below, that affect store sales performance. Consumer purchases of high-quality perishables and specialty food products are particularly sensitive to a number of factors that influence the levels of consumer spending, including economic conditions, the level of disposable consumer income, consumer debt, interest rates and consumer confidence. In addition, our business is seasonal and, as a result, our average weekly sales fluctuate during the year and are usually highest in

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our third fiscal quarter, from October through December, when customers make holiday purchases, and typically lower during the summer months in our second fiscal quarter.

        Although adverse economic conditions affected our sales beginning in fiscal 2009 and continuing in fiscal 2010 and fiscal 2011 due to decreased levels of consumer spending, disposable income and confidence, this adverse effect was more than offset in fiscal 2010 and fiscal 2011 by growth in sales attributable to the new store we opened in fiscal 2009 and the two stores and adjacent Fairway Wines & Spirits locations we opened in fiscal 2011. In addition, growth in sales attributable to the new stores we opened in fiscal 2012 contributed significantly to improved net sales.

    Gross Profit

        We use gross profit to measure the effectiveness of our pricing and procurement strategies as well as initiatives to increase sales of higher margin items and to reduce shrink. We calculate gross profit as net sales less cost of sales and occupancy costs. Gross margin measures gross profit as a percentage of our net sales. Cost of sales includes the cost of merchandise inventory sold during the year (net of discounts and allowances), distribution costs, food preparation costs (primarily labor) and shipping and handling costs. Occupancy costs include store rental costs and property taxes. The components of our cost of sales and occupancy costs may not be identical to those of our competitors. As a result, data in this prospectus regarding our gross profit and gross margin may not be comparable to similar data made available by our competitors.

        Changes in the mix of products sold may impact our gross margin. Unlike natural / specialty stores, we also carry a full assortment of conventional groceries, which generally have lower margins than fresh, natural and organic foods, prepared foods and specialty and gourmet items. We expect to enhance our gross margins through:

    economies of scale resulting from expanding the store base;

    our price optimization initiative;

    productivity gains through process and program improvements;

    reduced shrinkage as a percentage of net sales; and

    leveraging our purchasing power and that of our suppliers to obtain volume discounts from vendors.

        Stores that we operate in higher density urban markets typically have generated higher sales volumes and margins than stores that we operate in suburban areas. We anticipate that a majority of stores that we will open in the near term will be in suburban areas due to the relative availability of attractive new store sites. As the percentage of our sales volumes provided by our suburban stores increases, our overall gross margins may decline.

    Direct Store Expenses

        Direct store expenses consist of store-level expenses such as salaries and benefits for our store work force, supplies, store depreciation and store-specific marketing costs. Store-level labor costs are generally the largest component of our direct store expenses. The components of our direct store expenses may not be identical to those of our competitors. As a result, data in this prospectus regarding our direct store expenses may not be comparable to similar data made available by our competitors.

    General and Administrative Expenses

        General and administrative expenses consist primarily of personnel costs that are not store specific, corporate sales and marketing expenses, depreciation and amortization expense as well as other expenses associated with our corporate headquarters, management expenses and expenses for

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accounting, information systems, legal, business development, human resources, purchasing and other administrative departments. Since Sterling Investment Partners acquired Fairway in January 2007, we have made significant investments in management, information technology systems, infrastructure, compliance and marketing to support our growth strategy. Our general and administrative expenses include management fees paid to Sterling Investment Partners, which we will cease paying upon consummation of the offering being made hereby. See "Certain Relationships and Related Party Transactions—Management Agreement with Sterling Advisers."

        The components of our general and administrative expenses may not be identical to those of our competitors. As a result, data in this prospectus regarding our general and administrative expenses may not be comparable to similar data made available by our competitors. We expect that our general and administrative expenses will increase in future periods due to additional legal, accounting, insurance and other expenses we expect to incur as a result of being a public company.

    Store Opening Costs

        Store opening costs include rent expense incurred during construction of new stores and costs related to new location openings, including costs associated with hiring and training personnel, supplies, the costs associated with our dedicated store opening team and other miscellaneous costs. Rent expense is recognized upon receiving possession of a store site, which generally ranges from three to six months before the opening of a store, although in some situations, the possession period can exceed twelve months. Store opening costs are expensed as incurred.

    Income from Operations

        Income from operations consists of gross profit minus direct store expenses, general and administrative expenses and store opening costs. Income from operations will vary from period to period based on a number of factors, including the number of stores open and the number of stores in the process of being opened in each period.

    Adjusted EBITDA

        We believe that Adjusted EBITDA is a useful performance measure and we use it to facilitate a comparison of our operating performance on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than GAAP measures alone can provide. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for employees, including our senior executives. In addition, the financial covenants in our senior credit facility are based on Adjusted EBITDA, subject to dollar limitations on certain adjustments. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

        We define Adjusted EBITDA as earnings before interest expense, income taxes, depreciation and amortization expense, amortization of deferred financing costs, store opening costs, loss on early extinguishment of debt, non-recurring expenses and management fees. All of the omitted items are either (i) non-cash items or (ii) items that we do not consider in assessing our on-going operating performance. Because it omits non-cash items, we believe that Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect our operating performance. Because it omits the other items, we believe Adjusted EBITDA is also more reflective of our on-going operating performance.

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Basis of Presentation

        Our fiscal year is the 52- or 53-week period ending on the Sunday closest to March 31. Our last three completed fiscal years ended on March 28, 2010, April 3, 2011 and April 1, 2012. For ease of reference, we identify our fiscal years in this prospectus by reference to the calendar year in which the fiscal year ends. For example, "fiscal 2012" refers to our fiscal year ended April 1, 2012. Fiscal 2010 and fiscal 2012 consist of 52 weeks and fiscal 2011 consists of 53 weeks. The differing length of certain fiscal years may affect the comparability of certain data.

Results of Operations

        The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as a percentage of net sales and have been derived from our consolidated financial statements.

 
  Fiscal Year Ended   Thirteen Weeks Ended  
 
  March 28,
2010
  April 3,
2011
  April 1,
2012
  July 3,
2011
  July 1,
2012
 
 
   
   
   
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

Net sales

  $ 401,167   $ 485,712   $ 554,858   $ 122,484   $ 154,683  

Cost of sales and occupancy costs(1)

    271,599     326,207     368,728     81,838     103,996  
                       

Gross profit

    129,568     159,505     186,130     40,646     50,687  

Direct store expenses

    85,840     109,867     132,446     29,356     34,484  

General and administrative expenses

    34,676     40,038     44,331     9,348     11,717  

Store opening costs

    3,949     10,006     12,688     3,263     6,478  
                       

Income (loss) from operations

    5,103     (406 )   (3,335 )   (1,321 )   (1,992 )

Interest expense, net

    13,787     19,111     16,918     4,174     4,584  

Loss on early extinguishment of debt

    2,837     13,931              
                       

Loss before income taxes

    (11,521 )   (33,448 )   (20,253 )   (5,495 )   (6,576 )

Income tax (benefit)

    (4,426 )   (14,860 )   (8,304 )   (2,249 )   (2,695 )
                       

Net loss

  $ (7,095 ) $ (18,588 ) $ (11,949 ) $ (3,246 ) $ (3,881 )
                       

Net sales

   
100.0

%
 
100.0

%
 
100.0

%
 
100.0

%
 
100.0

%

Cost of sales and occupancy costs(1)

    67.7     67.2     66.5     66.8     67.2  
                       

Gross profit

    32.3     32.8     33.5     33.2     32.8  

Direct store expenses

    21.4     22.6     23.9     24.0     22.3  

General and administrative expenses

    8.6     8.2     8.0     7.6     7.6  

Store opening costs

    1.0     2.1     2.3     2.7     4.2  
                       

Income (loss) from operations

    1.3     (0.1 )   (0.6 )   (1.1 )   (1.3 )

Interest expense, net

    3.4     3.9     3.0     3.4     3.0  

Loss on early extinguishment of debt

    0.7     2.9              
                       

Loss before income taxes

    (2.9 )   (6.9 )   (3.7 )   (4.5 )   (4.3 )

Income tax (benefit)

    (1.1 )   (3.1 )   (1.5 )   (1.8 )   (1.7 )
                       

Net loss

    (1.8 )%   (3.8 )%   (2.2 )%   (2.7 )%   (2.5 )%
                       

Figures may not sum due to rounding

                               

(1)
Excludes depreciation and amortization

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Thirteen weeks ended July 1, 2012 compared to thirteen weeks ended July 3, 2011

    Net Sales

        We had net sales of $154.7 million in the thirteen weeks ended July 1, 2012, an increase of $32.2 million, or 26.3%, from $122.5 million in the thirteen weeks ended July 3, 2011. The increase was attributable to the $40.2 million of net sales from the three new stores (including one integrated Fairway Wines & Spirits location) that we opened subsequent to July 3, 2011, partially offset by an $8.3 million decrease in sales at stores open during both periods. One of the new stores was only open for 26 days in the thirteen weeks ended July 1, 2012.

        Comparable store sales decreased 7.0% in the thirteen weeks ended July 1, 2012 compared to the thirteen weeks ended July 3, 2011, primarily as a result of sales transferred to our newly opened stores and the implementation of our price optimization initiative to refine the pricing and balance of our promotional activities across our mix of higher-margin perishable items and everyday conventional grocery items. Customer transactions in our comparable stores decreased by 4.5% and average transaction size at our comparable stores decreased by 2.6%.

    Gross Profit

        Gross profit was $50.7 million for the thirteen weeks ended July 1, 2012, an increase of $10.0 million, or 24.7%, from $40.7 million for the thirteen weeks ended July 3, 2011. Gross margin was 32.8% for the thirteen weeks ended July 1, 2012, compared to 33.2% for the thirteen weeks ended July 3, 2011. The decrease in gross margin was primarily attributable to higher occupancy costs in new stores and rent increases in three of our older stores, partially offset by our price optimization initiative, which involved increases and decreases to prices on certain items, lower prices from certain vendors and the continuing benefit from our shrink management initiative launched in fiscal 2009. We calculate gross profit as net sales less cost of sales and occupancy costs, which includes the cost of merchandise inventory sold during the year (net of discounts and allowances), distribution costs, food preparation costs (primarily labor), shipping and handling costs and store occupancy costs.

    Direct Store Expenses

        Direct store expenses were $34.5 million in the thirteen weeks ended July 1, 2012, an increase of $5.1 million, or 17.5%, from $29.4 million in the thirteen weeks ended July 3, 2011. The increase in direct store expenses was primarily attributable to three new stores (including one integrated Fairway Wines & Spirits location) that we opened subsequent to July 3, 2011. With more stores in operation during the thirteen weeks ended July 1, 2012, our store labor expenses increased $2.9 million and our other store operating expenses increased $1.5 million compared to the thirteen weeks ended July 3, 2011. The portion of our depreciation expense included in direct store expenses, which includes amortization of prepaid rent, increased $0.7 million, or 23.9%, to $3.5 million for the thirteen weeks ended July 1, 2012, compared to direct store depreciation expense for the thirteen weeks ended July 3, 2011 of $2.8 million. The increase in direct store depreciation expense for the thirteen weeks ended July 1, 2012 compared with the thirteen weeks ended July 3, 2011 is directly attributable to the increase in the number of stores.

        Direct store expenses as a percentage of net sales decreased to 22.3% in the thirteen weeks ended July 1, 2012 from 24.0% in the thirteen weeks ended July 3, 2011, due to the success of our continued cost controls, including labor management.

    General and Administrative Expenses

        General and administrative expenses were $11.7 million for the thirteen weeks ended July 1, 2012, an increase of $2.4 million, or 25.3%, from $9.3 million in the thirteen weeks ended July 3, 2011. The

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increase in our general and administrative expenses was primarily attributable to our continued investments in management, information technology systems, infrastructure, compliance and marketing to enable us to pursue our growth plans. The portion of our depreciation and amortization expense included in general and administrative expenses decreased by $0.4 million, or 27.9%, to $1.0 million for the thirteen weeks ended July 1, 2012 from $1.4 million in the thirteen weeks ended July 3, 2011. Our general and administrative expenses include management fees of $752,000 and $502,000 paid to an affiliate of Sterling Investment Partners in the thirteen weeks ended July 1, 2012 and July 3, 2011, respectively. We will cease paying these management fees upon consummation of the offering being made hereby. See "Certain Relationships and Related Party Transactions—Management Agreement with Sterling Advisers."

        As a percentage of net sales, general and administrative expenses were 7.6% for each of the thirteen week periods ended July 1, 2012 and July 3, 2011.

    Store Opening Costs

        Store opening costs were $6.5 million in the thirteen weeks ended July 1, 2012, an increase of $3.2 million from $3.3 million in the thirteen weeks ended July 3, 2011. Store opening costs for the thirteen weeks ended July 1, 2012 include approximately $5.0 million related to the Woodland Park, New Jersey store and integrated Fairway Wines & Spirits location we opened in the period, with the remainder for our Westbury, Long Island store that opened in August 2012. Store opening costs for the thirteen weeks ended July 3, 2011 primarily relate to the store we opened on the Upper East Side of Manhattan in July 2011. Approximately $2.8 million and $567,000 of store opening costs in the thirteen weeks ended July 1, 2012 and July 3, 2011, respectively, did not require the expenditure of cash in the period, primarily due to deferred rent and other landlord allowances.

    Income (loss) from Operations

        For the thirteen weeks ended July 1, 2012, our operating loss was $2.0 million, an increase of $0.7 million from $1.3 million for the thirteen weeks ended July 3, 2011. The increase in the loss from operations in the thirteen weeks ended July 1, 2012 over the same period in the prior year was primarily due to increased store opening, direct store and general and administrative expenses, partially offset by increased net sales and gross profit.

    Interest Expense

        Interest expense increased 9.8%, or $0.4 million, to $4.6 million for the thirteen weeks ended July 1, 2012, from $4.2 million for the thirteen weeks ended July 3, 2011, due to higher average borrowings, partially offset by lower interest rates.

    Net Loss

        Our net loss was $3.9 million in the thirteen weeks ended July 1, 2012, an increase of $0.6 million from $3.2 million for the thirteen weeks ended July 3, 2011. The increase in net loss was primarily attributable to increased store opening, direct store, general and administrative and interest expenses, partially offset by increased net sales and gross profit.

Fiscal year ended April 1, 2012 compared to fiscal year ended April 3, 2011

        Fiscal 2012 consists of 52 weeks while fiscal 2011 consists of 53 weeks; accordingly, the differing lengths of the fiscal years may affect the comparability of certain data.

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    Net Sales

        We had net sales of $554.9 million in fiscal 2012, an increase of $69.2 million, or 14.2%, from $485.7 million in fiscal 2011. The increase was attributable to the $103.3 million of net sales from the two stores and adjacent Fairway Wines & Spirits locations that we opened during fiscal 2011 and the two stores that we opened during fiscal 2012. The increase was partially offset by a $34.1 million decrease in sales at stores open during both periods. We estimate that the extra week in fiscal 2011 compared to fiscal 2012 increased our fiscal 2011 net sales by approximately $9.2 million, representing our average weekly net sales in fiscal 2011. If fiscal 2011 had been a 52 week year, we estimate our net sales would have been approximately $476.5 million.

