DOMINICKS SUPERMARKETS INC, S-1, 1996-08-30

DOMINICKS SUPERMARKETS INC
S-1, 1996-08-30

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 30, 1996

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

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

DOMINICK'S SUPERMARKETS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 5411 94-3220603
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
</TABLE>

505 RAILROAD AVENUE
NORTHLAKE, ILLINOIS 60164
(708) 562-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

------------------------

THOMAS D. ROTI, ESQ.
GENERAL COUNSEL
DOMINICK'S SUPERMARKETS, INC.
505 RAILROAD AVENUE
NORTHLAKE, ILLINOIS 60164
(708) 562-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

------------------------

COPIES TO:

THOMAS C. SADLER, ESQ. MICHAEL A. BECKER, ESQ.
LATHAM & WATKINS CAHILL GORDON & REINDEL
633 WEST FIFTH STREET 80 PINE STREET
LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10005
(213) 485-1234 (212) 701-3000

------------------------

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 of
1933, check the following box. / /

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. / /

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. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------

CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
PROPOSED
TITLE OF EACH MAXIMUM AMOUNT OF
CLASS OF SECURITIES AGGREGATE REGISTRATION
TO BE REGISTERED OFFERING PRICE(1)(2) FEE
- ----------------------------------------------------------------------------------------------------
Common Stock, par value $.01.............................. $150,000,000 $51,725
</TABLE>

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(1) Includes an amount relating to shares that the Underwriters have the option
to purchase to cover over-allotments, if any.

(2) Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933.

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 OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED AUGUST 30, 1996
PROSPECTUS
, 1996

LOGO

DOMINICK'S SUPERMARKETS, INC.

COMMON STOCK

Of the shares of common stock (the "Common Stock") offered hereby
(the "Offering"), shares are being sold by Dominick's Supermarkets,
Inc. (the "Company") and shares are being sold by certain of the
Company's stockholders (the "Selling Stockholders"). See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders.

Prior to this Offering there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price of the
Common Stock will be between $ and $ per share. See
"Underwriting" for information relating to the factors considered in determining
the initial public offering price.

Application will be made to list the Common Stock on the New York Stock
Exchange under the symbol "DFF."

SEE "RISK FACTORS" COMMENCING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Per Share.................... $ $ $ $
Total (3).................... $ $ $ $
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</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.

(2) Before deducting expenses payable by the Company estimated at $ .

(3) The Selling Stockholders have granted to the Underwriters a 30-day option to
purchase up to additional shares of Common Stock at the Price
to the Public less Underwriting Discounts and Commissions, solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the total Price to the Public, Underwriting Discounts and Commissions,
Proceeds to the Company and Proceeds to Selling Stockholders will be
, , and , respectively. See
"Underwriting."

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of the shares of
Common Stock will be made in New York, New York on or about , 1996.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
BT SECURITIES CORPORATION

CHASE SECURITIES, INC.
<PAGE> 3

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. For purposes of this Prospectus, unless the context otherwise
requires, the "Company" refers to Dominick's Supermarkets, Inc. and its
consolidated subsidiaries, including its principal operating subsidiary,
Dominick's Finer Foods, Inc. ("Dominick's"). All references to fiscal years in
this Prospectus refer to the fiscal year ending on the Saturday closest to
October 31st of the year indicated (fiscal 1995 refers to the combined fiscal
periods of the Company and its predecessor for the 52 weeks ended October 28,
1995). The Company's fiscal year generally consists of three 12-week quarters
and a 16-week third quarter. All references to market share and demographic data
in this Prospectus are based upon industry publications and data developed by
the Company and, unless otherwise indicated, all references to numbers of stores
are as of August 3, 1996. Unless otherwise indicated, all information in this
Prospectus (i) assumes that the over-allotment option granted to the
Underwriters is not exercised and (ii) has been adjusted to reflect a 14.638 for
one stock split of the Common Stock which was effected prior to the date of this
Prospectus.

THE COMPANY

The Company has increased its market share among Chicago-area supermarkets
from 19.0% in 1989 to 25.4% in 1995. With the exception of Jewel Food Stores,
which had a 35.6% market share in 1995, no other supermarket operator in the
Chicago area has more than a 5% market share. The Chicago metropolitan area is
the nation's third largest Metropolitan Statistical Area with a reported
population of approximately 7.7 million people, approximately 2.8 million
households and a stable and diverse economic base which includes major
manufacturing, transportation, finance and other business centers. According to
the U.S. Bureau of the Census, the population of suburban Chicago, where nearly
80% of the Company's stores are located, has grown by approximately 12% since
1986. According to a recent report issued by the U.S. Department of Commerce, by
the year 2005 the Chicago area is also expected to have a population of 8.3
million residents and the largest increase in jobs of all of the nation's major
metropolitan areas. The Company believes that its existing market share and its
plans to add new stores will allow it to benefit from the continuing growth of
the Chicago area.

DOMINICK'S. The Company's Dominick's stores are full-service supermarkets
that emphasize quality, freshness and service. The Company classifies its
Dominick's stores into three categories:

Conventional Supermarkets. Dominick's 24 conventional supermarkets are
typically located in higher density population areas and average
approximately 43,400 square feet in size (including approximately 29,100
square feet of selling space). All of the Company's conventional
supermarkets include a variety of service departments typically found in
full-service supermarkets such as delicatessen, bakery, meat and seafood
departments, and a limited selection of health and beauty care products.
Many stores also feature salad bars, prepared foods, floral departments,
film processing and liquor.

Combination Food and Drug Stores. Dominick's 38 combination food and
drug stores average approximately 57,600 square feet in size (including
approximately 40,300 square feet of selling space). The combination food
and drug stores offer all products and services typically found in a
conventional supermarket and, by virtue of their large size, include a
full-service drug store complete with a pharmacy, a broader line of health
and beauty care products and a larger selection of seasonal merchandise.

3
<PAGE> 5

Fresh Stores. Dominick's 18 Fresh Stores are enhanced combination food
and drug stores designed to create a European-style fresh market atmosphere
and emphasize the store's visual appeal and quality merchandise perception.
The Company's Fresh Stores feature significant upgrades in store design and
fixtures and offer an expanded assortment of high quality fresh produce and
other perishables, a large selection of restaurant-quality prepared foods
for carry-out and in-store dining and a superior line of freshly baked
goods and pastry items. Fresh Stores also typically offer expanded
delicatessen, bakery, meat, seafood and floral departments and additional
service departments such as a gourmet coffee cafe. The first Fresh Store
was introduced in 1993 through the conversion of an existing conventional
store. A total of 14 stores have been converted to date, resulting in an
average increase in customer counts, sales per square foot and store
contribution margins for the converted stores over pre-conversion levels.
Converted Fresh Stores average approximately 53,000 square feet in size
(including approximately 39,300 square feet of selling space) while new
Fresh Stores are expected to average approximately 70,000 square feet
(including approximately 55,000 square feet of selling space). In addition
to the 14 Fresh Stores converted, four new Fresh Stores have been opened,
and an estimated 20 additional Fresh Stores are expected to be opened or
converted by the end of fiscal 1998.

OMNI. The Company's 17 Omni stores are high-volume, price impact
combination food and drug stores emphasizing low prices and a broad selection of
products while offering less extensive service departments than traditional
full-service supermarkets. Omni stores average approximately 92,300 square feet
(including approximately 65,300 square feet of selling space). Omni stores offer
modified everyday low prices and compete effectively with warehouse formats and
other discount retailers in the Chicago area. Omni stores have an approximate
7.2% market share, giving Omni the third largest market share among Chicago area
supermarkets on a stand-alone basis.

THE ACQUISITION. The Company was formed by The Yucaipa Companies
("Yucaipa") for the purpose of effecting the acquisition of Dominick's on March
22, 1995 (the "Acquisition"). Yucaipa is a private investment group specializing
in the acquisition and management of supermarket chains, and has investments in
and currently manages supermarket chains with total combined sales of
approximately $11 billion in their most recent fiscal year. Since the
Acquisition, the Company has increased its EBITDA margins for each fiscal
quarter, achieving a 5.4% margin in the 16-week period ended August 3, 1996 as
compared to 4.8% in the same period in fiscal 1995. Prior to the Acquisition,
Dominick's had been operated by Dominick DiMatteo, Jr., its founder, and his
family for approximately 70 years. Yucaipa, together with a group of
institutional investors, including affiliates of Apollo Advisors, L.P.
("Apollo"), and members of Dominick's management provided the common equity
financing for the Acquisition. See "The Acquisition."

