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Owing $1 Million to NBPA, New Brunswick FreshGrocer Closes After Just 18 Months in Business

City Government and Store Employees Given Inaccurate Information About Closure
FreshGrocer Produce
The FreshGrocer supermarket was a barren wasteland yesterday, as the market's owner prepared to cut and run. Charlie Kratovil

NEW BRUNSWICK, NJ—TheFreshGrocer is cutting and running on the Hub City after a failed attempt to open their first supermarket in New Jersey.

After telling the city they would close on May 24, the store abruptly shut down for good at 1:30pm this afternoon.

The store stopped paying its $78,000 monthly rent after just two or three months, according to NJ.com.

As of last week, the company owed $1,001,700 to its landlord, the New Brunswick Parking Authority.

But because the entire supermarket was managed through a limited liability company, "New Brunswick Foods LLC," it is unlikely the back rent will ever be paid.

"The NBPA is currently considering all options," said Mitch Karon, Executive Director of the authority, which in February filed a notice of default in court against one of its biggest tenants.

Metro Philly Management, FreshGrocer's parent company owns six other supermarkets in Pennsylvania and Delaware, as well as several animals hospitals, pet resorts, and a country club.

Representatives of the city and the developer have said they are committed to finding another supermarket operator to replace FreshGrocer, which they once hailed as a "another New Brunswick success story."

In 2010, Mayor James Cahill announced ambitious plans for "Wellness Plaza," a nine-story parking garage that would add  a 50,000 square-foot supermarket on the ground floor and a state-of-the-art fitness center to the city's vibrant downtown.

Cahill, on his way to being re-elected to a sixth term as Mayor, had directed the developer to move forward on the project, even without a supermarket operator signed on.

By January 2011, however, the Parking Authority had found an operator that they thought was a good fit for New Brunswick: TheFreshGrocer.

The Mayor said he and the project's developer arrived at the decision after "interviewing" several supermarkets.

"When [New Brunswick Development Corporation President] Chris [Paladino] and I toured and interviewed a number of supermarkets to determine the best fit and option for New Brunswick, it was readily apparent that FreshGrocer was at the top of the list."

The powers that be worked hard to make the vision a reality, getting the store a valuable license to sell beer and wine, providing free office space for a worker hiring and training center, and giving three hours of free parking to any customer who spent $10 or more at the grocer.

The Parking Authority also spent millions buying up the valuable real estate across the street from the city's train station and demolishing six buildings including a four-story office that was once a garment factory.

The project cost $105.1 million in total.  Cahill said that it was funded by "conventional' bank financing, a combination of different tax credits, "private equity," and bonds "available through President Obama's economic recovery plan."

NEW BRUNSWICK AND THE "SUPERMARKET ARISTOCRACY"

The store was the first FreshGrocer in New Jersey, a state dominated by longstanding chains like Shop-Rite, Stop & Shop, PathMark and A&P.

FreshGrocer seemed like a good fit, because of its experience operating stores near college campuses in Philadelphia.

The grand opening of a new FreshGrocer store near Temple University attracted First Lady Michelle Obama, who used the opportunity to promote her childhood obestity initiative.

Years later, at the November 9, 2012 grand opening in New Brunswick, Mayor Cahill praised the small chain and characterized them as a community partner that "gets it."

FreshGrocer CEO Pat Burns told the hundreds who had assembled to watch his market open, "Starting in the next ten minutes, we will never close."

Originally open 24 hours a day, the store cut back those hours this January just over a year after they opened. New Brunswick Today broke the story of the grocer's huge debt one month later.

Mayor Cahill said Burns "doubled down" on New Brunswick, by purchasing a $400,000 condominium in the Vue, a residential highrise just across the train tracks from FreshGrocer.

After the store's first few days in business, Burns was rarely seen in New Brunswick.

At the grand opening ceremony in 2012, Cahill and Paladino each lauded praise on one another, while slamming the supermarket chains that had eschewed New Brunswick for so long.

"The folks who are kind of the supermarket aristocracy of New Jersey, who think that all supermarkets should be out on some highway and have four nail salons connected to them and six acres of parking, were not cooperating," Chris Paladino told the crowd.

Paladino said his organization, which goes by the abbreviation DEVCO, had worked out all the details of the project, including "how to pay for it."  But the team still had not found a supermarket chain that wanted to open in the space.

Paladino had just told the mayor that they could get started as soon as they found a tenant, but then Cahill surprised him and "pulled the pin on the grenade," Paladino said.