        Comparable store sales decreased 7.0% in fiscal 2012 compared to fiscal 2011, primarily as a result of sales transferred from our existing stores to our newly opened stores and the launch in late fiscal 2011 of our price optimization initiative to refine the pricing and balance of our promotional activities across our mix of higher-margin perishable items and everyday conventional grocery items. Customer transactions in our comparable stores decreased by 8.3% and average transaction size at our comparable stores increased 1.4%. Amounts for fiscal 2011 have been adjusted to reflect a 52-week year.

    Gross Profit

        Gross profit was $186.1 million for fiscal 2012, an increase of $26.6 million, or 16.7%, from $159.5 million for fiscal 2011. Gross margin increased 70 basis points to 33.5% for fiscal 2012 from 32.8% for fiscal 2011. The increase in our gross margin was primarily attributable to our price optimization initiative, which involved increases and decreases to prices on various items, lower prices from certain vendors and the continuing benefit from our shrink management initiative launched in fiscal 2009, partially offset by increased occupancy costs resulting from the two stores and adjacent Fairway Wines & Spirits locations we opened in fiscal 2011 and the two stores we opened in fiscal 2012. We estimate that the extra week in fiscal 2011 compared to fiscal 2012 increased our fiscal 2011 gross profit by approximately $3.0 million, representing our average weekly gross profit in fiscal 2011. If fiscal 2011 had been a 52 week year, we estimate our gross profit would have been approximately $156.5 million. We calculate gross profit as net sales less cost of sales and occupancy costs, which includes the cost of merchandise inventory sold during the year (net of discounts and allowances), distribution costs, food preparation costs (primarily labor), shipping and handling costs and store occupancy costs.

    Direct Store Expenses

        Direct store expenses were $132.4 million in fiscal 2012, an increase of $22.6 million, or 20.6%, from $109.9 million in fiscal 2011. The increase in direct store expenses was primarily attributable to the two new stores we opened in fiscal 2012 and the two stores and adjacent Fairway Wines & Spirits locations opened in fiscal 2011 that were open for a full year in fiscal 2012. With more stores in operation during fiscal 2012, our store labor expenses increased $12.5 million and our other store operating expenses increased $10.1 million compared to fiscal 2011. The portion of our depreciation expense included in direct store expenses, which includes amortization of prepaid rent, increased $3.2 million, or 30.8%, to $13.5 million for fiscal 2012, compared to direct store depreciation expense for fiscal 2011 of $10.3 million. The increase in direct store depreciation expense for fiscal year 2012 compared with fiscal 2011 is directly attributable to the increase in the number of stores. We estimate that the extra week in fiscal 2011 compared to fiscal 2012 increased our fiscal 2011 direct store expenses by approximately $2.1 million, representing our average weekly direct store expenses in fiscal 2011. If fiscal 2011 had been a 52 week year, we estimate our direct store expenses would have been approximately $107.8 million.

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        Direct store expenses as a percentage of net sales increased to 23.9% in fiscal 2012 from 22.6% in fiscal 2011. This increase was primarily attributable to higher expenses as a percentage of net sales at our newly opened stores as we built sales at these stores.

    General and Administrative Expenses

        General and administrative expenses were $44.3 million for fiscal 2012, an increase of $4.3 million, or 10.7%, from $40.0 million in fiscal 2011. The increase in our general and administrative expenses was primarily attributable to our continued investments in management, information technology systems, infrastructure, compliance and marketing to enable us to pursue our growth plans. The portion of our depreciation and amortization expense included in general and administrative expenses increased $1.4 million, or 32.6%, to $5.7 million for fiscal 2012 from $4.3 million in fiscal 2011. Our general and administrative expenses include management fees of $2.6 million and $1.6 million paid to an affiliate of Sterling Investment Partners in fiscal 2012 and fiscal 2011, respectively. We will cease paying these management fees upon consummation of the offering being made hereby. See "Certain Relationships and Related Party Transactions—Management Agreement with Sterling Advisers." Our general and administrative expenses in fiscal 2012 also includes $0.4 million in non-stock compensation expense relating to shares of restricted stock that we issued at below fair market value. We estimate that the extra week in fiscal 2011 compared to fiscal 2012 increased our fiscal 2011 general and administrative expenses by approximately $755,000, representing our average weekly general and administrative expenses in fiscal 2011. If fiscal 2011 had been a 52 week year, we estimate our general and administrative expenses would have been approximately $39.3 million.

        As a percentage of net sales, general and administrative expenses for fiscal 2012 were 8.0%, or 20 basis points lower, than the 8.2% we recorded in fiscal 2011. This improvement was primarily a result of our revenue growth and leveraging of our infrastructure investment made during the last several years.

    Store Opening Costs

        Store opening costs were $12.7 million in fiscal 2012, an increase of $2.7 million from $10.0 million in fiscal 2011. We opened two new stores in fiscal 2012 and two new stores and adjacent Fairway Wines & Spirits locations in fiscal 2011. Store opening costs for fiscal 2011 includes $3.2 million related to the two stores we opened in fiscal 2012, and we incurred $3.9 million of store opening costs related to the stores we opened in fiscal 2011 in fiscal 2010. Approximately $2.0 million of store opening costs in fiscal 2012 are attributable to our decision to delay the opening of our store in Douglaston, New York in order to focus on opening our new store in Manhattan, which opened in July 2011. Approximately $0.7 million of our fiscal 2012 store opening costs relate to the store and integrated Fairway Wines & Spirits location we opened in the first quarter of fiscal 2013. Approximately $3.4 million and $4.2 million of store opening costs in fiscal 2012 and fiscal 2011, respectively, did not require the expenditure of cash in the period, primarily due to deferred rent and other landlord allowances.

    Income (Loss) from Operations

        For fiscal 2012 our operating loss was $3.3 million, an increase of $2.9 million from $0.4 million for fiscal 2011. The increase in operating loss was primarily due to the $22.5 million increase in direct store expenses, $4.3 million increase in general and administrative expenses and $2.7 million increase in store opening costs in fiscal 2012 compared to fiscal 2011, partially offset by the $26.6 million increase in gross profit.

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    Interest Expense

        Interest expense decreased 11.5%, or $2.2 million, to $16.9 million for fiscal 2012, as compared to $19.1 million for fiscal 2011, due to lower interest rates, partially offset by higher average borrowings.

    Loss on Early Extinguishment of Debt

        In fiscal 2011, we refinanced our $124 million credit facility with our $200 million senior credit facility, which we subsequently increased to $225 million in December 2011 and $235 million in July 2012, and in connection therewith we incurred a loss on early extinguishment of debt of $13.9 million. The loss consisted of the write off of unamortized deferred financing fees of $6.1 million and unamortized discount of $2.6 million, as well as the expensing of $5.2 million of placement fees.

    Net Loss

        Our net loss was $11.9 million in fiscal 2012, a decrease of $6.7 million from $18.6 million for fiscal 2011. The decrease in net loss was primarily attributable to an increased gross margin, no loss on early extinguishment of debt and lower interest expense, partially offset by increased direct store and store opening costs.

Fiscal year ended April 3, 2011 compared to the fiscal year ended March 28, 2010

        Fiscal 2011 consists of 53 weeks while fiscal 2010 consists of 52 weeks; accordingly, the differing lengths of the fiscal years may affect the comparability of certain data.

    Net Sales

        We had net sales of $485.7 million in fiscal 2011, an increase of $84.5 million, or 21.1%, from $401.2 million in fiscal 2010. The increase was attributable to the $95.6 million of net sales from the two stores and adjacent Fairway Wines & Spirits locations that we opened during fiscal 2011. The increase was partially offset by an $11.1 million decrease in net sales at stores open during both periods. We estimate that the extra week in fiscal 2011 compared to fiscal 2010 increased our fiscal 2011 net sales by approximately $9.2 million, representing our average weekly net sales in fiscal 2011. If fiscal 2011 had been a 52 week year, we estimate our net sales would have been approximately $476.5 million.

        Comparable store sales decreased 5.0% in fiscal 2011 compared to fiscal 2010, primarily as a result of sales transferred from our existing stores to our newly opened stores. Customer transactions in our comparable stores decreased by 4.8% and average transaction size at our comparable stores decreased by 0.2%. Amounts for fiscal 2011 have been adjusted to reflect a 52-week year.

    Gross Profit

        Gross profit was $159.5 million for fiscal 2011, an increase of $29.9 million, or 23.1%, from $129.6 million for fiscal 2010. Our gross margin increased 50 basis points to 32.8% for fiscal 2011 from 32.3% for fiscal 2010. The increase in our gross margin was primarily attributable to the launch of our price optimization initiative, which involved increases and decreases to prices on various items, lower prices from certain vendors, the discontinuation of certain promotional activities in our suburban stores and reduced inventory shrinkage as a result of the shrink management initiative we launched in fiscal 2009, partially offset by increased occupancy costs resulting from the two stores and adjacent Fairway Wines & Spirits locations we opened in fiscal 2011 and supplies expense. We estimate that the extra week in fiscal 2011 compared to fiscal 2010 increased our fiscal 2011 gross profit by approximately $3.0 million, representing our average weekly gross profit in fiscal 2011. If fiscal 2011 had been a 52 week year, we estimate our gross profit would have been approximately $156.5 million.

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    Direct Store Expenses

        Direct store expenses were $109.9 million in fiscal 2011, an increase of $24.0 million, or 28.0%, from $85.8 million in fiscal 2010. The increase in direct store expenses was primarily attributable to the two new stores and adjacent Fairway Wines & Spirits locations we opened in fiscal 2011. With more stores in operation during fiscal 2011, our store labor expenses increased $11.6 million and our other store operating expenses increased $12.5 million compared to fiscal 2010. The portion of our depreciation expense included in direct store expenses, which includes amortization of prepaid rent, increased $3.3 million, or 47.6%, to $10.3 million for fiscal 2011, compared to direct store depreciation expense for fiscal 2010 of $7.0 million. The increase in direct store depreciation expense for fiscal 2011 compared with fiscal 2010 is directly attributable to the increase in the number of stores. We estimate that the extra week in fiscal 2011 compared to fiscal 2010 increased our fiscal 2011 direct store expenses by approximately $2.1 million, representing our average weekly direct store expenses in fiscal 2011. If fiscal 2011 had been a 52 week year, we estimate our direct store expenses would have been approximately $107.8 million.

        Direct store expenses as a percentage of net sales increased to 22.6% in fiscal 2011 from 21.4% in fiscal 2010. This increase was primarily attributable to higher expenses as a percentage of net sales at our newly opened stores as we built sales at these stores.

    General and Administrative Expenses

        General and administrative expenses were $40.0 million for fiscal 2011, an increase of $5.3 million, or 15.5%, from $34.7 million in fiscal 2010. The increase in our general and administrative expenses was primarily attributable to our continued investments in management, information technology systems, infrastructure, compliance and marketing to enable us to pursue our growth plans. The portion of our depreciation and amortization expense included in general and administrative expenses increased $1.1 million, or 34.4%, to $4.3 million for fiscal 2011, from $3.2 million in fiscal 2010. Our general and administrative expenses include management fees of $1.6 million and $1.2 million paid to an affiliate of Sterling Investment Partners in fiscal 2011 and fiscal 2010, respectively. We will cease paying these management fees upon consummation of the offering being made hereby. See "Certain Relationships and Related Party Transactions—Management Agreement with Sterling Advisers." We estimate that the extra week in fiscal 2011 compared to fiscal 2010 increased our fiscal 2011 general and administrative expenses by approximately $755,000, representing our average weekly general and administrative expenses in fiscal 2011. If fiscal 2011 had been a 52 week year, we estimate our general and administrative expenses would have been approximately $39.3 million.

        As a percentage of net sales, general and administrative expenses for fiscal 2011 were 8.2%, or 40 basis points lower than the 8.6% we recorded in fiscal 2010. This improvement was primarily a result of our revenue growth and leveraging of our infrastructure investment made during the last several years.

    Store Opening Costs

        Store opening costs were $10.0 million in fiscal 2011, an increase of $6.1 million from $3.9 million in fiscal 2010. We opened two new stores and adjacent Fairway Wines & Spirits locations in fiscal 2011. Store opening costs for fiscal 2011 includes $3.2 million related to the two stores we opened in fiscal 2012, and store opening costs for fiscal 2010 includes $3.9 million related to the two stores and adjacent Fairway Wines & Spirits locations we opened in fiscal 2011. Approximately $4.2 million and $0.9 million of store opening costs in fiscal 2011 and fiscal 2010, respectively, did not require the expenditure of cash in the period, primarily due to deferred rent and other landlord allowances.

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    Income (Loss) from Operations

        For fiscal 2011, our operating loss was $0.4 million, a decrease of $5.5 million from operating income of $5.1 million in fiscal 2010. The decrease in operating income was due to the $24.1 million increase in direct store expenses, $5.4 million increase in general and administrative expenses and $6.1 million increase in store opening costs in fiscal 2011 compared to fiscal 2010, partially offset by the $29.9 million increase in gross profit.

    Interest Expense

        Interest expense increased 38.6%, or $5.3 million, to $19.1 million for fiscal 2011, compared to $13.8 million for fiscal 2010, due primarily to increased weighted average borrowings, partially offset by lower interest rates.

    Loss on Early Extinguishment of Debt

        In fiscal 2011, we refinanced our $124 million credit facility with our $200 million senior credit facility, which we subsequently increased to $225 million in December 2011 and to $235 million in July 2012, and in connection therewith we incurred a loss on early extinguishment of debt of $13.9 million. The loss consisted of the write off of unamortized deferred financing fees of $6.1 million and unamortized discount of $2.6 million, as well as the expensing of $5.2 million of placement fees. In fiscal 2010, we refinanced our existing first and second lien credit facilities with a new $114 million credit facility, which we subsequently increased to $124 million in November 2010, and in connection therewith we incurred a loss on early extinguishment of debt of $2.8 million. The loss consisted of the write off of unamortized deferred financing fees and unamortized discount.

    Net Loss

        Our net loss was $18.6 million in fiscal 2011, an increase of $11.5 million from $7.1 million for fiscal 2010. The increase in net loss was primarily due to an $11.1 million increase in loss on early extinguishment of debt, a $6.1 million increase in store opening costs and a $5.3 million increase in interest expense, partially offset by increased sales and gross profit and a $10.4 million increase in income tax benefit.