GROWTH AND OPERATING STRATEGY

The Company's senior managers have, on average, over 20 years of experience
in the food retailing industry. Management, in conjunction with Yucaipa, has
formulated a strategic plan to increase sales and profitability consisting of
the following key elements:

ACCELERATE NEW STORE PROGRAM. From 1987 until 1993, the Company's store
development program was focused primarily on developing combination food and
drug stores or converting existing conventional Dominick's stores to the
combination format, closing underperforming stores and creating a critical mass
of Omni stores. From fiscal 1994 until the Acquisition, the Company's growth
plan was focused on the conversion of existing stores to the Fresh Store
concept. During that period, only one new store was opened. Since the
Acquisition, management and Yucaipa have developed a growth strategy designed to
emphasize the expansion of the Company's Dominick's store format in areas
currently underserved by the Company. As part of this strategy, management
undertook an aggressive plan to identify and develop new store sites and has
since opened three new Fresh Stores during the third quarter of fiscal 1996 and
expects to open four additional Fresh Stores during the fourth quarter of fiscal
1996. In addition, management expects to continue to grow the Company's store
base by opening nine Fresh Stores and one Omni store in fiscal 1997 and seven
Fresh Stores and one Omni store in fiscal 1998.

4
<PAGE> 6

EXPAND DOMINICK'S FRESH STORE CONCEPT. The results of the Company's 14
Fresh Store conversions have been highly favorable and have resulted in an
average increase in annualized sales of approximately 27% compared to such
stores prior to their conversion. It is currently anticipated that substantially
all of the Company's new Dominick's combination food and drug stores will be
Fresh Stores. A number of existing Dominick's conventional and combination
stores will also be converted to Fresh Stores over the next two years. In
addition, certain elements of the Fresh Store concept, including expanded
produce and perishable departments, are currently being incorporated into many
of the remaining Dominick's stores as part of the chain-wide emphasis on high
quality perishables. The Company believes that the expansion of its Fresh Store
concept through the addition of new stores and conversion of existing stores
should have a favorable impact on the Company's growth in sales and
profitability.

CONTINUE TO IMPROVE PROFIT MARGINS. At the time of the Acquisition,
management and Yucaipa identified areas of opportunity for operating
improvements which they believed would result in approximately $23 million of
annual cost reductions compared to pre-Acquisition levels. These included: (i)
purchasing improvements resulting in part from renegotiating vendor contracts
and coordinating its buying efforts with other Yucaipa-managed supermarket
chains, (ii) labor productivity improvements resulting from increased automation
of labor planning systems and changes in labor processes and procedures, (iii)
general and administrative expense and occupancy expense reductions and (iv)
other merchandising and buying improvements, including an increase in the
percentage of private label sales. The Company believes that, as of the end of
the third quarter of fiscal 1996, it had implemented operating improvements
which should provide, on an annualized basis, a level of cost savings
substantially equal to the $23 million estimated at the time of the Acquisition.
The Company believes that approximately $17 million of such cost savings are
reflected in its results of operations for the 52-week period ended August 3,
1996. In addition, since the Acquisition management has identified additional
potential cost savings and efficiencies which it plans to implement in future
periods. The Company believes that these cost savings, combined with the greater
number of Fresh Stores, should result in higher overall operating margins than
the Company has experienced historically.

The Company was incorporated in Delaware in 1995 and its principal
executive offices are located at 505 Railroad Avenue, Northlake, Illinois 60164,
telephone (708) 562-1000.

5
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered:
By the Company......................... shares
By the Selling Stockholders............ shares(1)
------------
Total.......................... shares(1)
------------
------------
Common Stock to be Outstanding After the
Offering............................... shares(2)
Use of Proceeds.......................... Of the estimated net proceeds of $ million
(based on an assumed initial public offering
price of $ per share), approximately
$50.4 million will be used to redeem the
Company's outstanding 15% Redeemable Exchangeable
Cumulative Preferred Stock; approximately $
million will be used, together with available
cash and borrowings under a new bank credit
facility (the "New Credit Facility"), to repay
all borrowings under Dominick's existing credit
facility (the "Old Credit Facility"); and
approximately $10.5 million will be used to
terminate the Company's obligations under its
consulting agreement with Yucaipa (see "Certain
Transactions" for a description of a new
management agreement). The Company will not
receive any of the proceeds from the sale of
shares by the Selling Stockholders.
Proposed NYSE Symbol..................... "DFF"
</TABLE>

- ------------------------------

(1) Assumes no exercise of the Underwriters' over-allotment option.

(2) Includes shares issuable upon the conversion of all outstanding shares of
non-voting Class B Common Stock (the "Class B Common Stock") which are
convertible into Common Stock on a one-for-one basis at the option of the
holder, subject to certain restrictions. See "Description of Capital Stock."
The shares of Class B Common Stock being sold by the Selling Stockholders
will be converted into shares of Common Stock at the time of the Offering.
Does not include 966,835 shares of Common Stock issuable upon the exercise
of options granted pursuant to the Company's 1995 Stock Option Plan, or an
additional 1,000,000 shares reserved for future issuance thereunder, or
shares of Common Stock issuable to Yucaipa upon exercise of the Yucaipa
Warrant (as defined herein). The Yucaipa Warrant will become exercisable
upon the consummation of the Offering at an exercise price of $20.73 per
share. Pursuant to the cashless exercise provisions of the Yucaipa Warrant,
upon exercise in full Yucaipa would be entitled to receive a number of
shares equal to the difference between 3,874,492 shares and the number of
shares having an aggregate market value at the time of exercise of $80.3
million (i.e., the aggregate exercise price). See "Management -- 1995 Stock
Option Plan" and "Description of Capital Stock -- Yucaipa Warrant."

RISK FACTORS

For a discussion of certain considerations relevant to an investment in the
Common Stock, see "Risk Factors" beginning on page 9.

6
<PAGE> 8

SUMMARY FINANCIAL INFORMATION AND OTHER DATA

The following summary financial information and other data should be read
in conjunction with the historical financial statements, the pro forma financial
statements and the related notes thereto included elsewhere in this Prospectus.
For purposes of the financial presentation below, the "Predecessor Company"
refers to Dominick's prior to the consummation of the Acquisition on March 22,
1995. The pro forma information set forth below gives effect to the Acquisition
and certain related events as though they had occurred on October 30, 1994. See
the Unaudited Pro Forma Financial Statements commencing on page P-1 of this
Prospectus.

<TABLE>
<CAPTION>
COMPANY
PREDECESSOR COMPANY ---------------------------------------------------
--------------------------
PRO FORMA LTM PRO FORMA
52 WEEKS ENDED 52 WEEKS 52 WEEKS 40 WEEKS 40 WEEKS
-------------------------- ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 29, OCTOBER 28, AUGUST 3, AUGUST 5, AUGUST 3,
1993 1994 1995 1996 1995 1996
----------- ----------- ----------- --------- ---------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA AND STORE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales................................ $2,330.2 $2,409.9 $2,433.8 $2,445.2 $ 1,889.1 $1,900.6
Gross profit......................... 515.2 538.4 552.1 564.7 423.7 437.0
Selling, general and administrative
expenses........................... 469.4 484.3 482.2 481.0 374.9 372.3
Operating income..................... 45.8 54.1 69.9 83.7 48.8 64.7
Interest expense..................... 34.1 30.0 72.4 73.2 56.1 53.4
Net income (loss)(a)................. $ 7.6 $ 7.5 (10.6) 1.8 (12.6) 3.1
Preferred stock accretion............ 6.3 6.7 4.8 5.2
Net loss available to common
stockholders....................... $ (16.9) $ (4.9) $ (17.4) $ (2.1)
SELECTED OPERATING DATA, AS ADJUSTED
FOR THE OFFERING(B):
Interest expense.....................
Net income...........................
Income (loss) per common share(c)....
Weighted average common and common
equivalent shares outstanding(c)...
OTHER FINANCIAL DATA:
Depreciation and amortization........ $ 51.1 $ 52.9 $ 48.2 $ 42.3 $ 35.6 $ 34.7
Capital expenditures................. 31.1 60.1 45.5 28.8 31.9 25.3
EBITDA (as adjusted)(d).............. 98.3 112.0 121.8 128.5 87.2 100.9
STORE DATA:
Fresh Store conversions.............. 0 6 8 1 7 0
Stores opened during period.......... 1 1 0 4 0 4
Stores closed during period.......... (1) (1) (4) (4) (4) (4)
Stores open at end of period......... 101 101 97 97 97 97
Comparable store sales growth........ (1.6)% 2.9% 1.8% 1.2% 2.0% 1.1%
Average weekly sales per store (in
thousands)......................... $ 448 $ 466 $ 481 $ 489 $ 484 $ 494
Average sales per selling square
foot............................... $ 601 $ 610 $ 613 $ 614 $ 619 $ 619
Total selling square feet (at end of
period, in thousands).............. 3,969 4,039 4,008 4,074 3,984 4,074
</TABLE>