"As I was walking out the door [Cahill] said, 'Just start building it.'" Paladino recounted.

"Without a tenant?" the developer shot back.

"And those of you who know the Mayor well, know that he's a big baseball fan.  So he delivered the line from the greatest baseball movie of all-time and he said, 'If you build it, they will come.'"

Cahill was also critical of the larger supermarket chains and their reluctance to invest in urban areas, saying the reason for it was "a mystery."

"While many supermarkets chains touted new urban models and design, they seemed to lack the will and the commitment to actually pull the trigger here, or anywhere in the state," said Cahill.

The mayor touted the Wellness Plaza FreshGrocer as New Jersey's first new urban supermarket "in a generation."

The original plan called for a rooftop garden, where vegetables would  be grown for sale downstairs in the market, and to restaurants in the surrounding neighborhood.

That part of the plan was nixed, replaced with more parking.

The public garage holds 1,275 cars, and allowed the Parking Authority to permanently close the enormous Ferren parking garage, a longtime home to the cars of commuters, county and court employees, jurors, and other visitors.

The grocer's departure leaves just three traditional supermarkets in New Brunswick: Aldi, Bravo and Foodtown. But dozens of other smaller stores including bodegas and farmer's markets help to fill the gaps in the city's food system.

Still, residents with their own cars have traditionally headed to neighboring towns like Franklin, East Brunswick or North Brunswick to shop for groceries.

SUDDEN LAYOFFS MAY HAVE VIOLATED FEDERAL LAW

According to the Worker Adjustment and Retraining Notification Act (WARN), most companies with 100 or more employees are required to provide notification 60 calendar days in advance of plant closings and mass layoffs.

Employees entitled to notice under WARN include managers and supervisors, as well as hourly and salaried workers.

"WARN requires that notice also be given to employees' representatives, the local chief elected official, and the state dislocated worker unit," according to the US Department of Labor website.

But, the law only counts employees who work more than 20 hours a week and have been with the company for at least six months, making it unclear if it applies in this case.

A city press release issued last week helps make the case that WARN does not apply, but does not provide independent verification of the company's claim.

"The Fresh Grocer has advised that fewer than 100 store employees will be affected by the closure," reads the release

Workers were given notice the store would close just ten days ago.  They said the word came from union reps and that they were told the store would be open for another 30 days.

Since NBT broke the story of the impending closure last week, employees say the store has been trying to find excuses to fire employees.

It soon became clear that the grocer would not last until May 24, the closing date they had given city officials.  Employees were assigned tasks like taking merchandise off the shelves and packing it into boxes, and told not to come back after they finished.

It is not clear if workers will be paid on Friday May 16, as scheduled.

The Mayor's Office statement said the workers "will be offered positions at other Fresh Grocer locations, according to the company," but the closest one is in Philadelphia, more than an hour away.

EMPLOYEES TREATED POORLY SINCE STORE OPENED

"One of our mission statements we started a few years back is really being involved in the community," CEO Pat Burns said at the grand opening.  "We believe that you have to be part of the fabric of the community."

"We hired over 300 associates from the neighborhood," Burns continued.  "Seventy percent of them live within a mile of the store, the other 30% within a 2-5 mile radius."

As we reported, FreshGrocer management privately blamed the store's unsustainability on unrealistic projections of revenue from food stamps, failing to account for the large number of potential shoppers that are non-citizens and therefore do not qualify for food stamps.

But ultimately the store failed for a variety of reasons like high prices and staff turnover, poor management and marketing efforts, a lack of products that appealed to the city's immigrant community, as well as some produce, hot foods, and other items that didn't live up to the store's "fresh" brand name.

"A lot of dirty and unfair things went on in this store behind closed doors that I hope come to light," said a former FreshGrocer department manager who resigned as the store's shelves began conspicuously thinning out earlier this year.

"The managers and directors of this place were unprofessional and disgusting. They promoted people and never gave them raises."

Within the first year, the store switched distributors from Minnesota-based Supervalu to Middlesex County-based Wakefern, the state's largest employer and owner of the Shop-Rite chain of stores.

In the deal, Wakefern also purchased theFreshGrocer brand name with the intention of using it for a new chain of urban stores.  Only one FreshGrocer officially became a Shop-Rite: the one at the company's coporate headquarters in Drexel Hill, PA.

While the Wakefern deal provided new hope to some involved in the troubled project, management took the opportunity to blame the workers, telling them it was their fault the store hadn't succeeded on its own and hinting there would be layoffs and cutbacks if the status quo didn't improve.