Quarterly Results of Operations

        The following tables set forth unaudited quarterly consolidated statement of income data for all quarters of fiscal 2011 and fiscal 2012 and the first quarter of fiscal 2013. We have prepared the statement of income data for each of these quarters on the same basis as the audited consolidated financial statements included elsewhere in this prospectus and, in the opinion of our management, each statement of income includes all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods. This information should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of our operating results for any future period. Each fiscal quarter consists of a 13-week period except for

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the fiscal quarter ended April 3, 2011, which consists of 14 weeks; accordingly, the differing lengths of the fiscal quarters may affect the comparability of certain data.

 
  Fiscal 2011 Quarter Ended   Fiscal 2012 Quarter Ended   Fiscal 2013
Quarter Ended
 
 
  June 27,
2010
  September 26,
2010
  December 26,
2010
  April 3,
2011
  July 3,
2011
  October 2,
2011
  January 1,
2012
  April 1,
2012
  July 1,
2012
 
 
  (unaudited)
  (unaudited)
  (unaudited)
 
 
  (dollars in thousands)
 

Statement of income data

                                                       

Net sales

  $ 118,019   $ 111,462   $ 124,145   $ 132,086   $ 122,484   $ 129,914   $ 152,129   $ 150,331   $ 154,683  

Cost of sales and occupancy costs(1)

    79,736     78,452     84,008     84,011     81,838     86,661     101,141     99,088     103,996  
                                       

Gross profit

    38,283     33,010     40,137     48,075     40,646     43,253     50,988     51,243     50,687  

Direct store expenses

    26,721     24,057     27,913     31,176     29,356     32,587     35,715     34,788     34,484  

General and administrative expenses

    8,470     7,695     9,165     14,708     9,348     10,078     11,173     13,732     11,717  

Store opening costs

    2,320     1,816     3,996     1,874     3,263     3,123     4,795     1,507     6,478  
                                       

Income (loss) from operations

    772     (558 )   (937 )   317     (1,321 )   (2,535 )   (695 )   1,216     (1,992 )

Interest expense, net

    4,311     4,557     5,082     5,161     4,174     4,038     4,159     4,547     4,584  

Loss on early extinguishment of debt

                13,931                      
                                       

Loss before income taxes

    (3,539 )   (5,115 )   (6,019 )   (18,775 )   (5,495 )   (6,573 )   (4,854 )   (3,331 )   (6,576 )

Income tax (benefit)

    (1,488 )   (2,150 )   (3,332 )   (7,890 )   (2,249 )   (2,690 )   (2,001 )   (1,364 )   (2,695 )
                                       

Net loss

  $ (2,051 ) $ (2,965 ) $ (2,687 ) $ (10,885 ) $ (3,246 ) $ (3,883 ) $ (2,853 ) $ (1,967 ) $ (3,881 )
                                       

(1)
Excluding depreciation and amortization.

 
  Fiscal 2011 Quarter Ended   Fiscal 2012 Quarter Ended   Fiscal 2013
Quarter Ended
 
 
  June 27,
2010
  September 26,
2010
  December 26,
2010
  April 3,
2011
  July 3,
2011
  October 2,
2011
  January 1,
2012
  April 1,
2012
  July 1,
2012
 
 
  (unaudited)
  (unaudited)
  (unaudited)
 
 
  (as a percentage of net sales)
 

Statement of income data

                                                       

Net sales

    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %

Cost of sales and occupancy costs(1)

    67.6     70.4     67.7     63.6     66.8     66.7     66.5     65.9     67.2  
                                       

Gross profit

    32.4     29.6     32.3     36.4     33.2     33.3     33.5     34.1     32.8  

Direct store expenses

    22.6     21.6     22.5     23.6     24.0     25.1     23.5     23.1     22.3  

General and administrative expenses

    7.2     6.9     7.4     11.1     7.6     7.8     7.3     9.1     7.6  

Store opening costs

    2.0     1.6     3.2     1.4     2.7     2.4     3.2     1.0     4.2  
                                       

Income (loss) from operations

    0.7     (0.5 )   (0.8 )   0.2     (1.1 )   (2.0 )   (0.5 )   0.8     (1.3 )

Interest expense, net

    3.7     4.1     4.1     3.9     3.4     3.1     2.7     3.0     3.0  

Loss on early extinguishment of debt

                10.5                      
                                       

Loss before income taxes

    (3.0 )   (4.6 )   (4.8 )   (14.2 )   (4.5 )   (5.1 )   (3.2 )   (2.2 )   (4.3 )

Income tax (benefit)

    (1.3 )   (1.9 )   (2.7 )   (6.0 )   (1.8 )   (2.1 )   (1.3 )   (0.9 )   (1.7 )
                                       

Net loss

    (1.7 )%   (2.7 )%   (2.2 )%   (8.2 )%   (2.7 )%   (3.0 )%   (1.9 )%   (1.3 )%   (2.5 )%
                                       

(1)
Excluding depreciation and amortization.

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Liquidity and Capital Resources

    Overview

        Our primary sources of liquidity are cash generated from operations and borrowings under our senior credit facility. Our primary uses of cash are purchases of merchandise inventories, operating expenses, capital expenditures, primarily for opening new stores and infrastructure, and debt service. We believe that the cash generated from operations, together with the borrowing availability under our senior credit facility, will be sufficient to meet our normal working capital needs for at least the next twelve months, including investments made, and expenses incurred, in connection with opening new stores. Our ability to continue to fund these items may be affected by general economic, competitive and other factors, many of which are outside of our control. If our future cash flow from operations and other capital resources are insufficient to fund our liquidity needs, we may be forced to reduce or delay our expected new store openings, sell assets, obtain additional debt or equity capital or refinance all or a portion of our debt. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within a few business days of the related sale.

        At July 1, 2012, we had $11.4 million in cash and cash equivalents and $11.2 million in borrowing availability pursuant to our prior senior credit facility. We were in compliance with all debt covenants under our prior senior credit facility as of July 1, 2012. Our current senior credit facility is discussed under "—Senior Credit Facility" below.

        While we believe we have sufficient liquidity and capital resources to meet our current operating requirements and expansion plans, we may elect to pursue additional expansion opportunities within the next year that could require additional debt or equity financing. If we are unable to secure additional financing at favorable terms in order to pursue such additional expansion opportunities, our ability to pursue such opportunities could be materially adversely affected.

        A summary of our operating, investing and financing activities are shown in the following table:

 
  Fiscal Year Ended   Thirteen Weeks Ended  
 
  March 28, 2010   April 3, 2011   April 1, 2012   July 3, 2011   July 1, 2012  
 
  (Amounts in thousands)
 

Net cash (used in) provided by operating activities

  $ (101 ) $ (6,997 ) $ 8,817   $ (4,576 ) $ (1,964 )

Net cash (used in) investing activities

    (21,658 )   (27,797 )   (44,528 )   (11,569 )   (16,338 )

Net cash provided by (used in) financing activities

    28,538     70,266     7,816     (15,250 )   (500 )
                       

Net increase (decrease) in cash and cash equivalents

  $ 6,779   $ 35,472   $ (27,895 ) $ (31,395 ) $ (18,802 )
                       

    Operating Activities

        Net cash (used in) provided by operating activities consists primarily of net income (loss) adjusted for non-cash items, including depreciation, changes in deferred income taxes and loss on early extinguishment of debt, and the effect of working capital changes.

        We used cash in operating activities of $4.6 million and $2.0 million during the thirteen weeks ended July 3, 2011 and July 1, 2012, respectively. The decrease in net cash used in operating activities in the thirteen weeks ended July 1, 2012 compared to the thirteen weeks ended July 3, 2011 was primarily due to the increase in deferred rent and depreciation and amortization and decreased working capital needs, primarily due to an increase in accounts payable partially offset by an increase in accounts receivable, merchandise inventories and prepaid expenses in the thirteen weeks ended July 1, 2012, partially offset by the increase in our net loss.

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        We used cash in operating activities of $0.1 million and $7.0 million during fiscal 2010 and fiscal 2011, respectively, and our operating activities provided cash of $8.8 million in fiscal 2012. The increase in net cash used in operating activities in fiscal 2011 compared to fiscal 2010 was primarily due to the increase in our net loss, and increased working capital needs, primarily due to an increase in accounts receivable, merchandise inventories and prepaid expenses, in fiscal 2011, partially offset by the increase in loss on early extinguishment of debt and deferred income taxes. Net cash was provided by operations in fiscal 2012 compared to net cash used in operations in fiscal 2011 primarily due to decreases in net loss, inventories, prepaid expenses, an increase in depreciation and amortization and reduced working capital needs, primarily due to an increase in accrued expenses and other and a decrease in merchandise inventories, in fiscal 2012, partially offset by a reduction in deferred income taxes and no loss on early extinguishment of debt.

    Investing Activities

        Cash used in investing activities consists primarily of capital expenditures for opening new stores and infrastructure, as well as investments in information technology and merchandising enhancements.

        We made capital expenditures of $16.3 million in the thirteen weeks ended July 1, 2012, of which $8.8 million was in connection with the store and integrated Fairway Wines & Spirits location we opened in the thirteen weeks ended July 1, 2012, $5.1 million was in connection with the store we opened in August 2012 and $940,000 was in connection with the store we expect to open in November 2012 and one of the stores we expect to open in calendar 2013. The remaining approximately $1.5 million of capital expenditures in this period was for merchandising initiatives and equipment upgrades and enhancements to existing stores. We made capital expenditures of $11.6 million in the thirteen weeks ended July 3, 2011, of which $9.5 million was in connection with the two stores we opened in July and November 2011 and approximately $2.1 million was for merchandising initiatives and equipment upgrades and enhancements to existing stores.

        We made capital expenditures of $44.5 million in fiscal 2012, of which $31.7 million was in connection with the two stores we opened in fiscal 2012. $4.1 million was in connection with the store and integrated Fairway Wines & Spirits location we opened in the first quarter of fiscal 2013 and $1.8 million was in connection with stores to be opened in the second half of calendar 2012. The remaining approximately $6.9 million of capital expenditures in fiscal 2012 was for merchandising initiatives and equipment upgrades and enhancements to existing stores. We made capital expenditures of $27.8 million in fiscal 2011, of which $17.3 million was in connection with the two stores and adjacent Fairway Wines & Spirits locations we opened in fiscal 2011 and $4.8 million was in connection with the two stores we opened in fiscal 2012, and approximately $5.7 million was for merchandising initiatives and equipment upgrades and enhancements to existing stores. We made capital expenditures of $21.7 million in fiscal 2010, of which $13.7 million was in connection with the two stores and adjacent Fairway Wines & Spirits locations we opened in fiscal 2011, with the remaining approximately $8.0 million for merchandising initiatives and equipment upgrades and enhancements to existing stores.

        We plan to spend approximately $50 million to $60 million on capital expenditures during the fiscal year ending March 31, 2013, primarily related to the new store and Fairway Wines & Spirits location we opened in June 2012, the new store we opened in August 2012, the planned opening of one additional new store in November 2012 and stores we plan to open in calendar 2013.

    Financing Activities

        Cash flows from financing activities consists principally of borrowings and payments under our senior credit facility, and proceeds from the issuance of capital stock, net of equity issuance costs. We

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currently do not intend to pay cash dividends on our common stock. See "Dividend Policy" for a discussion of our dividend policy.

 
  Fiscal Year Ended   Thirteen Weeks Ended  
 
  March 28,
2010
  April 3,
2011
  April 1,
2012
  July 3,
2011
  July 1,
2012
 
 
  (Amounts in thousands)
 

Proceeds from long-term debt, net of issuance costs

  $ 95,224   $ 173,535   $ 31,688   $ 7,187   $  

Payments on long-term debt

    (76,095 )   (115,738 )   (23,875 )   (22,437 )   (500 )

Proceeds from issuance of preferred and common stock, net of issuance costs

    9,409     12,469     3          
                       

Net cash provided by (used in) financing activities

  $ 28,538   $ 70,266   $ 7,816   $ (15,250 ) $ (500 )
                       

        Net cash provided by financing activities during fiscal 2010, fiscal 2011 and fiscal 2012 was $28.5 million, $70.3 million and $7.8 million, respectively. Net cash used in financing activities during the thirteen weeks ended July 3, 2011 and July 1, 2012 was $15.3 million and $0.5 million, respectively. In the thirteen weeks ended July 3, 2011, we repaid $22.0 million of subordinated debt and issued $7.3 million of subordinated debt.

        In December 2009, we refinanced our existing first and second lien credit facilities with a new $114 million credit facility, which we subsequently increased to $124 million in November 2010. In March 2011, we refinanced our $124 million credit facility with a new $200 million senior credit facility, which we subsequently increased to $225 million in December 2011 and $235 million in July 2012. In fiscal 2012, we used a portion of the proceeds from the borrowing under the 2011 senior credit facility to repay $22.0 million of subordinated debt and issued $7.3 million of subordinated debt. Subsequent to July 1, 2012, we refinanced the 2011 senior credit facility. See "—Senior Credit Facility."

        In October 2009, we issued 9,650 shares of Series A preferred stock and received proceeds of approximately $9.4 million net of issuance costs of approximately $241,000. In October 2010, we issued 12,788 shares of Series A preferred stock and received net proceeds of approximately $12.5 million net of issuance costs of approximately $321,000.

    Senior Credit Facility

        In August 2012, we and our wholly-owned subsidiary Fairway Group Acquisition Company, as the borrower, entered into a senior secured credit facility consisting of a $260 million term loan (the "Term Facility") and a $40 million revolving credit facility, which includes a $40 million letter of credit subfacility (the "Revolving Facility" and together with the Term Facility, the "Credit Facility") with the Term Facility maturing in August 2018 and the Revolving Facility maturing in August 2017. We used the proceeds from the Term Facility to repay our existing senior debt and to finance our growth. Affiliates of certain of the underwriters participate as lenders under the Credit Facility, and Credit Suisse AG, an affiliate of Credit Suisse Securities (USA) LLC, acts as administrative agent and collateral agent. Credit Suisse Securities (USA) LLC, acted as bookrunner and lead arranger of the Credit Facility, Bank of America, N.A., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, acted as syndication agent and Jefferies Finance LLC, an affiliate of Jefferies & Company Inc., acted as documentation agent.

        Borrowings under the Credit Facility bear interest, at our option, at (i) adjusted LIBOR (subject to a 1.5% floor) plus 6.75% or (ii) an alternate base rate plus 5.75%. The 6.75% and 5.75% margins will each be reduced by 50 basis points at any time following completion of the offering being made hereby when our public corporate family rating from Moody's Investor Services Inc. is B2 or higher and our

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public corporate rating from Standard & Poors rating service is B or higher, in each case with a stable outlook, and as long as certain events of default have not occurred. In addition, there is a fee payable quarterly in an amount equal to 1% per annum of the undrawn portion of the Revolving Facility, calculated based on a 360-day year. Interest is payable quarterly in the case of base rate loans and on maturity dates or every three months, whichever is shorter, in the case of adjusted LIBOR loans.