<TABLE>
<CAPTION>
AUGUST 3, 1996
---------------------------
OCTOBER 28, 1995 ACTUAL AS ADJUSTED(E)
---------------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital deficit............................................ $ (34.2) $ (6.0) $
Total assets....................................................... 1,100.2 1,094.9
Total debt......................................................... 599.4 604.7
Redeemable preferred stock......................................... 43.7 49.0
Stockholders' equity............................................... 96.2 94.1
</TABLE>

7
<PAGE> 9

- ------------------------------

(a) Net income (loss) for the 52 weeks ended October 29, 1994 reflects an
extraordinary loss of $6.3 million, net of applicable income tax benefit of
$3.9 million, resulting from the retirement of $60 million principal amount
of Dominick's 11.78% Senior Notes.

(b) Selected operating data, as adjusted for the Offering, reflects the
consummation of the sale of the Common Stock offered hereby and the
application of the estimated net proceeds therefrom, as well as certain
related transactions described under "Use of Proceeds," as if such
transactions had occurred at the beginning of the applicable period. Such
adjusted operating data does not reflect an anticipated charge to earnings
associated with the termination of the existing consulting agreement and the
anticipated write-off of deferred debt issuance costs in connection with the
refinancing of the Old Credit Facility. See footnote (e) below.

(c) Income (loss) per common share, as adjusted for the Offering, is computed
based upon the weighted average number of shares outstanding during the
period and gives effect to the issuance of the shares of Common Stock being
offered hereby by the Company. In loss periods, dilutive equivalent shares
are excluded as the effect would be anti-dilutive.

(d) EBITDA (as adjusted) represents income (loss) before interest expense,
income taxes, depreciation and amortization, seller transaction expenses,
SARs expenses and termination costs, net equipment write-offs related to
closed stores and remodels, the LIFO charge, restructuring charges,
extraordinary loss on extinguishment of debt and cumulative effect of
accounting change. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income, net income or cash flow from
operating activities (as determined in accordance with generally accepted
accounting principles) and should not be construed as an indication of the
Company's operating performance or as a measure of liquidity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

(e) As adjusted to give effect to the issuance of the Common Stock offered
hereby and the application of the net proceeds therefrom, together with the
anticipated utilization of existing cash and borrowings under the New Credit
Facility. See "Use of Proceeds." Stockholders' equity is adjusted to reflect
an anticipated charge to earnings of $6.3 million (net of applicable income
tax benefit of $4.2 million) associated with the termination of the existing
consulting agreement and an anticipated extraordinary loss resulting from
the write-off of approximately $6.4 million (net of applicable income tax
benefit of $4.2 million) of deferred financing costs in connection with the
repayment of the Old Credit Facility.

8
<PAGE> 10

RISK FACTORS

Prospective investors should carefully consider the following factors, in
addition to the other information contained in this Prospectus, in evaluating
the Company and its business before purchasing shares of the Common Stock
offered hereby.

LEVERAGE AND DEBT SERVICE

At August 3, 1996, as adjusted to give effect to the Offering and the
application of the net proceeds therefrom, the Company's consolidated total
indebtedness and total stockholders' equity would have been $ million and
$ million, respectively. See "Capitalization." In addition, the Company's
balance sheet at August 3, 1996 reflected goodwill of $422.7 million. As of
August 3, 1996, pro forma for the Offering and certain related transactions, the
Company would have had $ million available for borrowing under the New
Revolving Facility (as defined). The Company's ability to make scheduled
payments of the principal of, or interest on, or to refinance, its indebtedness
and to make scheduled payments under its operating leases depends on its future
performance, which to a certain extent is subject to economic, financial,
competitive and other factors beyond its control. Based upon the current level
of operations, management believes that available cash flow, together with
available borrowings under the New Credit Facility and other sources of
liquidity, including proceeds from sale-leaseback transactions, will be adequate
to meet the Company's anticipated requirements for working capital, capital
expenditures, interest payments and scheduled principal payments under the New
Credit Facility and the Company's other indebtedness. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." There can be no assurance,
however, that the Company's business will continue to generate cash flow at or
above current levels or that anticipated growth will materialize. If the Company
is unable to meet its obligations from such sources, the Company may be required
to refinance all or a portion of its existing debt, sell assets or obtain
additional financing. There can be no assurance that any such refinancing would
be possible or that any such sales of assets or additional financing could be
completed.

LABOR RELATIONS; EXPIRED UNION CONTRACTS

Approximately 91% of the Company's employees are unionized. The Company's
principal union contracts with the Dominick's retail clerks and the Omni
meatcutters which cover approximately 53% and 3% of the Company's employees,
respectively, expired in July 1996 and no new agreements have been reached. The
Company and the respective unions representing such employees are negotiating
the terms of new contracts. While the Company believes that its relations with
its employees are good, a prolonged labor dispute (which could include a work
stoppage) would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Employees and
Labor Relations."

COMPETITION

The supermarket industry is highly competitive and characterized by narrow
profit margins. The Company's competitors include national and regional
supermarket chains, independent and specialty grocers, drug and convenience
stores, warehouse club stores, deep discount drug stores and supercenters.
Supermarket chains generally compete on the basis of location, quality of
products, service, price, product variety and store condition. The Company
regularly monitors its competitors' prices and adjusts its prices and marketing
strategy as management deems appropriate in light of existing conditions. There
can be no assurance that new competitors will not enter the supermarket industry
or that the Company can maintain its current market share. See
"Business--Competition."

PENDING LITIGATION

On March 16, 1995, a lawsuit was filed in the United States District Court
for the Northern District of Illinois against Dominick's by two employees of
Dominick's. The plaintiff's original complaint asserted allegations of gender
discrimination and sought compensatory and punitive damages in an unspecified
amount. The plaintiffs filed an amended complaint on May 1, 1995. The amended
complaint added four additional plaintiffs and asserted allegations of gender
and national origin discrimination. The plaintiffs filed a second

9
<PAGE> 11

amended complaint on August 16, 1996 adding three additional plaintiffs. There
are currently several outstanding motions before the court, including the
plaintiffs' motion for class certification. The parties are conducting discovery
with respect to the pending motion for class certification. The Company believes
that there is no merit to the allegations made by the plaintiffs and plans to
vigorously defend this lawsuit. Due to the numerous legal and factual issues
which must be resolved during the course of this litigation, however, the
Company is unable to predict the ultimate outcome of this lawsuit. If Dominick's
were held liable for the alleged discrimination, it could be required to pay
monetary damages which, depending on the outcome of the class certification
motion (and the size of any class certified), the theory of recovery or the
resolution of the plaintiffs' claims for compensatory and punitive damages,
could be substantial. See "Business -- Legal Proceedings."

