Fresh & Easy

Fresh & Easy Neighborhood Market Inc.

Company type	Subsidiary
Industry	Grocery store
Founded	November 2007 (2007-11)
Defunct	November 2015 (2015-11)
Fate	Closed all stores; filed for bankruptcy
Headquarters	El Segundo, California , United States
Area served	Western United States (Arizona, California, Nevada)
Key people	Timothy John Rollit Mason (former CEO)
Products	Groceries
Owner	Tesco (until 2013), Yucaipa Companies (from 2013)
Number of employees	20–30 per store (typical) (circa 2011)

Overview

Fresh & Easy Neighborhood Market Inc. operated as a grocery store chain located primarily in the Western United States, with its corporate headquarters situated in El Segundo, California. It functioned as a subsidiary under Tesco, the United Kingdom-based retailer ranked as the third largest globally. This ownership lasted until November 2013, when the company was acquired by Yucaipa Companies.

The chain embarked on an aggressive expansion strategy, launching its initial outlets in November 2007. Although store openings were briefly halted during the second quarter of 2008, the expansion efforts resumed thereafter. By December 2012, Fresh & Easy had established over 200 locations across Arizona, California, and Nevada. However, in April 2013, Tesco announced its withdrawal from the U.S. market, incurring an estimated loss of £1.2 billion.

On September 10, 2013, Tesco revealed plans to transfer control and management of more than 150 Fresh & Easy stores to Ron Burkle's investment firm, Yucaipa Companies. Shortly after, in early October 2013, Fresh & Easy filed for Chapter 11 bankruptcy protection within the United States legal system. The transaction resulted in Tesco absorbing a £150 million loss, bringing the total financial setback of its American venture close to £2 billion.

Ultimately, on October 23, 2015, Yucaipa declared the closure of all Fresh & Easy outlets. Later that month, on October 30, 2015, Fresh & Easy initiated a second Chapter 11 bankruptcy filing within a span of two years.

History

On February 9, 2006, Tesco revealed plans to enter the U.S. market by launching a series of compact grocery outlets called Fresh & Easy across three Western states—Arizona, California, and Nevada—in 2007. The initial investment was projected to reach up to £250 million (approximately $436 million) annually. Despite CEO Terry Leahy's statement that significant effort had been dedicated to creating a format appealing to American shoppers, investor reaction was cautious, resulting in a slight decline in Tesco’s share value. These stores were designed to cover an area of around 1400 square meters—considered a decent size internationally but roughly one-third the size of a typical American supermarket. By January 2007, Tesco had established its U.S. headquarters in El Segundo, California, and began expanding into Southern California, Phoenix, Arizona, and Las Vegas, Nevada.

On April 21, 2009, Tesco disclosed that Fresh & Easy had incurred a trading loss of £142 million. On October 4, 2010, Fresh & Easy announced the temporary closure of 13 locations due to declining local populations, elevated foreclosure rates on homes, and high unemployment. These stores were put into a dormant state with the intention of reopening once economic conditions improved. Among these closures were six stores in the Las Vegas vicinity, six in the Phoenix area, and one in Moreno Valley, California. Most affected stores were categorized as "C-level," generating less than $50,000 in weekly sales. The business was not anticipated to reach profitability until between 2012 and 2013. A December 2012 Strategic Review indicated that profitability might be delayed until late 2013 or even 2014. According to a Los Angeles Times article, Fresh & Easy had accumulated approximately $1.2 billion in losses before 2013.

In February 2013, despite circulating rumors suggesting otherwise, Tesco confirmed it had no immediate plans to sell or shutter the Fresh & Easy chain. These rumors stemmed from comments made by Tesco CEO Philip Clarke during a shareholder meeting about potential closure or sale of Fresh & Easy.

Ultimately, on September 10, 2013, Tesco announced the sale of Fresh & Easy to Yucaipa Companies LLC. Rather than a straightforward sale, Tesco effectively compensated Yucaipa Companies for assuming Fresh & Easy’s liabilities at an estimated cost of £150 million (around $235 million), along with providing an £80 million loan to support the transferred operations. The transaction concluded on November 27, 2013. Yucaipa acquired 167 Fresh & Easy stores but proceeded to close roughly 40 of them.

Following the acquisition announcement, Yucaipa’s representative Burkle indicated plans to modify the store format to fulfill Tesco’s original vision while enhancing relevance for contemporary consumers. In June 2014, Fresh & Easy launched a rebranding effort focusing on affordable organic products, freshly prepared takeout options made on-site, emphasis on freshness, and elimination of artificial colors and flavors.

After the change in ownership was communicated via email, customers were informed they needed to re-register for the Fresh & Easy Friends Card Loyalty program due to California regulations prohibiting transfer of personal information to the new owner; however, once re-enrolled, existing points and rewards balances would be honored.

On March 22, 2015, Fresh & Easy declared plans to close 50 stores as part of reallocating resources toward developing an online shopping platform. Of these closures, 30 stores were located in California. The new service—called Click & Collect—was initially trialed at locations within the Las Vegas Valley before being planned for broader rollout across the chain.

Closure

On October 21, 2015, Fresh & Easy declared its decision to shut down all of its retail locations. Brendan Wonnacott, representing the company as a spokesperson, indicated that Fresh & Easy was initiating "an orderly wind-down process." Wonnacott explained that the chain lacked sufficient funds and was unable to secure financing to maintain business operations. The plan involved liquidating and closing stores within a few weeks under a Chapter 7 bankruptcy framework. Beginning October 24, 2015, stores commenced liquidation sales, and by November 13, 2015, every store had ceased operations, which also marked the end of the Friends Rewards program. Since that time, the Fresh & Easy brand has completely disappeared from the market.