        All of the borrower's obligations under the Credit Facility are unconditionally guaranteed (the "Guarantees") by us and each of our direct and indirect subsidiaries (other than the borrower and any future unrestricted subsidiaries as we may designate, at our discretion, from time to time) (the "Guarantors"). Additionally, the Credit Facility and the Guarantees are secured by a first-priority perfected security interest in substantially all present and future assets of the borrower and each Guarantor, including accounts receivable, equipment, inventory, general intangibles, leases, intellectual property, investment property and intercompany notes among Guarantors.

        Mandatory prepayments under the Credit Facility are required with (i) 50% of adjusted excess cash flow (which percentage will decrease to 25% upon achievement and maintenance of a leverage ratio of less than 5.0:1.0, and to 0% upon achievement and maintenance of a leverage ratio of less than 4.0:1.0); (ii) 100% of the net cash proceeds of assets sales or other dispositions of property by us and our restricted subsidiaries (subject to certain exceptions and reinvestment provisions); and (iii) 100% of the net cash proceeds of issuances, offerings or placements of debt obligations (subject to certain exceptions).

        The Credit Facility contains customary affirmative covenants, including (i) maintenance of legal existence and compliance with laws and regulations; (ii) delivery of consolidated financial statements and other information; (iii) maintenance of properties in good working order; (iv) payment of taxes; (v) delivery of notices of defaults, litigation, ERISA events and material adverse changes; (vi) maintenance of adequate insurance; and (vii) inspection of books and records.

        The Credit Facility also contains customary negative covenants, including restrictions on (i) the incurrence of additional debt; (ii) liens and sale-leaseback transactions; (iii) loans and investments; (iv) guarantees and hedging agreements; (v) the sale, transfer or disposition of assets and businesses; (vi) dividends on, and redemptions of, equity interests and other restricted payments (although the Credit Facility permits us to use the proceeds of this offering to redeem our outstanding preferred stock), including dividends and distributions to the issuer by its subsidiaries; (vii) transactions with affiliates; (viii) changes in the business conducted by us; (ix) payment or amendment of subordinated debt and organizational documents; and (x) maximum capital expenditures. We are also required to comply with the following financial covenants: (i) a maximum total leverage ratio and (ii) a minimum cash interest coverage ratio.

        Events of default under the Credit Facility include:

    failure to pay principal, interest, fees or other amounts under the Credit Facility when due, taking into account any applicable grace period;

    any representation or warranty proving to have been incorrect in any material respect when made;

    failure to perform or observe covenants or other terms of the Credit Facility subject to certain grace periods;

    a cross-default and cross-acceleration with certain other debt;

    bankruptcy events;

    a change in control, which includes any person other than Sterling Investment Partners owning, directly or indirectly, beneficially or of record, shares representing more than 35% of the voting

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      power of our outstanding common stock or a majority of our directors being persons who were not nominated by the board or appointed by directors so nominated;

    certain defaults under ERISA; and

    the invalidity or impairment of any security interest.

        The foregoing is a brief summary of the material terms of the Credit Facility, and is qualified in its entirety by reference to the Credit Facility filed as an exhibit to the registration statement relating to this prospectus. See "Where You Can Find More Information."

    Subordinated Notes

        In connection with Sterling Investment Partners' acquisition of Fairway in January 2007, we issued to certain of the selling entities subordinated promissory notes in an aggregate principal amount of $22.0 million. The notes bore interest at the rate of 10% per annum, which rate was increased to 12% in April 2010, with the additional two percent paid in kind rather than cash, and were due in January 2015. Mr. Howard Glickberg, our Vice Chairman of Development and a director, owned one-third of each of the entities that received a promissory note. In May 2011, we used a portion of the proceeds from our prior senior credit facility to repay these notes. In May 2011, we sold to Mr. Glickberg a subordinated promissory note in the aggregate principal amount of $7.3 million. This note bears interest at a rate of 12% per annum, of which 10% is paid in cash quarterly and 2% is paid in kind. The maturity date of the note is March 3, 2018. See "Certain Relationships and Related Party Transactions—Transactions with Howard Glickberg—Subordinated Notes."

Contractual Obligations

        The following table summarizes our contractual obligations as of April 1, 2012.

 
  Payment by period  
(amounts in thousands)
  Total   Less than 1 year   1 - 3 years   3 - 5 years   More than 5 years  

Long-term debt obligations(1)

  $ 205,458   $ 2,000   $ 4,000   $ 192,125   $ 7,333  

Estimated interest on long-term debt obligations(2)

    81,413     17,021     32,505     30,211     1,676  

Operating lease obligations(3)

    455,898     19,745     41,219     42,004     352,930  
                       

Total

  $ 742,769   $ 38,766   $ 77,724   $ 264,340   $ 361,939  
                       

(1)
Reflects the outstanding balance on our prior $225.0 million senior credit facility at April 1, 2012, including unamortized discount of $1.9 million, and our subordinated promissory note. Does not include $9.9 million of outstanding letters of credit under our prior senior credit facility. For a more detailed description of our prior senior credit facility, see note 8 to our financial statements found elsewhere in this prospectus.

(2)
Borrowings under our prior senior credit facility bore interest, at our option, at (i) adjusted LIBOR (subject to a 1.5% floor) plus 6% or (ii) an alternate base rate plus 5%. At April 1, 2012, the interest rate on our outstanding borrowings was 7.5%. For the purposes of this table, we have estimated interest expense to be paid during the remaining term of our revolving credit facility using the outstanding balance and interest rate as of April 1, 2012. Our actual cash payments for interest on the senior credit facility will fluctuate as the outstanding balance changes with our cash needs and the LIBOR rate fluctuates. For a more detailed description of the interest requirement for our long-term debt under our prior senior credit facility, see note 8 to our financial statements found elsewhere in this prospectus. A one percentage point increase in LIBOR above the 1.5% floor would cause an increase to interest expense of $2.1 million for the "less than 1 year" period,

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    $3.9 million for "1 - 3 years" and $3.7 million for "3 - 5 years." The debt in the "more than 5 years" period has a fixed rate of interest and an increase in interest rates will not affect the amount of interest payable.

(3)
Represents the minimum lease payments due under our operating leases, excluding maintenance, insurance and taxes related to our operating lease obligations, which combined represented approximately 19.5% of our minimum lease obligations for the fiscal year ended April 1, 2012, and does not reflect fair market value rent reset provisions in the leases. For a more detailed description of our operating leases, see note 14 to our financial statements found elsewhere in this prospectus.

        The following summarizes our contractual obligations as of April 1, 2012 on a pro forma basis after giving effect to our entry into a new senior credit facility on August 17, 2012, consisting of a $260 million term loan facility and a $40 million revolving credit facility, as if this transaction had occurred on April 1, 2012:

 
  Payment by period  
(amounts in thousands)
  Total   Less than 1 year   1 - 3 years   3 - 5 years   More than 5 years  

Long-term debt obligations(1)

  $ 267,333   $ 2,600   $ 5,200   $ 5,200   $ 254,333  

Estimated interest on long-term debt obligations(2)

    138,174     23,395     46,509     46,128     22,142  

Operating lease obligations(3)

    455,898     19,745     41,219     42,004     352,930  
                       

Total

  $ 861,405   $ 45,740   $ 92,928   $ 93,332   $ 629,405  
                       

(1)
Reflects the outstanding balance on our $300.0 million senior credit facility as if we had entered into that facility at April 1, 2012, including unamortized discount of $3.9 million, and our subordinated promissory note. Does not include $9.9 million of outstanding letters of credit under our senior credit facility. For a more detailed description of our senior credit facility, see "—Senior Credit Facility", "Description of Certain Indebtedness—Senior Credit Facility" and note 16 to our financial statements found elsewhere in this prospectus.

(2)
Borrowings under our senior credit facility bear interest, at our option, at (i) adjusted LIBOR (subject to a 1.5% floor) plus 6.75% or (ii) an alternate base rate plus 5.75%, subject to reduction if we achieve certain specified ratings following completion of the offering being made hereby. At April 1, 2012, the interest rate on our outstanding borrowings would have been 8.25%. For the purposes of this table, we have estimated interest expense to be paid during the remaining term of our revolving credit facility using the outstanding balance and interest rate as of April 1, 2012 as if we had entered into our new credit facility on that date. Our actual cash payments for interest on the senior credit facility will fluctuate as the outstanding balance changes with our cash needs and the LIBOR rate fluctuates. For a more detailed description of the interest requirement for our long-term debt, see "—Senior Credit Facility", "Description of Certain Indebtedness—Senior Credit Facility" and note 16 to our financial statements found elsewhere in this prospectus. A one percentage point increase in LIBOR above the 1.5% floor would cause an increase to interest expense of $2.5 million for the "less than 1 year" period, $5.0 million for each of "1 - 3 years" and "3 - 5 years" and $2.4 million for "more than 5 years".

(3)
Represents the minimum lease payments due under our operating leases, excluding common area maintenance, insurance and taxes related to our operating lease obligations, which combined represented approximately 19.5% of our minimum lease obligations for the year ended April 1, 2012, and does not reflect fair market value rent reset provisions in the leases. For a more detailed description of our operating leases, see note 14 to our financial statements found elsewhere in this prospectus.

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        We periodically make other commitments and become subject to other contractual obligations that we believe to be routine in nature and incidental to the operation of our business. We believe that such routine commitments and contractual obligations do not have a material impact on our business, financial condition or results of operations.

Off-Balance Sheet Arrangements

        We are not party to any off-balance sheet arrangements.

Multiemployer Plans

        We are a party to one underfunded multiemployer pension plan on behalf of our union-affiliated employees. This underfunding has increased in part due to increases in the costs of benefits provided or paid under these plans as well as lower returns on plan assets. The unfunded liabilities of these plans may result in increased future payments by us and other participating employers. Going forward, our required contributions to these multiemployer plans could increase as a result of many factors, including the outcome of collective bargaining with the unions, actions taken by trustees who manage the plans, government regulations, the actual return on assets held in the plans and the payment of a withdrawal liability if we choose to exit a plan. Our risk of future increased payments may be greater if other participating employers withdraw from the plan and are not able to pay the total liability assessed as a result of such withdrawal, or if the pension plan adopts surcharges and/or increased pension contributions as part of a rehabilitation plan. For a more detailed description of this underfunded plan, see note 12 to our financial statements found elsewhere in this prospectus.

Quantitative and Qualitative Disclosure About Market Risk

        Our market risks relate primarily to changes in interest rates. Borrowings under our existing senior credit facility bear floating interest rates that are tied to LIBOR or alternate base rates and, therefore, our statements of income and our cash flows will be exposed to changes in interest rates. A one percentage point increase in LIBOR above the 1.5% minimum floor would cause an annual increase to the interest expense on our borrowings under our senior credit facilities of approximately $2.1 million. Pursuant to the requirements of our prior senior credit facility, in fiscal 2012 we entered into an interest rate cap agreement with Credit Suisse AG to cap the LIBOR interest rate at 4% on $70 million notional amount of the term loan for the period July 19, 2011 through June 14, 2012 and $120 million notional amount of the term loan from June 14, 2012 through July 19, 2013. We paid Credit Suisse AG $98,000 for this interest rate cap. Pursuant to the requirements of our prior 2009 senior credit facility, in fiscal 2011 we entered into an interest rate cap agreement with Credit Suisse AG to cap the LIBOR interest on $50.1 million of the outstanding term loan at 5% for the period June 4, 2010 through June 14, 2011 and 4% from June 14, 2011 through June 14, 2012. We paid Credit Suisse AG a fee of $118,000 for this agreement.

        At July 1, 2012, we had cash and cash equivalents of $11.4 million. These amounts are held primarily in cash and money market funds. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates.

        We do not have any foreign currency or any other material derivative financial instruments.

Critical Accounting Policies and Estimates

        The preparation of our financial statements in conformity with GAAP requires us to make estimates, assumptions and judgments that affect amounts of assets and liabilities reported in the consolidated financial statements, the disclosure of contingent assets and liabilities as of the date of the

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financial statements and reported amounts of revenues and expenses during the year. We believe our estimates and assumptions are reasonable; however, future results could differ from those estimates.

        Critical accounting policies reflect material judgment and uncertainty and may result in materially different results using different assumptions or conditions. We identified the following critical accounting policies and estimates: merchandise inventories, goodwill and other intangible assets, impairment of long-lived assets and income taxes. For a detailed discussion of accounting policies, please refer to the notes to our consolidated financial statements included elsewhere in this prospectus.

    Merchandise Inventories

        Perishable inventories are stated at the lower of cost (first in, first out) or market. Non-perishable inventories are stated principally at the lower of cost or market, with cost determined under the retail method, which approximates average cost. We value inventories at the lower of cost or market. Under the retail method, the valuation of inventories at cost and the resulting gross margins are determined by applying a cost-to-retail ratio for various groupings of similar items to the retail value of inventories. Inherent in the retail inventory method calculations are certain management judgments and estimates which could impact the ending inventory valuation at cost as well as the resulting gross margins.

    Goodwill and Other Intangibles Assets

        We account for goodwill and other intangible assets in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic No. 350—Intangibles—Goodwill and Other. Accordingly, goodwill and identifiable intangible assets with indefinite lives are not amortized, but instead are subject to annual testing for impairment.

        Goodwill is tested for impairment on an annual basis at the end of each fiscal year or between annual tests if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying amount. To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit, we are required to perform a second step, as this is an indication that the reporting unit goodwill may be impaired. In this step, we compare the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit to all of the assets (recognized and unrecognized) and liabilities of the reporting unit in a manner similar to a purchase price allocation The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Based on this annual impairment analysis, there was no impairment of non-amortizable intangible assets, including goodwill, as of April 1, 2012, April 3, 2011 and March 28, 2010.

        We test for intangibles that are not subject to amortization whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We test indefinite-lived assets using a two-step approach. The first step screens for potential impairment while the second step measures the amount of impairment. We use a discounted cash flow analysis to complete the first step in the process. The amount of the impairment loss, if any, is measured as the difference between the net book value of the asset and its estimated fair value. As of April 1, 2012, April 3, 2011 and March 28, 2010 no impairment charges have been recorded.

    Impairment of Long-Lived Assets

        ASC 360, "Impairment of Long-Lived- Assets" requires that long-lived assets other than goodwill and other non-amortizable intangibles be reviewed for impairment whenever events such as adjustments to lease terms or other adverse changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In reviewing for impairment, we compare the carrying value of such assets with finite lives to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. When the estimated undiscounted future cash flows are less than their

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carrying amount, an impairment loss is recognized equal to the difference between the assets' fair value and their carrying value. We have concluded that the carrying amount of the long-lived assets is recoverable as of April 1, 2012, April 3, 2011 and March 28, 2010.

    Income Taxes

        Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in tax rates is recognized in income in the period that includes the enactment date.