FORWARD-LOOKING STATEMENTS

When used in this Prospectus, the words "estimate," "expect," "project" and
similar expressions are intended to identify forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such statements are subject to certain risks and
uncertainties, including those discussed below, that could cause actual results
to differ materially from those projected. These forward-looking statements
speak only as of the date hereof. All of these forward-looking statements are
based on estimates and assumptions made by management of the Company, which
although believed to be reasonable, are inherently uncertain and difficult to
predict; therefore, undue reliance should not be placed upon such estimates.
There can be no assurance that the savings or other benefits anticipated in
these forward-looking statements will be achieved. The following important
factors, among others, could cause the Company not to achieve the cost savings
or other benefits contemplated herein or otherwise cause the Company's results
of operations to be adversely affected in future periods: (i) continued or
increased competitive pressures from existing competitors and new entrants,
including price-cutting strategies; (ii) unanticipated costs related to the
growth and operating strategy; (iii) loss or retirement of key members of
management; (iv) inability to negotiate more favorable terms with suppliers or
to improve working capital management; (v) increases in interest rates or the
Company's cost of borrowing or a default under any material debt agreements;
(vi) inability to develop new stores in advantageous locations or to
successfully convert existing stores; (vii) prolonged labor disruption; (viii)
deterioration in general or regional economic conditions; (ix) adverse state or
federal legislation or regulation that increases the costs of compliance, or
adverse findings by a regulator with respect to existing operations; (x) loss of
customers as a result of the conversion of store formats; (xi) adverse
determinations in connection with pending or future litigation or other material
claims and judgments against the Company; (xii) inability to achieve future
sales levels or other operating results that support the cost savings and (xiii)
the unavailability of funds for capital expenditures. Many of such factors are
beyond the control of the Company. In addition, there can be no assurance that
unforeseen costs and expenses or other factors will not offset or adversely
affect the projected cost savings or other benefits in whole or in part.

GEOGRAPHIC CONCENTRATION

All of the Company's stores are located in the greater Chicago metropolitan
area and thus the performance of the Company will be particularly influenced by
developments in this area. The Chicago area has experienced relatively stable
economic conditions over the past several years, but a significant economic
downturn in the Chicago metropolitan area could have a material adverse effect
on the Company's business, financial condition or results of operations.

LIMITATIONS ON ACCESS TO CASH FLOW OF DOMINICK'S

The Company is a holding company which conducts its business through its
wholly owned subsidiary, Dominick's, and its subsidiaries. Under the terms of
the New Credit Facility, the indenture governing its 10 7/8% Senior Subordinated
Notes due 2005 (the "Note Indenture") and the other instruments governing its
indebtedness, Dominick's is restricted in its ability to pay dividends or
otherwise distribute cash to the Company. See "Description of Certain
Indebtedness."

10
<PAGE> 12

ENVIRONMENTAL MATTERS

The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes and (ii) impose liability
for the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous materials (together,
"Environmental Laws"). The Company believes that it currently conducts its
operations, and in the past has operated its business, in substantial compliance
with applicable Environmental Laws. From time to time, operations of the Company
have resulted or may result in noncompliance with or liability for cleanup
pursuant to Environmental Laws. However, the Company believes that any such
noncompliance or liability under current Environmental Laws would not have a
material adverse effect on its business, financial condition or results of
operations. See "Business--Environmental Matters."

CONTROL BY MAJOR STOCKHOLDERS

Upon consummation of the Offering, certain affiliates of Yucaipa and Apollo
will have beneficial ownership of approximately % and %, respectively,
of the outstanding Common Stock (including, with respect to Apollo, 2,455,224
shares of Class B Common Stock). Pursuant to a stockholders' agreement (the
"Stockholders Agreement") entered into by such affiliates of Yucaipa, Apollo and
certain other stockholders of the Company, Yucaipa and Apollo have the right to
nominate six and three directors, respectively, to the boards of directors of
the Company and Dominick's and are required to vote their respective shares of
Common Stock to elect the directors nominated by the other party as well as for
the two independent directors who will be appointed to the boards following the
consummation of this Offering. As a result of the ownership structure of the
Company and the contractual commitments described above, the voting and
management control of the Company is highly concentrated. As a result of its
ability to nominate a majority of the members of the board of directors, Yucaipa
has the ability to direct the actions of the Company with respect to matters
such as the payment of dividends, material acquisitions and dispositions and
other extraordinary corporate transactions. Concurrently with the consummation
of this Offering, Yucaipa will enter into a new management agreement with the
Company and Dominick's, pursuant to which Yucaipa will render certain management
and advisory services to the Company and Dominick's and will receive fees for
such services. Yucaipa will also receive a payment in connection with the
termination of an existing consulting agreement. See "Certain Transactions,"
"Principal and Selling Stockholders" and "Description of Capital Stock."

ANTI-TAKEOVER PROVISIONS

The Company's Restated Certificate of Incorporation and Bylaws contain
provisions that could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of the Company. These provisions, among other things, establish certain
advance notice procedures for nomination of candidates for election as directors
and for stockholder proposals to be considered at stockholders' meetings and
provide that only the Board of Directors, the Chief Executive Officer of the
Company or the holders of a majority of the Company's outstanding Common Stock
may call special meetings of the stockholders. In accordance with the terms of
the Company's Restated Certificate of Incorporation, effective upon the closing
of the Offering, the terms of office of the Board of Directors will be divided
into three classes serving staggered three-year terms. The Company's Restated
Certificate of Incorporation also provides that the authorized number of
directors may be changed only by resolution of the Board of Directors and,
although directors of the Company may be removed for cause by the affirmative
vote of the holders of a majority of the Common Stock, the Company's Restated
Certificate of Incorporation provides that holders of 66 2/3% of the Common
Stock must vote to approve the removal of a director without cause. In addition,
the Company's Restated Certificate of Incorporation authorizes the Board of
Directors to issue Preferred Stock (as defined) without stockholder approval and
upon such terms as the Board of Directors may determine. While no shares of
Preferred Stock will be outstanding upon the consummation of this Offering and
the Company has no present plans to issue any shares of Preferred Stock, the
rights of the

11
<PAGE> 13

holders of Common Stock will be subject to, and may be adversely affected by,
the rights of any holders of Preferred Stock that may be issued in the future.
See "Description of Capital Stock."

NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market will develop
or be sustained after the Offering. The initial public offering price will be
determined by negotiations between the Company and the Representatives (as
defined), and there can be no assurance that the market price of the Common
Stock after the Offering will equal or exceed the initial public offering price.
See "Underwriting" for information relating to the factors considered in
determining the initial public offering price. Following the consummation of the
Offering, the market price of the Common Stock could be subject to significant
fluctuations in response to variations in results of operations, general
economic and market conditions and other factors.

SUBSTANTIAL DILUTION

Purchasers of Common Stock offered hereby will experience substantial
dilution of $ per share in pro forma net tangible book value per share
of Common Stock from the initial public offering price. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

There will be shares of Common Stock outstanding immediately
following consummation of the Offering. The shares of Common Stock
offered hereby will be freely tradeable without restriction or registration
under the Securities Act by persons other than "affiliates" (as defined in the
Securities Act) of the Company. The remaining shares of outstanding
Common Stock and Class B Common Stock are "restricted securities" under the
Securities Act and may only be sold pursuant to an effective registration
statement under the Securities Act or an applicable exemption from the
registration requirements of the Securities Act, including Rule 144 thereunder.
Holders of 12,124,924 shares of Common Stock and Class B Common Stock have
certain registration rights. In connection with this Offering, all of the
existing holders of Common Stock and Class B Common Stock and all of the
directors and executive officers of the Company have agreed not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of their
shares of Common Stock or Class B Common Stock of the Company or any securities
convertible into or exercisable or exchangeable for such Common Stock or Class B
Common Stock, or in any other manner transfer all or a portion of the economic
consequences associated with the ownership of such Common Stock or Class B
Common Stock, or to cause a registration statement covering any shares of Common
Stock or Class B Common Stock to be filed, for a period of 180 days after the
date of this Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. See "Shares Eligible for Future Sale." Upon the
expiration of such lock-up period, there will be shares of Common
Stock (including Common Stock issuable upon conversion of the Class B Common
Stock, but excluding shares issuable upon exercise of the Yucaipa Warrant or any
employee stock options) eligible for sale subject to certain volume and other
limitations of Rule 144 under the Securities Act. (See "Description of Capital
Stock -- Yucaipa Warrant.") No prediction can be made as to the effect, if any,
that future sales of shares of Common Stock or the availability of shares for
future sale will have on the market price of shares of Common Stock prevailing
from time to time. Sales of substantial amounts of Common Stock (including
shares issuable upon the exercise of stock options), or the perception that such
sales could occur, could adversely affect prevailing market prices for the
Common Stock.

12
<PAGE> 14

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby (after deducting underwriting discounts and estimated expenses of the
Offering) are estimated to be approximately $ million, assuming an initial
public offering price of $ per share. The actual net proceeds will vary
if the actual initial public offering price or the estimated expenses are
different. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders.