Fresh & Easy filed for Chapter 11 bankruptcy protection again on October 30, 2015, marking its second filing within two years.

Following discussions between Fresh & Easy’s financial advisors—FTI Consulting, Inc.—and Industrial Assets Corp., led by Venice Gamble (Director of Legal & Business Development for Industrial Assets) and Nyk Westbrook (Director of Business Development for Industrial Assets Corp.), along with Mary Ann Kaptain (Managing Director at FTI Consulting), an agreement was reached to appoint Industrial Assets Corp. and Maynards Industries as auctioneers responsible for liquidating Fresh & Easy’s assets. On November 5, 2015, Fresh & Easy submitted a motion seeking court approval to retain these firms to conduct a public auction. Venice Gamble signed the supporting declaration for this engagement. (Refer to Exhibit 1 [Pages 50-55] in the court pleadings.)

The U.S. Bankruptcy Court granted approval on November 20, 2015, authorizing Industrial Assets Corp. and Maynards Industries to act as auctioneers.

Subsequently, on December 12, 2015, Industrial Assets Corp., along with its affiliate BidItUp Auctions Worldwide and Maynards Industries, conducted a public auction at Fresh & Easy’s distribution facility located in Riverside, California. This event involved the sale of all tangible assets including tractors, trailers, and various furnishings, fixtures, and equipment ("FF&E").

Management

Timothy John Rollit Mason previously held the positions of President and Chief Executive Officer at Fresh & Easy. He began his career with Tesco in 1982 and was appointed to the company's Board of Directors in 1995. Mason moved to the United States with his family to spearhead Tesco's expansion into the American market. He led the team responsible for analyzing the U.S. retail environment before Fresh & Easy launched its initial store stateside. In March 2011, Mason assumed additional responsibilities as deputy chief executive and chief marketing officer at Tesco, dividing his time with roughly one-third spent outside the U.S.

In December 2012, reports emerged that Mason had departed from Tesco. Upon his resignation, he received a substantial severance package amounting to approximately £5.7 million. This payout attracted criticism from many observers, given that the U.S. Fresh & Easy outlets had yet to achieve profitability.

Stores

File:Fresh & Easy Las Vegas, Sun City Summerlin.jpg

Fresh & Easy market located in Las Vegas, Nevada

In October 2007, Fresh & Easy announced plans to open its first stores in California and Arizona on November 8. However, the company initiated a "soft opening" on November 1, 2007, with its inaugural store in Hemet, California. This approach allowed for operational testing and staff training before the official grand opening. The Hemet location, situated near the distribution center, along with five additional stores across Los Angeles and Orange Counties, officially opened their doors on November 8, 2007.

Each Fresh & Easy Neighborhood Market typically employed between 20 and 30 staff members. Part-time workers started at an hourly wage of $10 USD, with those clocking at least 20 hours weekly eligible for a contributory health insurance plan. Assistant managers, designated as Team Leaders, earned $13 per hour in California; in Arizona, wages for comparable roles were reduced by one dollar per hour. From April through June 2008, Fresh & Easy temporarily halted new store openings but resumed expansion with a new location launched in Manhattan Beach, California on July 2, 2008. As of October 5, 2011, the chain operated 182 stores across Arizona, California, and Nevada.

File:P4010072-Hybrid Parking Only-Clovis CA.jpg

Parking spots reserved for hybrid cars at a store in Clovis, California.

California

On September 8, 2010, Fresh & Easy inaugurated four additional locations in California, marking the state's 100th store milestone. By August 2011, following the introduction of its first Northern California outlets, the total number of stores in California reached 128. This figure rose to 130 after opening sites in Brentwood, California and Antioch, California between January and March of 2012.

Arizona

Tesco revealed plans for multiple Arizona stores in July 2007. The first Fresh & Easy in Mesa, Arizona commenced operations on December 5, 2007. By August 2011, there were 28 active stores serving the Phoenix metropolitan area.

Nevada

The initial five Fresh & Easy outlets in Nevada launched within the Las Vegas Valley on November 11, 2007. As of August 2011, twenty-one stores were functioning throughout Las Vegas and surrounding communities. Numerous locations occupied former Rite-Aid Pharmacy sites.

Distribution centres

Tesco acquired a distribution facility spanning 130,000 square meters in an unincorporated area of Riverside County, California, situated near the cities of Riverside and Moreno Valley. This site was formerly part of the March Air Reserve Base. The company was also exploring options for an additional distribution hub in Stockton, California, to serve the Northern California market effectively, and had evaluated a potential location in Phoenix, Arizona.

On December 12, 2015, Industrial Assets Corp. together with Maynards Industries conducted a public auction for the Chapter 7 Bankruptcy Estate at the Riverside distribution centre.

Environmental goals

Fresh & Easy committed to constructing buildings certified under Leadership in Energy and Environmental Design (LEED). Their refrigerated transport trailers utilized hybrid electric-diesel technology. For the Riverside distribution centre, they arranged for a rooftop solar power installation designed to generate approximately 2.6 million kilowatt-hours annually—supplying about 20% of the facility’s energy requirements and reducing carbon dioxide emissions by 1,200 tons each year. At the time, this was anticipated to be among the largest such solar systems worldwide. Additionally, stores featured LED lighting in freezers, coolers, and exterior signage. Certain locations also provided designated parking spaces specifically for hybrid vehicles.

External links

• Case Study on Retail: Dissecting Tesco Fresh and Easy Neighborhood