    Stock Based Compensation

        We measure and recognize stock-based compensation expense for all equity-based payment awards made to employees using estimated fair values. The fair value of the award that is ultimately expected to vest is recognized as compensation expense over the requisite service period. For awards with a change of control condition, an evaluation is made at the grant date and future periods as to the likelihood of the condition being met. Compensation expense is adjusted in future periods for subsequent changes in the expected outcome of the change of control conditions until the vesting date. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

        In fiscal 2010, fiscal 2011, fiscal 2012 and the thirteen weeks ended July 3, 2011, we issued restricted shares of Class B common stock at a price per share of $[    •    ]. We estimated the fair value of a share of Class B common stock to be $[    •    ], $[    •    ], $[    •    ] and $[    •    ] in fiscal 2010, fiscal 2011, fiscal 2012 and the thirteen weeks ended July 3, 2011, respectively, compared to an initial public offering price of $[    •    ] per share, which is the midpoint of the price range set forth on the cover of this prospectus. As part of our fair valuation analysis, we engaged an unrelated valuation specialist to value our common stock at April 1, 2012, using probability-weighted expected returns considering three discrete scenarios: consummate an initial public offering within six months, sell the company or remain a private company. During fiscal 2012 and the thirteen weeks ended July 3, 2011 and July 1, 2012, we charged to operations approximately $437,000, $109,000 and $26,000, respectively, for non-cash stock based compensation expense. We issued no stock in the thirteen week period ended July 1, 2012.

Recent Accounting Pronouncements

        In September 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-08—Intangibles—Goodwill and Other (ASC Topic No. 350)—Testing Goodwill for Impairment. The ASU simplifies how entities test for goodwill impairment. The ASU permits an entity to first assess the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining if performing the two-step goodwill impairment test, as defined, is necessary. The ASU is effective for annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We do not believe that the adoption of this ASU will have a material impact on our consolidated financial statements.

        In September 2011, the FASB issued an amendment related to multiemployer pension plans. This amendment increases the quantitative and qualitative disclosures about an employer's participation in individually significant multiemployer plans that offer pension and other postretirement benefits. The guidance is effective for fiscal years ended after December 15, 2011. We have adopted the guidance

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and modified the disclosures surrounding our participation in multiemployer plans in note 12 to our financial statements appearing elsewhere in this prospectus.

        We do not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements.

JOBS Act

        The JOBS Act provides that an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to delay the adoption of new or revised accounting pronouncements applicable to public and private companies until such pronouncements become mandatory for private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public and private companies.

        Additionally, as an "emerging growth company", we are not required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404 or (ii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis).

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BUSINESS

Our Company

        Fairway Market is a high-growth food retailer offering customers a differentiated one-stop shopping experience "Like No Other Market". Since beginning as a small neighborhood market in the 1930s, Fairway has established itself as a leading food retailing destination in the Greater New York City metropolitan area, an approximately $30 billion food retail market that is the largest in the United States. Our stores emphasize an extensive selection of fresh, natural and organic products, prepared foods and hard-to-find specialty and gourmet offerings, along with a full assortment of conventional groceries. Our prices typically are lower than natural / specialty stores and competitive with conventional supermarkets. We believe that the combination of our broad product selection, in-store experience and value pricing creates a premier food shopping experience that appeals to a broad demographic.

        We operate 11 locations in the Greater New York City metropolitan area, three of which include Fairway Wines & Spirits stores. Three of our food stores, which we refer to as our "urban stores," are located in Manhattan, and the remainder, which we refer to as our "suburban stores," are located in New York (outside of Manhattan), New Jersey and Connecticut. We expect to open an additional food store in Manhattan in November 2012. Since Sterling Investment Partners' acquisition of Fairway in 2007, we have made significant investments in infrastructure required to accelerate our future growth, and, since March 2009, have opened seven food stores, including the three Fairway Wines & Spirits stores.

        We have a proven track record of growth led by a seasoned management team. We believe our stores are among the most productive in the industry in net sales per store and net sales per square foot as a result of our distinctive merchandising strategies, value positioning and efficient operating structure. Through our focused efforts on expanding our store base, enhancing our customers' shopping experience and improving the value proposition we offer our customers, we have increased our net sales from $401.2 million in fiscal 2010 to $554.9 million in fiscal 2012, or 38.3%, and our Adjusted EBITDA from $23.9 million in fiscal 2010 to $35.8 million in fiscal 2012, or 49.8%, while significantly investing in corporate infrastructure to support our growth, including new store expansion. We increased our net sales from $122.5 million in the thirteen weeks ended July 3, 2011 to $154.7 million in the thirteen weeks ended July 1, 2012, or 26.3%, and our Adjusted EBITDA from $6.9 million in the thirteen weeks ended July 3, 2011 to $11.3 million in the thirteen weeks ended July 1, 2012, or 63.9%, due principally to new store openings and leveraging our infrastructure. We had net losses of $7.1 million, $18.6 million, $11.9 million, $3.2 million and $3.9 million in fiscal 2010, fiscal 2011, fiscal 2012 and the thirteen weeks ended July 3, 2011 and July 1, 2012, respectively. For a discussion of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss, see note 5 to the tables included in "Selected Historical Consolidated Financial and Other Data."

Our History

        Fairway began in the 1930s as a fruit and vegetable stand located at our Broadway store's current location on Broadway and 74th Street in Manhattan under the name "74th Street Market." In 1954, we expanded the 74th Street location, adding groceries, meat, cheese, dairy products and frozen foods, and renamed the store "FAIRWAY" to convey the concept of "fair prices."

        In the mid-1970s, Fairway began expanding into gourmet and specialty categories, transforming its retail grocery operations into a full service food superstore known for high quality and value pricing. During this transformation, we also began hiring the team of ambitious, hardworking "foodies" who would eventually become our category experts and senior merchants. In the late 1970s, we adopted the slogan "Like No Other Market" in recognition of our distinctive format.

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        In January 2007, Sterling Investment Partners acquired 80.1% of Fairway. With Sterling Investment Partners' support, we made significant investments in infrastructure required to accelerate our future growth, and in early 2009, began to execute our successful new store expansion program.

        The issuer was incorporated as a Delaware corporation on September 29, 2006. Each of our stores is owned by a separate Delaware subsidiary.

Our Competitive Strengths

        We believe the following strengths contribute to our success as a premier destination food retailer and position us for sustainable growth:

        Iconic brand.    We believe our Fairway brand has a well established reputation for delivering high-quality, value-priced fresh, specialty and conventional groceries. Fairway has served millions of passionate customers in the Greater New York City metropolitan area for more than 75 years. We recorded approximately 12.7 million customer transactions in fiscal 2012, and believe the Fairway brand is widely recognized throughout the Greater New York City metropolitan area. Our food experts regularly appear on nationally syndicated food and cooking programs. We believe the strength of the Fairway brand enhances our ability to: (i) attract a broad demographic of customers from a wider geographic radius than a conventional supermarket; (ii) source hard-to-find, unique gourmet and specialty foods; (iii) build a trusted connection with our customers that results in a high degree of loyalty; (iv) attract and retain highly talented employees; (v) secure attractive real estate locations; and (vi) successfully open new stores.

        Destination food shopping experience "Like No Other Market".    We provide our customers a differentiated one-stop shopping experience by offering a unique mix of product breadth, quality and value in a visually appealing in-store environment. Fairway creates a fun and engaging atmosphere in which customers select from an abundance of fresh foods and other high-quality products while interacting with our attentive and knowledgeable employees throughout the store. When customers enter a Fairway, they are immediately greeted by our signature towering displays of fresh produce. As they continue through the store, customers will find a "specialty shop" orientation designed to recreate the best features of local specialty markets, such as a gourmet cheese purveyor, full service butcher shop, seafood market and bakery, all in one location. Our stores provide a sensory experience, including aromas of fresh coffee roasts and freshly baked bread, an array of vibrant colors across our produce displays, cheese experts describing selections of our over 600 artisanal cheeses, samples of our approximately 135 varieties of olive oil and free tastings of our delicious prepared foods. Our stores feature whimsical and informative signs designed to educate customers about the quality, origin and characteristics of our products, and offer tips and suggestions on food preparation and pairings. We encourage a high level of interaction among our employees and customers, which results in a more informed, engaged and satisfied customer. We believe the distinctive Fairway food shopping experience drives loyalty, referrals and repeat business.

        Distinctive merchandising strategy.    Our merchandising strategy is the foundation of our highly differentiated, one-stop shopping experience. We offer a unique product assortment generally not found in either conventional grocery stores or natural / specialty stores, consisting of a large variety of high-quality produce, meats and seafood, as well as gourmet, specialty and prepared foods and a full selection of everyday conventional groceries. High-quality perishables and prepared foods account for approximately 65% of our sales, compared to the more typical one-quarter to one-third of a conventional grocer's sales. Fairway stores also showcase hard-to-find specialty and gourmet items that expand our customers' culinary interests, and we are often one of the first retailers to carry or import a new product. Our Fairway-branded products represent a high-quality, value-oriented specialty alternative unlike the more typical generic, low-cost option presented by conventional food retailers. In product lines where we offer a Fairway-branded alternative it is typically the store's top seller in the category. Fairway's prices typically are lower than natural / specialty food stores and competitive with

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conventional grocery stores. Our dedicated merchandising team focuses on continuously enhancing the Fairway experience for our loyal customers. We believe that our distinctive merchandising strategy has enabled us to build a trusted connection with our customers, who value the quality and fair prices of our food, our merchandising teams' expertise and our one-stop shopping convenience.

        Powerful store format with industry leading productivity.    We believe our stores are among the most productive in the industry in net sales per store, net sales per square foot and store contribution margin. During fiscal 2012, for food stores open more than 13 full months, our net sales per store and net sales per selling square foot averaged $64.8 million and $1,859, respectively. In addition, during fiscal 2012, the contribution margin of our food stores open more than 13 full months was 12.3%. Our highly productive store format delivers attractive returns on investment due to the following key characteristics:

    High-volume one-stop shopping destination.  Our distinctive merchandising strategy, locations in high density markets and iconic brand drive strong customer traffic to our stores. Our high volumes result in operating efficiencies that provide us with a greater ability to offer competitive prices while maintaining or improving our operating margins. In addition, our strong per store volumes generate high inventory turnover, which enables us to maintain a fresher selection of quality perishables than most of our competitors, in turn helping to drive customer traffic and sales.

    Attractive product mix.  Our broad assortment of high-quality fresh, natural and organic products and prepared foods, which account for approximately 65% of our sales, and specialty items, which account for approximately 7% of our sales, enhance gross margins and store productivity.

    Direct-store delivery.  We believe that our "farm-to-shelf" time is shorter than that of many of our competitors. The majority of our perishables are delivered directly to our stores and not stored in a warehouse during the transport period. Given our large store volumes, our ability to utilize direct-store delivery for a greater portion of our perishables than other food retailers helps us to ensure the highest quality and fastest delivery from our suppliers. Direct-store distribution eliminates multiple logistical layers, reducing supply chain costs while enhancing product freshness.

    Strong vendor relationships.  We have built valued, long-standing relationships with both large and small vendors that enable us to achieve attractive pricing on our broad merchandise offering. Fairway is viewed as an important strategic partner by many of our smaller suppliers, helping them to build scale. We source our perishable products locally whenever possible to ensure freshness. As we grow our sales, we expect that we and our vendors will benefit from increasing economies of scale.

    Maximum merchandising flexibility.  We generally enable our merchandising teams to control our on-shelf product selection and positioning, rather than permitting vendors to do so through slotting fees. This permits us to offer the products customers want most and provides us with the flexibility to expand or contract our product offerings as demand warrants.

        Proven ability to replicate store model.    Since March 2009, we have successfully opened seven new food stores, three of which include Fairway Wines & Spirits locations, more than doubling our store base. In aggregate, the two food stores we opened in July and November 2011 added $88.4 million of net sales and increased our store contribution by $11.4 million in fiscal 2012. We leverage our well-developed corporate infrastructure, including our dedicated store opening team and flexible supply chain, to open in desirable locations using a disciplined approach to new store site selection. We benefit from economies of scale and expect to enhance our operating efficiency as we expand our store footprint, further reinforcing our competitive position and ability to grow our sales profitably. As a result of our iconic brand and customer traffic, many landlords seek us out as a tenant.

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        Our new suburban food store operating model is based primarily on a store size of approximately 60,000 gross square feet (approximately 40,000 selling square feet), a net cash investment, including store opening costs, of $15 million to $16 million, not all of which requires an immediate cash outlay, net sales after two years of $45 million to $55 million, a contribution margin at maturity of 10% to 13%, and an average payback period on our initial investment of 3 to 3.5 years. We anticipate that a majority of stores that we will open in the near term will be in suburban areas.

        Our new urban food store operating model is based primarily on a store size of approximately 40,000 gross square feet (approximately 25,000 selling square feet), a net cash investment, including store opening costs, of $17 million to $19 million, not all of which requires an immediate cash outlay, net sales after two years of $75 million to $85 million, a contribution margin at maturity of 17% to 20%, and an average payback period on our initial investment of less than two years.

        Passionate and experienced management team.    We are led by a management team with a proven track record, complemented by hands-on senior merchants and store operations managers who have broad responsibility for merchandising and store operations. Our senior merchants have an average of 32 years in the food retailing industry and an average of 14 years at Fairway. We believe that our senior merchants for each broad merchandising category (e.g., produce, meat, deli, cheese) are widely recognized as authorities in their area and are more invested in the success of their product categories than employees of most conventional food retailers because they provide significant merchandising input. We also believe our management and senior merchants' depth of experience and continuity as a team have significantly contributed toward our success in offering customers a compelling food shopping experience. In addition, since Sterling Investment Partners acquired Fairway in January 2007, we have made significant additions to our company's personnel, including experienced industry executives and the next generation management and merchandising teams to support our long-term growth objectives.

Our Growth Strategy

        We plan to pursue the following growth strategies:

        Open stores in existing and new markets.    We operate in the Greater New York City metropolitan area, an approximately $30 billion food retail market that is the largest in the United States. Although we have significantly grown our sales in the Greater New York City metropolitan area, we believe our existing market presents a significant opportunity for our continued growth.

        We opened an additional food store and integrated Fairway Wines & Spirits location in Woodland Park, New Jersey in June 2012 and an additional food store in Westbury, New York in August 2012, and we expect to open an additional food store in Manhattan in November 2012. For the next several years, we intend to grow our store base in the Greater New York City metropolitan area, primarily in suburban locations, at a rate of three to four stores annually. Over time, we also plan to expand Fairway's presence into new, high-density metropolitan markets. Based on demographic research conducted for us by the Buxton Company, a customer analytics research firm, we believe, based on these demographics, we have the opportunity to more than triple the number of stores in our existing marketing region of the Greater New York City metropolitan area, that the Northeast market (from New England to the District of Columbia) can support up to 90 stores and the U.S. market can support more than 300 additional stores (including stores in the Northeast) operating under our current format.