The Company will use approximately $50.4 million of the estimated net
proceeds to redeem all of the Company's outstanding 15% Redeemable Exchangeable
Cumulative Preferred Stock, and pay all accrued dividends thereon. Approximately
$ million of net proceeds, together with available cash and borrowings under
the New Credit Facility, will be used to repay all outstanding borrowings under
the Old Credit Facility, together with accrued interest thereon. The remaining
$10.5 million of such estimated net proceeds will be used to terminate the
Company's obligations under its existing consulting agreement with Yucaipa. The
New Credit Facility will provide the Company with additional working capital
availability to support, among other things, its strategy to build new stores
and to continue remodeling existing stores. The Old Credit Facility was used to
fund a portion of the purchase price in the Acquisition and to provide working
capital. Portions of the Old Credit Facility mature annually on March 31 of
2001, 2002 and 2003 and a portion matures on September 30, 2003. For the 40
weeks ended August 3, 1996, the borrowings under the Old Credit Facility had an
average blended interest rate of 9.0%. Pending application of the net proceeds
for the purposes specified above, they will be invested in short-term,
interest-bearing obligations.

DIVIDEND POLICY

The Company anticipates that all earnings in the foreseeable future will be
retained to finance the continuing development of its business and that it will
not pay any dividends in the foreseeable future. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, future earnings, the success of the Company's
business activities, capital requirements, the general financial condition of
the Company and general business conditions. The New Credit Facility will
restrict the ability of the Company to pay dividends and the New Credit Facility
and the Note Indenture will restrict the ability of Dominick's to pay dividends
or otherwise distribute cash to the Company. See "Description of Certain
Indebtedness."

13
<PAGE> 15

DILUTION

The net tangible book value of the Company at August 3, 1996 was
$ , or $ per share of Common Stock. Net tangible book value
per share is equal to the Company's total tangible assets less its total
liabilities, divided by the total number of outstanding shares of Common Stock.
After giving effect to the sale of shares of Common Stock offered
hereby (at an assumed initial public offering price of $ per share) and
the receipt and application of the net proceeds therefrom, the pro forma net
tangible book value of the Company at August 3, 1996 would have been
$ , or $ per share. This represents an immediate increase in
such net tangible book value of an additional $ per share to the
existing stockholders and an immediate dilution of $ per share to new
stockholders purchasing shares in the Offering. The following table illustrates
this dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share.................... $
Net tangible book value per share before the Offering.... $
Increase per share attributable to new stockholders......
Pro forma net tangible book value per share after the
Offering.................................................
Dilution per share to new stockholders..................... $
======
</TABLE>

The following table summarizes (as of August 3, 1996) the differences
between the existing stockholders and the new stockholders with respect to the
number of shares of Common Stock offered hereby, the total consideration paid to
the Company and the average price paid per share (assuming an initial offering
price of $ per share).

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- -------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)................... % $ % $
New stockholders(1)........................ $
------- --- -------- ---
Total............................ % $ %
======= === ======== ===
</TABLE>

The calculations in the tables set forth above (i) assume no exercise of
the Underwriters' over-allotment option and (ii) do not reflect a total of
1,000,000 shares reserved for issuance pursuant to the Company's 1995 Stock
Option Plan or any shares issuable upon exercise of the Yucaipa Warrant.
- ---------------

(1) Sales by Selling Stockholders in the Offering will reduce the number of
shares held by existing stockholders to or approximately %
(approximately % if the Underwriters' over-allotment option is exercised
in full) and will increase the number of shares to be purchased by new
stockholders to or approximately % ( shares or
approximately % if the Underwriters' over-allotment option is exercised in
full) of the total number of shares of Common Stock outstanding after the
Offering. See "Principal and Selling Stockholders."

14
<PAGE> 16

CAPITALIZATION

The following table sets forth the unaudited consolidated cash and cash
equivalents, the current portion of long-term debt and the capitalization of the
Company at August 3, 1996, and as adjusted to give effect to the Offering and
the application of the net proceeds therefrom, together with the utilization of
existing cash and borrowings under the New Credit Facility to repay all
indebtedness under the Old Credit Facility. See "Use of Proceeds." This table
should be read in conjunction with the consolidated financial statements of the
Company and related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AUGUST 3, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents............................................. $ 66.8 $
======== ========
Current portion of long-term debt and capital lease obligations....... $ 9.8 $
======== ========
Long-term debt:
New Credit Facility(a):
New Term Loan.................................................... $ -- $
New Revolving Facility........................................... --
Old Credit Facility................................................. 268.1
Capital lease obligations........................................... 121.1
Mortgages, industrial revenue bonds and other....................... 5.7
Senior Subordinated Notes due 2005.................................. 200.0
-------- --------
Total long-term debt........................................ $ 594.9 $
-------- --------
15% Redeemable Exchangeable Cumulative Preferred Stock, Series A, $.01
par value, 40,000 shares authorized, issued and outstanding; no
shares issued and outstanding as adjusted(b)........................ 49.0
Stockholders' equity:
Common Stock, $.01 par value, 36,594,895 shares authorized,
7,012,607 shares
issued and outstanding; shares issued and outstanding,
as adjusted(c)................................................... --
Class B Common Stock, $.01 par value, 36,594,895 shares authorized,
8,434,392 shares issued and outstanding; shares issued
and outstanding, as adjusted..................................... --
Additional paid-in capital.......................................... 107.8
Retained earnings (deficit)(d)...................................... (13.8)
-------- --------
Total stockholders' equity(d).................................... 94.0
-------- --------
Total capitalization........................................ $ 737.9 $
======== ========
</TABLE>

- ------------------------------

(a) The New Credit Facility will provide a $100 million term loan and a $225
million line of credit which will be available for working capital and
general corporate purposes. Up to $50 million of the Revolving Credit
Facility may be used to support commercial and standby letters of credit.
The letters of credit will be used to cover workers' compensation
contingencies and for other purposes permitted under the New Credit
Facility. Letters of credit for approximately $17.2 million were issued
under the Old Credit Facility at August 3, 1996. See "Description of Certain
Indebtedness."

(b) Upon redemption of the 15% Redeemable Exchangeable Cumulative Preferred
Stock, concurrently with the consummation of the Offering, the Company will
have 200,000 shares of Preferred Stock authorized, none of which will be
issued and outstanding.

(c) Does not include 966,835 shares of Common Stock issuable upon the exercise
of options granted pursuant to the Company's 1995 Stock Option Plan, or an
additional 1,000,000 shares reserved for future issuance thereunder, or
shares of Common Stock issuable to Yucaipa upon exercise of the Yucaipa
Warrant. The Yucaipa Warrant will be exercisable upon the consummation of
this Offering at an exercise price of $20.73 per share. Pursuant to the
cashless exercise provisions of the Yucaipa Warrant, upon exercise in full
Yucaipa would be entitled to receive a number of shares equal to the
difference between 3,874,492 shares and the number of shares having an
aggregate market value at the time of exercise of $80.3 million (i.e., the
aggregate exercise price). See "Management -- 1995 Stock Option Plan" and
"Description of Capital Stock -- Yucaipa Warrant."

(d) Stockholders' equity, as adjusted, gives effect to an anticipated charge to
earnings of $6.3 million (net of applicable income tax benefit of $4.2
million) resulting from the termination of the existing consulting agreement
and an anticipated extraordinary loss of $6.4 million (net of applicable
income tax benefit of $4.2 million) resulting from the write-off of deferred
financing costs in connection with the repayment of the Old Credit Facility.

15
<PAGE> 17

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth selected historical financial data of the
Company as of and for the 52 weeks ended November 2, 1991, the 52 weeks ended
October 31, 1992, the 52 weeks ended October 30, 1993, the 52 weeks ended
October 29, 1994 and the 32 weeks ended October 28, 1995, which, together with
the operating and other financial data for the 20 weeks ended March 21, 1995,
have been derived from the financial statements audited by Ernst & Young LLP,
independent auditors. The selected historical balance sheet data as of March 21,
1995 and the selected historical financial data as of and for the 40 weeks ended
August 3, 1996 have been derived from unaudited interim consolidated financial
statements which, in the opinion of management, reflect all material
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such data. The pro forma information set forth below for
the 52 weeks ended October 28, 1995 and the 40 weeks ended August 5, 1995 gives
effect to the Acquisition and certain related events as though they had occurred
on October 30, 1994. The following information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," the historical consolidated financial statements of the Company and
the Predecessor Company, together with the related notes thereto, and the
Unaudited Pro Forma Financial Statements included elsewhere in this Prospectus.

