Fairway’s gourmet grocery failure shows danger of overpromising before an IPO

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Fairway's dream of becoming nationwide gourmet grocer passed its sell-by date. Competition from its own new stores, as well as Whole Foods Market Inc. and Trader Joe's Co., cannibalized revenue at older locations.

Next time a company tells potential investors that it’s “Like No Other,” they might think twice about handing over their money.

When Fairway Group Holdings Corp. went public three years ago it told investors that its chain of gourmet grocers — then numbering just 12 stores in Greater New York — could grow by 2,400 per cent, or an additional 300 sites nationwide. This week the company filed for bankruptcy having never made it farther than Lake Grove, Long Island.

With the filing, Fairway’s dream of becoming nationwide gourmet grocer passed its sell-by date. Competition from its own new stores, as well as Whole Foods Market Inc. and Trader Joe’s Co., cannibalized revenue at older locations. Meanwhile grocery and meal-kit delivery services like FreshDirect and Blue Apron Inc. kept time-pressed shoppers away from its doors.

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