        As we continue to open new stores in our existing markets, we expect these stores to be the primary driver of our sales, operating profit and market share gains. We believe our differentiated format and destination one-stop shopping appeal attracts customers from as far as 25 miles away. As we open new stores in closer proximity to our customers who currently travel longer distances to shop at our stores, we expect some of these customers to take advantage of the convenience of our new locations. As a result, we have experienced in the past, and expect to experience in the future, some sales volume transfer from our existing stores to our new stores as some of our existing customers

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switch to these new, closer locations. Consequently, while we expect our new stores will impact sales at our existing stores, we believe that by making shopping at our stores for those customers who travel longer distances more convenient, our overall sales to these customers will increase as they increase the frequency and amount of purchases from our stores.

        Capitalize on consumer trends.    We believe that our differentiated format positions us to capitalize on evolving consumer preferences and other key trends currently shaping the food retail industry, which include:

    Increasing focus on the customer shopping experience.  Fairway's merchandise breadth, quality and value, market-style store layout and personalized customer service cater to shoppers looking for a differentiated shopping experience.

    Increasing consumer focus on healthy eating.  Fairway offers a large variety of high-quality natural and organic foods at prices that are typically lower than natural / specialty food stores. Our merchandise mix of high-quality fresh and prepared foods, which accounts for approximately 65% of our sales, and broad array of specialty items appeals to customers seeking healthier eating choices.

    Increasing consumer interest in private label product offerings.  Fairway's branded products represent a high-quality, value-oriented specialty alternative unlike the more typical generic, low-cost option presented by conventional food retailers. In product lines where we offer a Fairway-branded alternative it is typically the store's top seller in the category. We will continue to expand our Fairway-branded product portfolio, selectively offering new high-quality specialty alternatives designed to strengthen our relationship with our customers.

        Improve our operating margins.    We intend to improve our operating margins by the following key initiatives:

    Leverage our well-developed and scalable infrastructure.  We have made significant investments in management, information technology systems, infrastructure, compliance and marketing to enable us to pursue our growth plans without a significant increase in infrastructure spending. Since Sterling Investment Partners acquired Fairway in January 2007, we have made significant additions to the company, including experienced industry executives and the next generation management and merchandising teams to support our long-term growth objectives. We have upgraded our systems and enhanced our new store development and training processes. We have also developed a robust, proprietary daily reporting portal that enables us to effectively manage our growing number of new stores and have implemented initiatives to improve labor productivity and reduce shrink throughout our operations. We believe we can leverage these investments to improve our operating margins as we grow our store base.

    Continue implementing our operating initiatives.  As we grow our store base, we will continue to use proprietary analytical, data driven techniques to optimize sales and profitability across our network. We will continue to focus on: (i) price optimization, where we refine the pricing and balance of our promotional activities across our mix of higher-margin perishable items and everyday value oriented conventional grocery items; (ii) labor productivity, where we utilize Fairway's intelligence portal to more effectively manage store labor; and (iii) shrink reduction, where we identify and capture opportunities to reduce waste and inventory loss.

Industry Overview and Trends

        The U.S. retail grocery market includes a variety of distribution channels, from small grocery shops and convenience stores to supermarkets, natural / specialty food stores, warehouse clubs and supercenters. According to Willard Bishop's June 2011 publication, The Future of Food Retailing, the U.S. retail market for groceries and consumables was approximately $1 trillion in 2010. We operate in

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the supermarket channel, which accounted for nearly 50% of the retail grocery and consumables market in 2010, with approximately $480 billion in sales.

        The supermarket segment is comprised of Conventional, Supercenter, Limited Assortment (under 1,500 items), Natural / Specialty and Other. Conventional stores are defined as full-line, self-service retail stores that sell dry groceries, perishable items and some non-food items. Despite being the largest segment of the supermarket category, conventional grocers have seen their overall share shrink from 73.2% in 2005 to 65.7% in 2010, according to the Progressive Grocer, as consumers have migrated towards other grocery retail formats. Supercenters such as Wal-Mart and Target have gained significant market share from traditional supermarkets through competitive pricing while specialty, natural / organic and gourmet grocers have continued to attract customers away from conventional grocers based on their unique product offering and differentiated shopping experience.

        Key trends impacting our industry include:

        Increasing focus on the customer shopping experience.    Consumers are increasingly focused on their shopping experience. According to the 2011 Food Marketing Institute study, The Food Retailing Industry Speaks (the "2011 Food Marketing Institute Study"), 60% of shoppers do not shop at the store most convenient to their home. Variety, price and higher-quality produce and meats are the primary drivers for customers travelling further to shop for food. The combination of a deep selection of center store items, a wide variety of perishables, better customer service and a cleaner store environment all contribute to this trend. Along with shoppers' willingness to devote time to shopping in their primary location, they are also more loyal to their primary store, with 76.8% of their total grocery budget spent at that location according to a survey in the Food Marketing Institute's US Grocery Shopper Trends 2011.

        To address this shift in consumer focus, supermarkets are striving to be more responsive to consumer preferences through their consumer interactions and product offerings. Retailers are using these expanded product ranges along with updated store design to create differentiated shopping experiences. According to the 2011 Food Marketing Institute Study, retailers focusing on store design and product selection increased from 74.4% of retailers in 2007 to 86.6% in 2011, and retailers emphasizing one-stop shopping increased from 45.1% to 56.7%, respectively.

        Increasing consumer focus on healthy eating.    A growing consumer focus on healthy eating has prompted food retailers to offer an enhanced assortment of fresh and minimally processed foods and natural and organic products. The increased popularity of farmers' markets over the past few years is also indicative of a consumer preference for fresh food items. Additionally, the growing consumer demand for fresh, quality offerings has improved the infrastructure for, and increased supply of, these items, resulting in improved sourcing, distribution and pricing.

        The percentage of natural and organic food sales has been rising. According to data in the 2010 Hartman Group Study, Beyond Organic & Natural 2010, 33% of consumers purchased organic products at least monthly in 2010, up from 22% in 2000 and, according to the 2011 Food Marketing Institute Study, in 2010 66.2% of retailers added natural and organic items to their product lineup while 64.6% noted an increase in sales in the prior 12 months. We believe the strength of a food retailer's natural and organic product offering attracts customers increasingly focused on health and wellness who are willing to pay a premium for high-quality, natural and organic products.

        Increasing private label offerings.    Consumers continue to purchase private label alternatives as part of their focus on quality products at value pricing and private label brands typically present a strong value proposition to both consumers and retailers. Rather than product emulation of national brands, selected retailers have increased their own-brand development, particularly in the area of health and wellness related offerings. According to the 2011 Food Marketing Institute Study, sales of private brands as a percentage of total sales increased from 14.3% in 2009 to 16.1% in 2011. Fairway's branded

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products represent a high-quality, value-oriented specialty alternative unlike the more typical generic, low-cost option presented by conventional food retailers.

Our Market

        We currently operate in the Greater New York City metropolitan area, an approximately $30 billion food retail market that is the largest in the United States. Based on demographic research conducted for us by the Buxton Company, a customer analytics research firm, we believe, based on these demographics, we have the opportunity to more than triple the number of stores in our existing marketing region of the Greater New York City metropolitan area.

Our Products

        We have a significant focus on perishable product categories, which include produce, natural and organic, deli, specialty, cheese, butcher, seafood, bakery, coffee and kosher foods. Our non-perishable product categories consist of conventional groceries as well as specialty foods. We emphasize fresh items that are of premium quality as compared to our conventional competitors. The following is a breakdown of our perishable and non-perishable sales mix:

    Sales by product

 
   
   
   
  Thirteen Weeks
Ended
 
 
  Fiscal year  
 
  July 3,
2011
  July 1,
2012
 
 
  2010   2011   2012  

Product type

                               

Perishable

    65.6 %   64.7 %   64.6 %   65.0 %   65.2 %

Specialty

    7.3     7.1     7.2     7.2     6.8  
                       

Subtotal

    72.9     71.8     71.8     72.2     72.0  

Conventional grocery(1)

    27.1     28.2     28.2     27.8     28.0  
                       

Total

    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                       

(1)
Includes sales of our Fairway Wines & Spirits locations.

        Our in-house senior merchants are the "authority" on their respective departments and actively seek high-quality products from a wide range of vendors. Our stores are designed in a market-style "specialty shop" orientation with portions of each store allocated to specific specialty categories.

        Produce.    When customers walk into a Fairway, they are immediately greeted by our signature towering displays of fresh produce, carefully and methodically stacked high. We also offer our shoppers a wide assortment of organic fruits and vegetables. Fairway sources fruits and vegetables directly from the growers, who deliver their produce to our stores directly from the fields, groves, orchards and hothouses daily. We believe this makes Fairway's fruits and vegetables days fresher than produce at other stores.

        Natural and organic.    Fairway offers a large variety of high-quality natural and organic foods at prices that are typically lower than natural / specialty food stores and that appeal to customers seeking healthier eating choices. Our extensive natural and organic product categories include: fruits and vegetables, natural and fresh juices, organic OBE beef and organic chicken, fresh organic peanut butter and natural almond butter, fresh roasted coffees and loose teas, dried fruits and nuts, full assortment of natural and organic groceries, cold cuts and cheeses, breads, supplements (homeopathy, vitamins, herbs), nutritional bars and protein powders, health and beauty aids, dairy, including Fairway-branded organic milk, eggs, including Fairway-branded organic eggs, vegetarian dairy alternatives, frozen foods, extensive gluten-free selections, baby food and baby care items and environmentally friendly cleaning products.

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        Deli.    We offer a classic New York deli counter. We carry smoked salmon prepared using our own recipe and hand-craft our own fresh mozzarella daily. Our employees are frequent contributors to our prepared foods recipes. We offer authentic tastes from many different cultures and backgrounds, and a variety that will please a range of appetites. Our stores offer full displays of many possibilities for delicious sandwiches, side dishes, toppings, platters, snacks and main dishes.

        Specialty.    Our Specialty Imports and Specialty Grocery departments provide shoppers with hard-to-find specialty and gourmet items, such as Lapalisse pure and virgin nut oils; authentic Sicilian foodstuffs; Burgundy's organic La Trinquelinette fruit preserves made in small batches using only unrefined raw cane sugar; ready-to-eat vacuum-packed beets from the Loire Valley; L'Herbier de Milly La Forêt verbena, hibiscus, peppermint and linden blossom infusions; La Quiberonnaise Vintage Sardines from Brittany, France; Pruneaux d'Agen (stuffed prunes); Royal Medjool dates, Quercy's soft dried figs and apricots. We carry approximately 115 varieties of specialty olive oil, including numerous imported unfiltered olive oils, and offer all-day, every day tasting of olive oils in each of our stores.

        Cheese.    At any of our locations, on any day of the week, consumers will find more than 600 artisanal cheeses at affordable prices. Our cheese experts can help customers design cheese platters to suit their needs.

        Butcher.    Our meat department team sources and selects each of our cuts of meat. We have meat delivered every day and it is cut and packaged at each of our stores within 24 hours of receipt. We also receive daily deliveries of fresh ice-packed chicken. This ensures peak freshness of the meat and chicken and proper packaging for discerning customers. We carry a full range of prime beef cuts at everyday low prices and grind our own beef. We also dry age our prime beef on the premises of many of our stores, which improves the flavor, texture and tenderness of the meat.

        Seafood.    We receive the majority of our fish whole and fillet them in our stores, reminiscent of the way fish was sold from an outdoor fresh market in Europe or an old-time fish market in New York City. We typically offer 50 to 80 different selections of fresh fish and seafood in each store every day. We employ high freshness, taste and safety standards in selecting our seafood.

        Bakery.    We utilize a combination of on-site and centralized bakeries to produce our baked goods. The presence of on-site baking enhances our customer's shopping experience and reinforces the freshness of our hand-crafted products. When consumers walk through a Fairway, they will encounter aromas of fresh-baked bagels and baguettes, similar to a European marketplace. Our full-service bakery prepares our signature cookies, tarts, cupcakes, baguettes and bagels.

        Coffee.    All of our coffees are 100% Arabica beans, grown in the high mountains. We buy directly from farmers and from select specialty brokers and roast the coffee ourselves, or have it roasted on our behalf, in small batches six days a week. We offer over 100 types of artisanal coffee beans sold by the pound, as well as over a dozen varieties of Fair Trade certified and organic coffee. Our decaffeinated coffee is water-processed, not chemically processed, which protects the flavor.

        Kosher.    We offer an extensive array of kosher options, including Fairway's branded products, our conventional and specialty groceries, our coffee, as well as our baked goods, dairy, organic, gluten-free, imported, and frozen items. We offer a variety of cuts of kosher poultry, red meat and seafood.

        Conventional grocery.    We carry a full range of conventional grocery items. Our grocery aisles are stacked high with the most recognized national brand names—Tide, Bounty, Kleenex, Charmin, Lysol, Poland Spring, Oreo, Cheerios, Lipton, Hershey's, Coke, Green Giant, and many more. In addition, we offer an extensive array of ethnic groceries that cater to each store's local demographic.

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    Fairway-branded products

        Fairway's branded products represent a high-quality, value-oriented specialty alternative unlike the more typical generic, low-cost option presented by conventional food retailers. Our Fairway-branded products are designed to strengthen our relationship with our customers through high-quality gourmet offerings. We display our own brands prominently in our stores, and in product lines where we offer a Fairway-branded alternative it is typically the store's top seller in the category. In fiscal 2012 and the thirteen weeks ended July 1, 2012, our portfolio of Fairway-branded items, including prepared foods, represented approximately 7.5% of our net sales. We maintain direct relationships with numerous producers with whom we work to develop and provide our Fairway-branded product offerings. These include rare barrel olive oils from Spain, Italy, and France that are exclusive to Fairway. Time Magazine named them one of The Five Best Presents For Foodies in their 2010 Holiday Shopping Guide. At our stores you will also find, among other items, Fairway golden honey, organic maple syrup, organic jams in five flavors, chocolates, a wide selection of spices, olive, artichoke and sundried tomato pastes, pasta and pizza sauces and coffees from exotic coffee-growing regions.

Pricing Strategy

        Our original store was named "FAIRWAY" in 1954 to convey the concept of "fair prices." Our strategy is to price our broad selection of fresh, natural and organic foods, hard-to-find specialty, and gourmet items and prepared foods at prices typically lower than those of natural / specialty stores. We price our full assortment of conventional groceries at prices competitive with those of conventional supermarkets. Beginning late in fiscal 2011, we launched a comprehensive price optimization initiative across our store network to refine the pricing and balance of our promotional activities across our mix of higher-margin perishable items and everyday value oriented traditional grocery items. We believe that the unique combination of our extensive product selection, our in-store experience, and our value pricing creates a premier food shopping experience that appeals to a broad demographic.

        In our suburban stores, we supplement our value pricing strategy with weekly promotions to highlight discounts in key departments and to compete effectively with conventional supermarkets in the same area. We distribute a weekly circular to the surrounding homes communicating our promotions and discounted items.

Seasonality

        The food retail industry and our sales are affected by seasonality. Our average weekly sales fluctuate during the year and are usually highest in our third fiscal quarter, from October through December, when customers make holiday purchases, and typically lower during the summer months in our second fiscal quarter.