Dominick's was acquired by the Company on March 22, 1995. The historical
financial statements for the 20 weeks ended March 21, 1995 and all prior periods
reflect the Predecessor Company results of operations. The historical results of
operations for the 32 weeks ended October 28, 1995 and the 40 weeks ended August
3, 1996 are those of the Company following the Acquisition.

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
---------------------------------------------------- ---------------------------------------------------
PRO FORMA PRO FORMA
52 WEEKS ENDED 20 WEEKS 32 WEEKS 52 WEEKS 40 WEEKS 40 WEEKS
----------------------------------------- ENDED ENDED ENDED ENDED ENDED
NOV. 2, OCT. 31, OCT. 30, OCT. 29, MAR. 21, OCT. 28, OCT. 28, AUG. 5, AUG. 3,
1991 1992 1993 1994 1995 1995 1995 1995 1996
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT SHARE AND STORE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales.............. $2,245.8 $2,285.7 $2,330.2 $2,409.9 $958.8 $ 1,475.0 $ 2,433.8 $ 1,889.1 $ 1,900.6
Cost of sales...... 1,775.6 1,789.0 1,815.0 1,871.5 747.6 1,136.6 1,881.7 1,465.4 1,463.6
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Gross profit....... 470.2 496.7 515.2 538.4 211.2 338.4 552.1 423.7 437.0
Selling, general
and
administrative
expenses......... 427.9 448.6 469.4 484.3 191.9 293.9 482.2 374.9 372.3
SARs termination
costs(a)......... -- -- -- -- 26.2 -- -- -- --
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Operating income
(loss)........... 42.3 48.1 45.8 54.1 (6.9) 44.5 69.9 48.8 64.7
Interest expense... 35.4 36.0 34.1 30.0 11.3 46.0 72.4 56.1 53.4
Restructuring
charges(b)....... 4.8 -- -- -- -- --
Income tax expense
(benefit)........ (0.5) 4.5 4.1 9.3 (7.1) 1.9 3.5 0.7 8.2
Extraordinary
item(c).......... -- -- -- 6.3 -- 4.6 4.6 4.6 --
Cumulative effect
of accounting
change........... -- -- -- 1.0 -- -- -- -- --
-------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
Net income
(loss)........... $ 2.6 $ 7.6 $ 7.6 $ 7.5 $(11.1) (8.0) (10.6 ) (12.6 ) 3.1
======= ======= ======= ======= =========
Preferred stock
accretion........ 3.7 6.3 4.8 5.2
---------- ---------- ---------- ----------
Net loss available
to common
stockholders..... $ (11.7) $ (16.9 ) $ (17.4 ) $ (2.1)
========= ========== ========== =========
PER SHARE DATA:
Loss per common
share(d)......... $ (0.76) $ (1.10 ) $ (1.13 ) $ (0.14)
========= ========== ========== =========
Weighted average
common and common
equivalent shares
outstanding(d)... 15,385,221 15,418,773 15,405,805 15,462,002
========= ========== ========== =========
OTHER FINANCIAL DATA:
Depreciation and
amortization..... $ 45.7 $ 49.2 $ 51.1 $ 52.9 $ 20.5 $ 25.4 $ 48.2 $ 35.6 $ 34.7
Capital
expenditures..... 62.5 39.3 31.1 60.1 22.4 23.1 45.5 31.9 25.3
EBITDA (as
adjusted)(e)..... 91.6 98.5 98.3 112.0 43.2 71.6 121.8 87.2 100.9
Cash flow from
operating
activities....... 19.2 47.9 89.9 73.2 20.0 61.8 32.4
Cash flow from
investing
activities....... (60.4) (34.3) (27.9) (55.5) (14.6) (464.6) (25.0)
Cash flow from
financing
activities....... 44.5 (9.2) (50.6) (29.4) (6.2) 441.1 3.8
STORE DATA:
Fresh Store
conversions...... 0 0 0 6 5 3 8 7 0
Stores opened
during the
period........... 6 5 1 1 0 0 0 0 4
Stores closed
during the
period........... (7) (2) (1) (1) (4) 0 (4 ) (4 ) (4)
Stores open at end
of period........ 98 101 101 101 97 97 97 97 97
Comparable store
sales growth..... (0.3)% (3.4)% (1.6)% 2.9% 2.4% 1.5% 1.8 % 2.0 % 1.1%
Average weekly
sales per store
(in thousands)... $ 441 $ 466 $ 448 $ 466 $ 484 $ 480 $ 481 $ 484 $ 494
Average sales per
selling square
foot............. $ 634 $ 611 $ 601 $ 610 $ 627 $ 606 $ 613 $ 619 $ 619
Total selling
square feet (at
end of period, in
thousands)....... 3,580 3,788 3,969 4,039 3,976 4,008 4,008 3,984 4,074
BALANCE SHEET DATA
(END OF PERIOD):
Working capital
surplus
(deficit)........ $ 15.0 $ 24.0 $ 2.0 $ (22.3) $(21.5) $ (34.2) $ (6.0)
Total assets....... 680.7 693.3 676.6 669.0 653.2 1,100.2 1,094.9
Total goodwill..... -- -- -- -- -- 419.3 422.7
Total debt......... 323.9 329.6 283.6 255.7 250.3 599.4 604.7
Redeemable
preferred
stock............ -- -- -- -- -- 43.7 49.0
Stockholders'
equity........... 97.8 103.5 110.2 116.7 104.7 96.2 94.1
</TABLE>

16
<PAGE> 18

- ------------------------------

(a) In connection with the Acquisition, the Company discharged certain
obligations under its stock appreciation rights ("SARs") plan by making
payments to plan participants. Such amount is considered an acquisition cost
for purposes of calculating the purchase price paid for the Company of $693
million.

(b) The $4.8 million restructuring charge recorded in fiscal 1991 consisted of
charges related to the closure of eight underperforming stores and early
retirement or termination of related personnel.

(c) Net income for the 52 weeks ended October 29, 1994 reflects an extraordinary
loss of $6.3 million, net of applicable income tax benefit of $3.9 million,
resulting from the retirement of $60 million principal amount of Dominick's
11.78% Senior Notes. Net income for the 32 weeks ended October 28, 1995
reflects an extraordinary loss of $4.6 million, net of applicable income tax
benefit of $2.8 million, resulting from the repayment of $150 million
principal amount under a senior subordinated credit facility and the partial
repayment of $50 million of the Old Credit Facility.

(d) Income (loss) per common share is computed based upon the weighted average
number of shares outstanding during the period. In loss periods, dilutive
equivalent shares are excluded as the effect would be anti-dilutive.

(e) EBITDA (as adjusted) represents income (loss) before interest expense,
income taxes, depreciation and amortization, seller transaction expenses,
SARs expenses and termination costs, net equipment write-offs related to
closed stores and remodels, the LIFO charge, restructuring charges,
extraordinary loss on extinguishment of debt and cumulative effect of
accounting change. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA should not be construed
as an alternative to operating income, net income or cash flow from
operating activities (as determined in accordance with generally accepted
accounting principles) and should not be construed as an indication of the
Company's operating performance or as a measure of liquidity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

The computation of EBITDA (as adjusted) for the period presented is as
follows (in millions):