Burns discussed his values when it comes to being a boss in an orchestrated promotional interview with "CEO IntroNet," saying a new supermarket, "re-gentrifies the neighborhood as well as providing good healthy food."

"So you're really creating a community experience, a client experience, a customer experience, and an employee experience," says the faux reporter interviewing Burns in the video.  "Where did you learn this kind of approach to leadership?" 

Burns responded that he's grown in his career as a leader, becoming less "gruff" over time.

"You know, just treat your employees just like your brothers and sisters and talk to them and listen.  And just learn from them cause you'll learn a wealth of knowledge and help them when they need a helping hand.

"I just love helping people and helping our employees because it helps everyone quite honestly," Burns said.

"Sounds like a great strategy for business and for life," responds the interviewer.

WORKERS AND COMMUNITY FEEL COMPANY RIPPED THEM OFF

Today, employees were still waiting for answers from the corporate offices of Metro Philly Management, based in Drexel Hill, PA.

A meeting that was supposed to take place Tuesday morning with representatives of the corporation was cancelled, workers told New Brunswick Today.

One employee who was with the company from the very beginning said she was told to take a hike after they finished "cleaning and putting products in boxes," even though she had been scheduled to work additional hours.

Staff morale had been low from the very first week in business.

Though the 300-person staff received more than a month of training, once the store opened, roughly half of the workforce quit or was fired within a matter of days.

It didn't help matters when the company started asking workers who drove to work, most of whom made the federal minimum wage, to let the company deduct parking fees from their paychecks.

Employees were allowed to cash their checks at the store, but they were required to accept 10% of the check on a gift card that only worked at FreshGrocer.  Workers who lost their name tag were charged $3 for a new one.

Just over a month after the store officially opened for business, the United Food & Commercial Workers (UFCW) Local 1262, with the blessing of store management, held a meeting to unionize the workers.

The employees who made it to the out-of-town hotel where the December 19, 2012 meeting was held, narrowly voted to approve a UFCW-negotiated contract that was admittedly worse than that of the other unionized supermarkets in New Jersey.

Union officials said the contract, which would be in effect through 2019, was not as good as others because the chain was smaller and the the store was struggling.

But not much changed.  Although union representatives had pledged to do something about the paycheck deductions for parking passes, the status quo prevailed.

The company's exploitation of its workers and the New Brunswick community seemed to know no bounds.

According to one source, a jingle playing on the store's public address system since May of 2013 was written and produced by a local woman who goes by the stage name Lady Rootz and once worked in the store's hot foods department.

Although she granted permission for the company to play the jingle in the New Brunswick location only, "The company has been using the copy-written jingle throughout every Fresh Grocer location," says the source.

Complaints from Lady Rootz, who did not receive any compensation for her jingle, have fallen on deaf ears, says the source.

RETALIATION AND LABOR LAW VIOLATIONS

FreshGrocer management was so out of touch with New Jersey that they often failed to follow state labor laws.

They forced cashiers whose cash drawers were returned more than $5 short to pay the store the difference. Or else the employees would not receive their paychecks.

While the practice is legal in Pennsylvania, it is prohibited in New Jersey.

After a few hundred dollars went missing from the store's safe in December 2012, security staff couldn't solve the mystery and managers told workers the "investigation is continuing."

The investigation was never completed, but the seven workers in the cash office were each asked individually via telephone to cough up $58.42 to make up for the store's loss.  Or else: no paychecks.

The author of this article, one of the seven workers asked to pay down the missing money, was immediately demoted after refusing to agree to pay the money.

Store managers attempted to coerce this reporter to sign a document, the same form required of cashiers whose drawers were short, with two options: "I agree to pay this back," and "I do not agree to pay this back and I understand that effective immediately I will be placed on indefinite suspension pending termination upon the final count of this money at the main office."

After refusing to pay the "shortage," this reporter was permanently removed from leadership positions, and re-assigned to the most monotonous role on the front-end: supervising the store's self-checkout machines.

Local managers told this reporter it was a mistake to go over their head to corporate because Burns had been notified of the law-breaking.

Two weeks later, wheh the seven workers went to get their regular paychecks, they were told they had to pay down at least some of the "shortage" to keep their jobs.  Most of them did.

After putting up a fight, this reporter was paid but remained in the monotonous job, while the shortage policy was changed.

Burns, Paladino, Karon, City Council members, and a spokesperson for Mayor Cahill did not respond to a requests for comment emailed earlier this evening.

Editor's Note: The author of this article is a former employee of theFreshGrocer, part of the team that opened the store in November 2012.

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