Our Stores

        Our stores are designed to recreate the best features of local specialty markets, such as the butcher shop, fish market, bakery and cheese monger, all in one location. When customers enter a Fairway, they are immediately greeted by our signature towering displays of fresh produce, carefully and methodically stacked high. As they continue through the store, customers will find a market-style "specialty shop" orientation, with sections of each store devoted to categories such as our world class cheese department, full service butcher shop and seafood market that are designed to bring the best of traditional local merchants to our stores. Each individual department is run by an expert who can answer any customer questions and provide the level of service found in a specialty shop. Most stores also have an in-house production bakery, full kitchen and coffee roaster. Our stores typically include sit-down eating areas where food is prepared to order.

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        Our stores provide a sensory experience, including aromas of fresh coffee roasts and freshly baked bread, an array of vibrant colors across our produce displays, cheese experts describing selections of our over 600 artisanal cheeses, samples of our approximately 100 varieties of olive oil and free tastings of our delicious prepared foods. Fairway creates a fun and engaging atmosphere in which customers select from an abundance of fresh foods and other high-quality products while interacting with our attentive and knowledgeable employees throughout the store. Our stores feature whimsical and informative signs designed to educate customers about the quality, origin and characteristics of our products, and offer tips and suggestions on food preparation and pairings.

        Each of our stores is organized around distinct departments with engaging merchandise displays that reinforce our emphasis on freshness and service. We position our full-service departments around the perimeter of the store and adjacent to each other to provide a "market feel" and foster interaction between employees and customers. We generally enable our merchandising teams to control our on-shelf product selection and positioning, rather than permitting vendors to do so through slotting fees. This permits Fairway to offer the products customers want most and provides us with the flexibility to expand or contract our product offerings as demand warrants. We have a comprehensive selection of 70,000 SKUs across our store network, many of which we believe are unique to Fairway or carried by a limited number of other food retailers.

        Our Fairway Wines & Spirits locations offer a full assortment of wines and spirits at everyday low prices, and are designed with the same general themes of our food stores, emphasizing abundance, variety and hard to find products from around the world. Our wine stores also offer a full selection of kosher, organic and low sulfite wines. Each store has certified wine specialists. We believe our Fairway Wines & Spirits locations complement our food stores and enhance the shopping experience we offer to consumers.

        We believe that our success and our growth are dependent upon hiring, training, retaining and promoting qualified and enthusiastic employees who share our passion for delivering an extraordinary food shopping experience. Each of our stores is managed by a store manager and one or two assistant managers who oversee full-time and part-time employees within each store. Each store manager is responsible for the day-to-day operations of his or her store, including the unit's operating results, maintaining a clean and appealing store environment and the hiring, training and development of personnel. Many of our store managers are promoted from within, and we actively track and reward mobility to ensure a sufficient pipeline of store managers and assistant store managers. We have well-established store operating policies and procedures and an in-store training program for new store managers, assistant managers and staff. Our customer service and store procedure training programs are designed to enable our employees to assist customers in a friendly manner and to help to create a positive sales-driven environment and culture as well as teach successful operating practices and procedures.

        We employ numerous analytical tools and metrics to monitor "the Fairway customer experience" and ensure that our execution is consistent and predictable. Beginning in 2010, we engaged a third party "secret shopper" service to visit our stores anonymously and measure key customer service parameters. Each visit measures 55 variables across eight categories, such as cleanliness, wait times and cashier friendliness using a survey created by Fairway management. Each store is visited regularly and results are distributed to the entire Fairway management team weekly. Results from the surveys are used by store management to identify specific issues in their store and by senior management to evaluate store management, identify issues that may be affecting the customer experience across the chain and identify emerging trends. We also conduct a quarterly survey with random customers at our stores to get their opinions on topics such as pricing, product selection and other variables that could affect consumer behavior, with a goal of making Fairway the number one destination for shoppers in the markets we serve. We also receive significant feedback from customers via social media, such as Facebook, Twitter and the growing number of food "blogs" in the local New York market. We have a

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dedicated team of customer service employees who monitor the social media sites and respond to comments about Fairway and distribute important customer comments to key Fairway managers.

Store Growth and Site Selection

        We employ a detailed, analytical process to identify new store locations. We target locations based on demographic characteristics, including income and education levels, drive times and population density, as well as other key characteristics including convenience for customers, visibility, access, signage and parking availability and availability of attractive lease terms. After we have selected a target site, our development group conducts a comprehensive site study and sales projection and develops construction and operating cost estimates. We generally visit a potential location multiple times to perform on-site diligence and interview potential customers. As a result of our iconic brand and customer traffic, many landlords seek us out as a tenant.

        We have a dedicated new store opening team, including a new store operations manager, which is exclusively focused on ensuring a consistent new store opening process and training our new store employees. We generally hire employees for our new stores several months in advance and provide them with extensive training at existing stores prior to the store opening. A new store is typically staffed by a combination of new employees and experienced employees from other Fairway locations being promoted into new store jobs.

        Although we have a prototypical layout we prefer, our first priority is the quality of the location, and we will creatively work to fit our departments into any potential layout. Our new suburban food store operating model is based primarily on a store size of approximately 60,000 gross square feet (approximately 40,000 selling square feet), a net cash investment, including store opening costs, of $15 million to $16 million, not all of which requires an immediate cash outlay, net sales after two years of $45 million to $55 million, a contribution margin at maturity of 10% to 13%, and an average payback period on our initial investment of 3 to 3.5 years. We anticipate that a majority of stores that we will open in the near term will be in suburban areas.

        Our new urban food store operating model is based primarily a store size of approximately 40,000 gross square feet (approximately 25,000 selling square feet), a net cash investment, including store opening costs, of $17 million to $19 million, not all of which requires an immediate cash outlay, net sales after two years of $75 million to $85 million, a contribution margin at maturity of 17% to 20%, and an average payback period on our initial investment of less than two years.

        The required cash investment for new stores varies depending on the size of the store, geographic location, degree of work performed by the landlord and complexity of site development issues. As a result, the average cost per square foot may vary significantly from project to project and from year to year.

        New store openings may negatively impact our financial results in the short-term due to the effect of store opening costs and lower sales and contribution margin during the initial period following opening. A new store builds its sales volume and customer base over time and, as a result, generally has lower margins and higher operating expenses, as a percentage of sales, than our more mature stores. A new store can take a year or more to achieve a level of operating performance comparable to our similarly existing stores. Stores that we have opened in higher density urban markets typically have generated higher sales volumes and margins than stores in suburban areas. We anticipate that a majority of stores that we open in the near term will be in suburban areas due to the relative availability of attractive new store sites.

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Marketing and Advertising

        We believe that the distinct and superior food shopping experience we offer our customers, and our customers' association of that shopping experience with Fairway, are major drivers of our comparable store sales and enable us to spend less on advertising than our conventional competitors. We employ various advertising and promotional strategies to reinforce the quality, value and appeal of our products and services. We promote these core values using many of the traditional advertising vehicles including radio, television, newspaper, and sponsorship. We also connect and engage with our customers through social media websites, in addition to e-newsletters, and our own website. Our stores spend most of their marketing budgets on in-store merchandising-related activities, including promotional signage and events such as taste fairs, classes, tours, cooking demonstrations and product samplings. We use in-store signage to highlight new products and any differentiated aspects of our products.

Sourcing and Distribution

        We source our products from approximately 1,000 vendors and suppliers. Our in-house merchants source only those products that meet our high specifications for quality, and we maintain strict control over the products that are sold in our stores. We have built longstanding vendor relationships that enable us to achieve attractive pricing on our broad offering of hard-to-find fresh, specialty and natural / organic offerings. Fairway is viewed as an important strategic partner to many of these small businesses.

        Substantially all of our products are delivered directly to our stores by our suppliers and vendors. Direct-store-distribution eliminates multiple logistical layers, further compressing the supply chain and reducing costs. A refrigerated cross-docking facility opened in October 2010 at the Harlem location supports this flexible supply chain.

        White Rose, Inc. is our single largest third-party supplier, accounting for approximately 13% of our total purchases in fiscal 2012. Under our agreement with White Rose, we are obligated to purchase all our requirements for specified products, principally warehouse conventional grocery, dairy, frozen food and ice cream products, for our existing stores. In addition, United Natural Foods, Inc. ("UNFI"), which is our primary supplier of specified natural and organic products, principally dry grocery, frozen food, vitamins/supplements and health, beauty and wellness, accounted for approximately 9% of our total purchases in fiscal 2012. The use of White Rose and UNFI gives us purchasing power through the volume discounts they receive from manufacturers. See "Risk Factors—Risks Relating to Our Business—Disruption of significant supplier relationships could negatively affect our business."

Properties

        We currently operate 11 locations in New York, New Jersey and Connecticut, three of which include Fairway Wines & Spirits stores. We lease all of our locations, most of them pursuant to long-term leases with initial terms of at least 15 years and several five to 10 year renewal options. We

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believe our portfolio of long-term leases is a valuable asset supporting our retail operations. Information regarding our stores is as follows:

Location
  Date Opened   Selling
Square Footage(1)
  Gross
Square Footage
 

Broadway (Manhattan), New York(2)

    1933     21,731     59,468  

Harlem (Manhattan), New York(3)

    December 1995     25,853     52,005  

Plainview, New York

    May 2001     36,579     55,180  

Brooklyn, New York(3)

    May 2006     38,977     80,591  

Paramus, New Jersey

    March 2009     32,643     50,307  

Pelham Manor, New York

    April 2010     49,963 (4)   75,310  

Stamford, Connecticut

    November 2010     48,691 (4)   86,062  

Upper East Side (Manhattan), New York

    July 2011     22,109     41,394  

Douglaston, New York

    November 2011     38,239     57,360  

Woodland Park, New Jersey

    June 2012     41,452 (4)   63,491  

Westbury, New York

    August 2012     44,640     68,357  

Kips Bay (Manhattan), New York

    Not yet open     25,480 (5)   43,284 (5)

Nanuet, New York

    Not yet open     50,500 (5)   66,000 (5)

(1)
Includes any outdoor produce areas, café and bakery areas, but excludes the square footage of the kitchen, bakery, meat department and produce coolers in our stores.

(2)
The landlord for a portion of this property has the right, at any time after June 30, 2017, to terminate this lease, upon at least 18 months' prior notice, in order to make substantial renovations to the existing building or construct a new building. If the landlord elects to terminate the lease, then we have the option to enter into a new lease for space on the lower level, ground floor and second level of the renovated or new building constructed on those premises with no less than the current square footage. See "Risk Factors—Risks Relating to Our Business—The landlord for a portion of our Broadway store has the right to terminate the lease at any time after June 30, 2017, which could adversely affect our business." We lease the remainder of this property from an entity in which Howard Glickberg, our vice chairman of development and a director, owns an interest. This property is currently the subject of an arbitration to set the fair market value rent. See "Certain Relationships and Related Party Transactions—Transactions with Howard Glickberg—Real Estate Leases" and "Risk Factors—Risks Relating to Our Business—We lease certain of our stores and related properties from a related party."

(3)
We lease this property from entities in which Howard Glickberg, our vice chairman of development and a director, owns an interest. This property is currently the subject of an arbitration to set the fair market value rent. See "Certain Relationships and Related Party Transactions—Transactions with Howard Glickberg—Real Estate Leases" and "Risk Factors—Risks Relating to Our Business—We lease certain of our stores and related properties from a related party."

(4)
Selling square footage includes adjacent (Pelham Manor, 4,808 sq. ft.; Stamford, 5,736 sq. ft.) or integrated (Woodland Park, 2,500 sq. ft.) Fairway Wines & Spirits location.

(5)
Estimated, as these locations have not yet opened.

        We lease our corporate headquarters, parking lots by certain of our stores and warehouse space.

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Employees

        As of July 1, 2012, we had approximately 3,800 employees, of which 800 are full-time employees and 3,000 are part-time employees. Under our collective bargaining agreements, employees working 35 hours or less Monday through Friday are considered part-time employees, even if such employees also work during the weekend.

        Approximately 18% of our employees were not subject to a collective bargaining agreement as of July 1, 2012. With respect to our unionized employees, we had three collective bargaining agreements in effect as of July 1, 2012 covering 93.5%, 5.3% and 1.2% of our unionized employees and scheduled to expire March 29, 2014, February 28, 2013 and March 29, 2014, respectively. We consider our employee relations to be good. We have never experienced a strike or significant work stoppage.

Information Technology

        Our management information systems provide a full range of business process assistance and timely information to support our merchandising strategy, warehouse management, stores and operating and financial teams. We currently use a combination of off-the-shelf and custom software running on clusters of commodity computers.

        We believe our current systems provide us with competitive advantages, operational efficiencies, scalability, management control and timely reporting that allow us to identify and respond to merchandising, pricing, cost and operating trends in our business. We use a combination of internal and external resources and systems to support store point-of-sale, merchandise planning and buying, inventory management, financial reporting, customer contact and administrative functions. We believe that our information systems have the capacity to accommodate our growth plans. We constantly evaluate new hardware alternatives and software techniques to help further reduce our costs and enhance our competitive advantage through innovation.

Intellectual Property

        We maintain registered trademarks such as FAIRWAY®, FAIRWAY "Like No Other Market"®, LIKE NO OTHER MARKET® and FAIRWAY WINES & SPIRITS®. Trademarks are generally renewable on a 10 year cycle. We consider our trademarks to be valuable assets that reinforce our customers' favorable perception of our stores and an important way to establish and protect our brands in a competitive environment.

        From time to time, third parties have used names similar to ours, have applied to register trademarks similar to ours and, we believe, have infringed or misappropriated our intellectual property rights. We respond to these actions on a case-by-case basis, including, where appropriate, by sending cease and desist letters and commencing opposition actions and litigation. The outcomes of these actions have included both negotiated out-of-court settlements as well as litigation. We are currently party to an agreement with a midwestern company, Fareway, with respect to the use of the Fairway name and trademarks which prohibits us from using the Fairway name other than on the East Coast, California and certain parts of Michigan and Ohio, and prohibits that company from using the Fareway name on the East Coast, California and certain parts of Michigan and Ohio. Our inability to use the Fairway name in these prohibited areas could adversely affect our growth strategy. We are also party to a settlement agreement that prohibits us from opening any new stores under the Fairway name in the New Jersey counties of Bergen, Essex, Hudson and Passaic. We believe this agreement will preclude us from opening one store that we otherwise might have opened in this territory. See "Risk Factors—Risks Relating to Our Business—We may be unable to protect or maintain our intellectual property, which could result in customer confusion, a negative perception of our brand and adversely affect our business."