PREDECESSOR COMPANY COMPANY
--------------------------------------------------- -------------------------------------------
20 32 PRO FORMA PRO FORMA 40
52 WEEKS ENDED WEEKS WEEKS 52 WEEKS 40 WEEKS WEEKS
---------------------------------------- ENDED ENDED ENDED ENDED ENDED
NOV. 2, OCT. 31, OCT. 30, OCT. 29, MAR. 21, OCT. 28, OCT. 28, AUG. 5, AUG. 3,
1991 1992 1993 1994 1995 1995 1995 1995 1996
------- -------- -------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss).......... $ 2.6 $ 7.6 $ 7.6 $ 7.5 $(11.1) $ (8.0) $ (10.6) $ (12.6) $ 3.1
Interest expense........... 35.4 36.0 34.1 30.0 11.3 46.0 72.4 56.1 53.4
Income tax expense
(benefit)................ (0.5) 4.5 4.1 9.3 (7.1) 1.9 3.5 0.7 8.2
Depreciation and
amortization............. 45.7 49.2 51.1 52.9 20.5 25.4 48.2 35.6 34.7
SARs expenses.............. 0.1 0.3 0.4 2.0 0.6 -- -- -- --
SARs termination costs..... -- -- -- -- 26.2 -- -- -- --
Seller transaction
expenses................. -- -- -- 0.2 0.8 -- -- -- --
Net equipment write-offs
......................... 1.9 0.3 0.6 1.7 1.3 -- 1.3 1.3 --
LIFO charge................ 1.6 0.6 0.4 1.1 0.7 1.7 2.4 1.5 1.5
Restructuring charges...... 4.8 -- -- -- -- -- -- -- --
Extraordinary loss on
extinguishment
of debt ................. -- -- -- 6.3 -- 4.6 4.6 4.6 --
Cumulative effect of
accounting change........ -- -- -- 1.0 -- -- -- -- --
----- ----- ----- ---- ----- -----
EBITDA (as adjusted)....... $91.6 $ 98.5 $ 98.3 $112.0 $ 43.2 $ 71.6 $ 121.8 $ 87.2 $100.9
===== ===== ===== ==== ===== =====
</TABLE>

17
<PAGE> 19

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

GENERAL

Over the past five fiscal years, the Company's sales increased
approximately 8.4% from $2.2 billion in fiscal 1991 to $2.4 billion in fiscal
1995. This growth occurred despite the fact that the total number of stores
operated by the Company decreased slightly, from 98 at the end of fiscal 1991 to
97 at the end of fiscal 1995. Management believes that this sales growth has
resulted in large measure from the substantial steps the Company has taken to
strengthen its store base over this period by remodeling existing stores,
closing certain underperforming stores and selectively adding new stores.
Through fiscal 1991, the Company's capital expenditure program focused on
developing combination food and drug stores and adding pharmacies and expanded
health and beauty care product lines to many stores which were previously
considered conventional stores and creating a critical mass of Omni stores. In
addition to upgrading its store base through capital expenditures, the Company
began to focus on rationalizing its conventional store base. Seven
underperforming stores were closed in fiscal 1991 and an additional eight
conventional stores were closed through the end of fiscal 1995. In order to
maximize the effectiveness of the remaining conventional stores, the Company
began to focus on upgrading their perishable departments and developed new
prototypes to convey a stronger image of quality, selection and freshness to the
customer. These efforts led to the introduction of the Fresh Store concept at
the beginning of fiscal 1994. During the five-year period ended October 28,
1995, the Company completed 27 major remodels (including the 14 Fresh Store
conversions). In addition to its remodeling and store rationalization
initiatives, the Company continued to build new stores on a selective basis.
From the beginning of fiscal 1991 through the end of fiscal 1995, the Company
opened four Dominick's combination food and drug stores and nine Omni stores.

Store Mix. As a result of its store rationalization and capital expenditure
program, the Company's store mix (by number of stores) changed from 54%
conventional, 34% combination food and drug and 12% Omni at the end of fiscal
1991 to 25% conventional, 39% combination food and drug, 19% Fresh Stores and
17% Omni at August 3, 1996. This store mix change, along with the remodels and
departmental improvements discussed above, resulted in a significant increase in
total sales despite the reduction of one store, as average weekly sales per
store increased from $441,000 in fiscal 1991 to $481,000 in fiscal 1995. In
addition, gross margins improved slightly from fiscal 1991 to fiscal 1995 due to
an improvement in gross margin at the Omni stores as the Omni store base matured
and an increase in the number of combination food and drug stores (which
generally have higher margins than conventional stores due to their product mix
and increased offerings of higher-margin perishables). This margin increase was
realized in spite of both the increase in the number of Omni stores as a
percentage of total Company stores, as these stores generally have lower margins
than either conventional or combination food and drug stores, and the negative
impact on gross margins resulting from the store disruptions during the Fresh
Store conversions in fiscal 1995. Management believes that as a result of its
store rationalization and capital expenditure programs and its continued
emphasis on opening new Fresh Stores and Omni stores, the Company is well
positioned for future growth.

Fresh Store Conversions. One key aspect of the Company's store
rationalization and capital expenditure programs has been the implementation of
the Fresh Store concept. Dominick's 18 Fresh Stores are enhanced combination
food and drug stores which are designed to create a European-style fresh market
atmosphere and emphasize the store's visual appeal and quality merchandise
perception. The Company's Fresh Stores feature significant upgrades in store
design and offer an expanded assortment of high quality fresh produce and other
perishables, a large selection of restaurant-quality prepared foods for
carry-out and in-store dining and a superior line of freshly baked goods and
pastry items. Fresh Stores also typically offer expanded delicatessen, bakery,
meat, seafood and floral departments, and additional service departments such as
a gourmet coffee cafe. The first Fresh Store was introduced in 1993 through the
conversion of an existing conventional store. A total of 14 stores have now been
converted, resulting in an average increase in customer counts, sales per square
foot and store contribution margins for the converted stores over pre-conversion
levels. In addition, by focusing customers on the increased offerings of
higher-margin perishables and prepared products, the Fresh Store concept is
intended to produce a more favorable margin mix. Although the Company believes
that the

18
<PAGE> 20

Fresh Store conversions will strengthen the Company's financial performance as
the converted stores mature, it also believes that its operating results in
fiscal 1994 and fiscal 1995 were adversely impacted by the conversion program.
The conversions completed in fiscal 1994 and fiscal 1995 generally required
complete renovation of the stores (at an average capital expenditure of
approximately $5.2 million per store conversion) and created significant
disruptions to normal retail operations during the construction period. The
Company estimates that the cost of future Fresh Store conversions will be
comparable to such historical costs. The Company estimates that its capital
expenditures associated with the opening of four new Fresh Stores in fiscal 1996
were approximately $2.7 million per store. The capital expenditures for opening
new Fresh Stores are lower than the historical cost of conversion due to the
fact that store construction is the responsibility of the site developer and
such construction costs are amortized over the life of the associated lease. In
addition, although the converted stores have generally achieved increased sales
levels relatively quickly following their grand openings as Fresh Stores, their
profitability has been adversely affected during the six-month ramp-up period
following such grand openings as a result of increased promotional costs and
other nonrecurring start-up expenses. The Company held grand openings for six
Fresh Stores in fiscal 1994 and an additional eight Fresh Stores in fiscal 1995.
In addition to the four Fresh Stores already opened in fiscal 1996, four Fresh
Stores are scheduled to be opened by the end of fiscal 1996. The Company's
current expansion plan calls for the construction of nine new Fresh Stores and
the Company is evaluating the feasibility of converting up to five additional
stores to the Fresh Store concept in fiscal 1997.

Acquisition Accounting. The Acquisition was accounted for as a purchase of
Dominick's by the Company. As a result, all financial statements for periods
subsequent to March 22, 1995, the date the Acquisition was consummated, reflect
Dominick's assets and liabilities at their estimated fair market values as of
March 22, 1995. The purchase price in excess of the fair market value of
Dominick's assets was recorded as goodwill and is being amortized over a 40-year
period. The Company's purchase price allocation resulted in a reduction in the
net fair market value of Dominick's fixed assets of approximately $83 million
and goodwill of approximately $438 million. Dominick's total debt also increased
substantially from approximately $250 million at March 21, 1995 to approximately
$602 million on the date of the Acquisition. As a result of these changes, the
Company's results of operations in periods subsequent to the Acquisition reflect
reduced levels of depreciation and significantly increased levels of
amortization and interest expense.