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Competition

        The food retail industry as a whole, particularly in the Greater New York City metropolitan area, is highly competitive. We compete with various types of retailers, including alternative food retailers, such as natural foods stores, smaller specialty stores and farmers' markets, conventional supermarkets, supercenters and membership warehouse clubs. Our principal competitors include alternative food retailers such as Whole Foods and Trader Joe's, traditional supermarkets such as Stop & Shop, ShopRite, Food Emporium and A&P, retailers with "big box" formats such as Target and Wal-Mart and warehouse clubs such as Costco and BJ's Wholesale Club. These businesses compete with us for customers, products and locations. In addition, some are expanding aggressively in marketing a range of natural and organic foods, prepared foods and quality specialty grocery items. Some of these potential competitors have more experience operating multiple store locations or have greater financial or marketing resources than we do and are able to devote greater resources to sourcing, promoting and selling their products. As competition in certain areas intensifies, our operating results may be negatively impacted through a loss of sales, reduction in margin from competitive price changes, and/or greater operating costs such as marketing. We also face limited competition from restaurants and fast-food chains. In addition, other established food retailers could enter our markets, increasing competition for market share.

Regulation

        We are subject to federal, state and local laws and regulations relating to zoning, land use, environmental protection, workplace safety, food safety, public health, community right-to-know and alcoholic beverage and tobacco sales. In particular, the states in which we operate and several local jurisdictions regulate the licensing of supermarkets and the sale of alcoholic beverages. In addition, certain local regulations may limit our ability to sell alcoholic beverages at certain times. We are also subject to laws governing our relationship with employees, including minimum wage requirements, overtime, working conditions, immigration, disabled access and work permit requirements. Our stores are subject to regular but unscheduled inspections. Certain of our parking lots and warehouses and our bakery either have only temporary certificates of occupancy or are awaiting a certificate of occupancy. Additionally, a number of federal, state and local laws impose requirements or restrictions on business owners with respect to access by disabled persons. We believe that we are in material compliance with such laws and regulations. See "Risk Factors—Risks Relating to Our Business—Various aspects of our business are subject to federal, state and local laws and regulations. Our compliance with these regulations may require additional capital expenditures and could materially adversely affect our ability to conduct our business as planned."

Legal Proceedings

        We are subject to various legal claims and proceedings which arise in the ordinary course of our business, including employment related claims, involving routine claims incidental to our business. Although the outcome of these routine claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these claims will have a material adverse effect on our results of operations, financial condition or cash flows.

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MANAGEMENT

        Below is a list of the names and ages, as of September 1, 2012, of the members of the board of directors of the issuer and our executive officers, as well as a summary of their business experience.

Name
  Age   Position

Charles W. Santoro

    53   Executive Chairman of the Board of Directors

Michael Barr

    41   Director

Daniel Glickberg

    29   Director

Howard Glickberg

    65   Director and Vice Chairman of Development

Stephen Key

    69   Director

William Selden

    65   Director

Farid Suleman

    60   Director

Herbert Ruetsch

    53   Chief Executive Officer

William E. Sanford

    52   President and Chief Financial Officer

Nathalie Augustin

    42   Senior Vice President—General Counsel & Secretary

Aaron J. Fleishaker

    51   Senior Vice President—Real Estate and Development

Kevin McDonnell

    48   Senior Vice President—Chief Operating Officer

Brian Riesenburger

    46   Senior Vice President—Chief Merchandising Officer

Larry Santoro

    53   Senior Vice President—Chief Administrative Officer

Peter Romano

    54   Vice President—Produce

Directors

        We believe our board of directors should be comprised of individuals with sophistication and experience in many substantive areas that impact our business. We believe experience, qualifications or skills in the following areas are most important: retail sales, marketing, accounting, finance and capital structure, strategic planning and leadership of complex organizations, legal and regulatory affairs, people management and board practices of other entities. We believe that all of our current board members possess the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for each board member in the individual biographies below.

        Charles W. Santoro has served as Executive Chairman of the Board of Fairway since September 2012 and as Chairman of the Board from January 2007. Mr. Santoro is co-founder and a managing partner of Sterling Investment Partners, a Westport, Connecticut based private equity firm. Before co-founding Sterling Investment Partners in 1998, Mr. Santoro was Vice Chairman, Investment Banking of Paine Webber Group, Inc. from 1995 to May 2000. Prior to joining Paine Webber in 1995, Mr. Santoro was a Managing Director of Smith Barney, Inc., in charge of that firm's Multi-Industry and New Business Development Groups. Prior to that, Mr. Santoro was responsible for Smith Barney's cross-border and international investment banking activities in New York and London, serving on its International Board of Directors. Mr. Santoro began his career at Morgan Stanley in New York and London, where he served as vice president, and was the operations officer of the European Mergers & Acquisitions Department. Mr. Santoro earned a B.A. degree from Columbia University and an M.B.A. from Harvard Business School. From April 2000 through May 2012, Mr. Santoro served on the Board of Directors of Interline Brands, Inc., a New York Stock Exchange listed leading national distributor and direct marketer of maintenance, repair and operations products, and its predecessors. Mr. Santoro also serves as chairman of the board or a director of a variety of private companies. Mr. Santoro's qualifications to sit on our board include his substantial experience in the areas of operations, corporate strategy, international and domestic business, logistics and distribution, outsourcing, sales and marketing, and finance, including capital markets and mergers and acquisitions.

        Michael A. Barr has served as a director of Fairway since January 2007. Mr. Barr is a principal of Sterling Investment Partners. From 1999 until joining Sterling Investment Partners in 2001, Mr. Barr served as Vice President of Finance of Wellsteads, Inc., an eRestaurant start-up company offering

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takeout and delivery, where he was responsible for all financial functions. From 1998 to 1999, Mr. Barr was an Associate in the Corporate Finance Department of Lehman Brothers, Inc. and from 1993 to 1996, he was an auditor at Arthur Andersen, L.L.P. Mr. Barr earned a B.A. degree from Claremont McKenna College and an M.B.A. from The Wharton School at the University of Pennsylvania. Mr. Barr also serves as a director of a variety of private companies. Mr. Barr's qualifications to sit on our board include his substantial experience in the areas of corporate strategy, accounting, operations, logistics and distribution, and finance, including capital markets and mergers and acquisitions.

        Daniel Glickberg has served as a director of Fairway since June 2010. Mr. Glickberg has served as one of our Vice Presidents since January 2007, and has been involved with Fairway in various capacities since September 2005. Mr. Glickberg earned a B.A. degree from Trinity College. Mr. Glickberg's qualifications to sit on our board include his substantial experience with Fairway in the areas of merchandising and marketing. Mr. Glickberg is the great grandson of our founder.

        Howard Glickberg has served as a director since January 2007 and as our Vice Chairman of Development since January 1, 2012. He previously served as our Chief Executive Officer from January 2007, when we were acquired by Sterling Investment Partners, to December 2011 and as our President from January 2007 until June 2010. Prior to our acquisition by Sterling Investment Partners, Mr. Glickberg served our company in various capacities since 1974, including Chief Executive Officer, President and Chief Financial Officer. Mr. Glickberg is the grandson of our founder. Mr. Glickberg's qualifications to sit on our board include his involvement as an owner and operator of our company for almost 40 years and his substantial experience in the areas of retail food sales, merchandising, marketing, store development, strategic planning and leadership of complex organizations and people management.

        Stephen Key has served as a director of Fairway since August 2012. Since 2003, Mr. Key has been the sole proprietor of Key Consulting, LLC, a financial consulting firm. From 1995 to 2001, Mr. Key served as Executive Vice President and Chief Financial Officer of Textron Inc., a New York Stock Exchange listed major diversified aerospace and defense company. From 1992 to 1995, Mr. Key served as the Executive Vice President and Chief Financial Officer of ConAgra, Inc., a New York Stock Exchange listed leading food company in North America. Prior to this, Mr. Key occupied multiple roles at Ernst & Young, including Managing Partner of the New York Office from 1988 to 1992. Mr. Key is a Certified Public Accountant in the State of New York. Mr. Key earned an A.B. from Dartmouth College and an M.B.A. from Cornell University. Mr. Key has served as a member of the Board of Directors and Chairman of the Audit Committee of Greenhill & Co., Inc., an investment bank, since 2004, and 1-800 Contacts, Inc., a contact lens distributor, from 2005 to June 2012. From 2010 through 2012, Mr. Key served on the Board of Directors of Forward Industries, Inc., a manufacturer of carrying cases. From 2006 through 2007, Mr. Key served on the Board of Directors of Sitel, a business-to-business service provider. He previously served as a member of the Senior Executive Advisory Board of Sterling Investment Partners. Mr. Key's qualifications to sit on our board include his substantial experience in the areas of public accounting, his knowledge of the food industry and his service on the board of directors and audit committees of other public companies.

        William L. Selden has served as a director of Fairway since January 2007. Mr. Selden is co-founder and a managing partner of Sterling Investment Partners, a Westport, Connecticut based private equity firm. Before co-founding Sterling Investment Partners in 1998 and its predecessor, Sterling Ventures Limited, in 1991, Mr. Selden was a Managing Director at Shearson Lehman Brothers, Inc., an Executive Vice President at E.F. Hutton & Co., Inc., a Vice President at Eastdil Realty, Inc., Chief Financial Officer of Sunbelt Communications, Inc. and a Vice President at Bankers Trust Co. Mr. Selden earned a B.A. degree from Dartmouth College and an M.B.A. from Columbia University. Mr. Selden also serves as chairman of the board or as a director of a variety of private companies, and served as chairman of the board of American Buildings Company, a publicly-traded diversified manufacturer and marketer of construction products and services for non-residential and residential applications. Mr. Selden's qualifications to sit on our board include his substantial experience in the

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areas of real estate, corporate strategy, international and domestic business, logistics and distribution, sales and marketing, and finance, including capital markets and mergers and acquisitions.

        Farid Suleman has served as a director of Fairway since August 2012. Mr. Suleman was the President and Chief Executive Officer of Citadel Broadcasting Corporation and a member of its board of directors from March 2002 to September 2011 and was also the Chairman of the board from March 2002 through June 2010. From February 1994 until February 2007, he was a director of Westwood One, Inc. and was a special limited partner of Forstmann Little & Co., a private equity firm, from March 2002 until June 2007. He previously served as a member of the Senior Executive Advisory Board of Sterling Investment Partners. Mr. Suleman's qualifications to sit on our board include his substantial experience in the areas of corporate strategy, as well as general executive and leadership expertise and his service on the board of directors and audit committees of other public companies.

        Each of the current members of our board of directors was elected according to our stockholders' agreement, pursuant to which Sterling Investment Partners has the right to designate four directors in aggregate, one of whom shall serve as Chairman, and Howard Glickberg and Harold Seybert, acting jointly, have the right to designate two directors. Messrs. Barr, Santoro and Selden are the designees of Sterling Investment Partners and Messrs. Howard Glickberg and Daniel Glickberg are the designees of Messrs. Glickberg and Seybert pursuant to our stockholders' agreement.

Executive Officers

        Herbert Ruetsch has served as our Chief Executive Officer since February 2012, as our President from June 2010 until March 2012, as our Chief Operating Officer from January 2007 to December 2011 and as our Chief Financial Officer from September 1998 to September 2007. Prior to joining us in September 1998, Mr. Ruetsch served in various financial positions for Grand Union for approximately 16 years. Mr. Ruetsch earned a B.S. degree from LaSalle College and is a certified public accountant.

        William E. Sanford has served as our President since March 2012 and as our Chief Financial Officer since April 2012. Mr. Sanford joined us in October 2008 as our Chief Administrative Officer and served as our acting Chief Financial Officer from September 2011. Mr. Sanford has been an operating partner of Sterling Investment Partners since 2008, assisting them in their review of industrial and consumer value-added distribution opportunities, and serves on the board of directors of two other portfolio companies of Sterling Investment Partners. From 1998 to June 2008, Mr. Sanford held various senior positions, including chief financial officer, president and chief operating officer, with Interline Brands, Inc., a New York Stock Exchange listed company that is a leading national distributor and direct marketer of maintenance, repair and operations products. Mr. Sanford has over 25 years of experience in the wholesale distribution field, having also held senior positions with Airgas and MSC Industrial Direct. Mr. Sanford is also a director of EverBank Financial Corp., a diversified financial services company that is listed on the New York Stock Exchange. Mr. Sanford earned a B.S. degree from Vanderbilt University.

        Nathalie Augustin has served as our Senior Vice President—General Counsel and Secretary since April 2012. Ms. Augustin joined us in June 2007 as Vice President—General Counsel and Secretary. Prior to joining us, Ms. Augustin served in various capacities at The Donna Karan Company LLC, an international fashion design house and a subsidiary of LVMH Moët Hennessy Louis Vuitton, from June 1999 to May 2007, most recently as Vice President and Associate General Counsel. Prior to joining Donna Karan, Ms. Augustin was an associate at Cleary Gottlieb Steen & Hamilton LLP for approximately 5 years. Ms. Augustin began her legal career as a law clerk to the Honorable Sterling Johnson of the United States District Court for the Eastern District of New York. She received her law degree from Harvard Law School and a B.A. degree from Columbia College.

        Aaron Fleishaker has served as our Senior Vice President—Real Estate and Development since September 2011. Mr. Fleishaker joined us in February 2008 as our Vice President—Real Estate. Prior to joining us, Mr. Fleishaker was Senior Vice President, Real Estate, of United Retail Group, Inc., a

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specialty retailer of large-size women's fashion apparel, from November 2006, Senior Managing Director, Equity Investments of DJM Asset Management, LLC, a diversified real estate consulting and advisory firm, from September 2005 to November 2006, Executive Vice President of Kimco Realty Corporation, a New York Stock Exchange listed real estate investment trust that owns and operates neighborhood and community shopping centers, from February 2002 to September 2005, Senior Vice President, General Counsel, Director of Real Estate for Modell's Sporting Goods, a sporting goods retailer, from July 1991 to January 2002 and General Counsel of Dresses for Less, a retail and wholesale women's garment company, from March 1989 to June 1991. Mr. Fleishaker began his career as a real estate attorney. Mr. Fleishaker received his law degree from Boston University School of Law and a B.S.B.A. degree from the Boston University School of Management.

        Kevin McDonnell has served as our Senior Vice President—Chief Operating Officer since March 2012, and served as our Chief Merchandising Officer from August 2007 to April 2011. Prior to joining us in August 2007, Mr. McDonnell served in various capacities at The Great Atlantic & Pacific Tea Company for over 27 years, most recently as Senior Vice President of Sales and Merchandising.

        Brian Riesenburger has served as our Senior Vice President—Chief Merchandising Officer since April 2012, and served as Senior Vice President of Merchandising and Operations from January 2011 to April 2012 and Vice President of Merchandising and Operations from January 2007 to December 2010. Mr. Riesenburger joined us in May 1995 and served in various capacities, including specialty products buyer, General Manager of our Broadway store and from 2002 to January 2007 as a junior partner responsible for merchandising and operations. Prior to joining us in May 1995, Mr. Riesenburger spent approximately five years working as a restaurant manager in South Africa.