RESULTS OF OPERATIONS

The following table sets forth the historical operating results of the
Predecessor Company for fiscal 1993 and fiscal 1994, the pro forma operating
results of the Company for the 52 weeks ended October 28, 1995 and the 40 weeks
ended August 5, 1995, in each case giving effect to the Acquisition and certain
related transactions, and the historical operating results of the Company for
the 40 weeks ended August 3, 1996, expressed in millions of dollars and as a
percentage of sales:

PREDECESSOR COMPANY COMPANY
---------------------------------- -----------------------------------------------------
PRO FORMA PRO FORMA
52 WEEKS ENDED 52 WEEKS 40 WEEKS 40 WEEKS
---------------------------------- ENDED ENDED ENDED
OCT. 30, 1993 OCT. 29, 1994 OCT. 28, 1995 AUG. 5, 1995 AUG. 3, 1996
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
Sales............................... $2,330.2 100.0% $2,409.9 100.0% $2,433.8 100.0% $1,889.1 100.0% $1,900.6 100.0%
Gross profit........................ 515.2 22.1 538.4 22.3 552.1 22.6 423.7 22.4 437.0 23.0
Selling, general and administrative
expenses.......................... 469.4 20.1 484.3 20.1 482.2 19.8 374.9 19.8 372.3 19.6
Operating income.................... 45.8 2.0 54.1 2.2 69.9 2.8 48.8 2.6 64.7 3.4
Interest expense.................... 34.1 1.5 30.0 1.2 72.4 2.9 56.1 3.0 53.4 2.8
Income tax expense.................. 4.1 0.2 9.3 0.4 3.5 0.1 0.7 -- 8.2 0.4
Extraordinary loss on extinguishment
of debt........................... -- -- 6.3 0.3 4.6 0.2 4.6 0.2 -- --
Cumulative effect of accounting
change............................ -- -- 1.0 -- -- -- -- -- -- --
Net income (loss)................... 7.6 0.3 7.5 0.3 (10.6) (0.4) (12.6) (0.6) 3.1 0.2
Preferred stock accretion........... -- -- -- -- 6.3 0.3 4.8 0.3 5.2 0.3
Net income (loss) available to
common stockholders............... $ 7.6 0.3 $ 7.5 0.3 $ (16.9) (0.7) $ (17.4) (0.9) $ (2.1) (0.1)
</TABLE>

19
<PAGE> 21

The following discussion of the Company's results of operation should be
read in conjunction with the consolidated financial statements of the Company
together with the related notes thereto and other information included elsewhere
herein.

COMPARISON OF RESULTS OF OPERATIONS FOR THE 40 WEEKS ENDED AUGUST 3, 1996
(HISTORICAL) WITH THE 40 WEEKS ENDED AUGUST 5, 1995 (PRO FORMA)

Sales: Sales increased $11.5 million, or 0.6%, from $1,889.1 million in the
40 weeks ended August 5, 1995, to $1,900.6 million in the 40 weeks ended August
3, 1996. The increase in sales in the fiscal 1996 period was primarily
attributable to a 1.1% increase in comparable store sales, partially offset by
the impact of the closure of four conventional stores during fiscal 1995. The
computation of "comparable store" sales growth excludes the sales of a store for
any period if such store or a comparable store was not open during the entire
preceding fiscal year. Replacement stores and stores expanded through remodeling
are considered comparable stores.

Gross Profit: Gross profit increased $13.3 million, or 3.1%, from $423.7
million in the 40 weeks ended August 5, 1995, to $437.0 million in the 40 weeks
ended August 3, 1996. Gross profit as a percentage of sales increased from 22.4%
in the 40 weeks ended August 5, 1995, to 23.0% in the 40 weeks ended August 3,
1996, due primarily to the reduction of product costs resulting from purchasing
improvements and improved perishable and drug department gross profit. The
increase in gross profit from perishables reflects the maturing of the converted
Fresh Stores.

Selling, General and Administrative Expense: Selling, general and
administrative expense ("SG&A") decreased $2.6 million, or 0.7%, from $374.9
million in the 40 weeks ended August 5, 1995 to $372.3 million in the 40 weeks
ended August 3, 1996. SG&A decreased from 19.8% of sales in the 40 weeks ended
August 5, 1995, to 19.6% of sales in the 40 weeks ended August 3, 1996. The
decrease in SG&A reflects improved labor productivity and reduced overhead
costs.

Operating Income: Operating income for the 40 weeks ended August 3, 1996
increased $15.9 million, or 32.6%, from $48.8 million in the 40 weeks ended
August 5, 1995, to $64.7 million as a result of the factors discussed above.

Interest Expense: Interest expense decreased from $56.1 million in the 40
weeks ended August 5, 1995 to $53.4 million in the 40 weeks ended August 3, 1996
primarily due to slightly lower interest rates and borrowing levels.

Net Income (Loss): Net income increased $15.7 million from a net loss of
$12.6 million in the 40 weeks ended August 5, 1995 to a net income of $3.1
million in the 40 weeks ended August 3, 1996, as a result of the factors
discussed above. After deducting preferred stock accretion of $4.8 million in
the 40 weeks ended August 5, 1995 and $5.2 million in the 40 weeks ended August
3, 1996, net loss available to common stockholders improved from a loss of $17.4
million in the 40 weeks ended August 5, 1995 to a loss of $2.1 million in the 40
weeks ended August 3, 1996.

COMPARISON OF RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED OCTOBER 28, 1995 (PRO
FORMA) WITH THE 52 WEEKS ENDED OCTOBER 29, 1994 (PREDECESSOR COMPANY)

Sales: Sales increased $23.9 million, or 1.0%, from $2,409.9 million in
fiscal 1994 to $2,433.8 million in fiscal 1995. The increase in sales in fiscal
1995 was primarily attributable to a 1.8% increase in comparable store sales and
additional sales due to the opening of one new Omni store in May 1994 partially
offset by the impact of the closure of four conventional stores in fiscal 1995.
The growth in comparable store sales primarily reflects strong sales results at
the 14 Fresh Stores opened prior to the end of fiscal 1995.

Gross Profit: Gross profit increased $13.7 million, or 2.5%, from $538.4
million in fiscal 1994 to $552.1 million in fiscal 1995. Gross profit as a
percentage of sales increased from 22.3% in fiscal 1994 to 22.6% in fiscal 1995.
The increase in gross margin was due primarily to the increased gross profit
contribution from the perishable departments resulting from the Fresh Stores
opened prior to the beginning of fiscal 1995 which more than offset the
continuing effects of the Fresh Store conversion program in fiscal 1995.

20
<PAGE> 22

Selling, General and Administrative Expense: SG&A decreased $2.1 million,
or 0.4%, from $484.3 million in fiscal 1994 to $482.2 million in fiscal 1995.
SG&A decreased from 20.1% of sales in fiscal 1994 to 19.8% of sales in fiscal
1995. The decrease in SG&A as a percentage of sales is due primarily to reduced
depreciation and amortization expenses resulting from purchase accounting
adjustments which reduced the net carrying value of the Company's fixed assets,
offset somewhat by the elimination of certain energy credits which lowered
utility costs in fiscal 1994.

Operating Income: Operating income increased $15.8 million, or 29.2%, from
$54.1 million in fiscal 1994 to $69.9 million in fiscal 1995, as a result of the
factors discussed above.

Interest Expense: Interest expense increased from $30.0 million in fiscal
1994 to $72.4 million in fiscal 1995 primarily due to the increased indebtedness
outstanding following the Acquisition.

Net Income (Loss): Net income decreased from $7.5 million in fiscal 1994 to
a net loss of $10.6 million in fiscal 1995. Pro forma net income in fiscal 1995
was adversely affected by an extraordinary charge of $4.6 million associated
with the repayment of $150 million principal amount of Dominick's senior
subordinated credit facility and the prepayment of $50 million principal amount
of Dominick's term loan facilities. Net income in fiscal 1994 was adversely
affected by an extraordinary charge of $6.3 million associated with the
prepayment of $60 million principal amount of Dominick's 11.78% Senior Notes and
a $1.0 million charge to reflect the cumulative effect on prior years of the
change in the Company's accounting for income taxes. Other factors affecting net
income (loss) are discussed above.

COMPARISON OF RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED OCTOBER 29, 1994
(PREDECESSOR COMPANY) WITH THE 52 WEEKS ENDED OCTOBER 30, 1993 (PREDECESSOR
COMPANY)

Sales: Sales increased $79.7 million, or 3.4%, from $2,330.2 million in
fiscal 1993 to $2,409.9 million in fiscal 1994. The increase resulted primarily
from a 2.9% increase in comparable store sales, the opening of one new store in
fiscal 1993 and one new store in fiscal 1994 and the completion of one major
remodel and six Fresh Store conversions in fiscal 1994. The increase in
comparable store sales was attributable to continued strong performance of the
Omni format, service department upgrades introduced at Dominick's stores and a
slight improvement in general economic conditions.

Gross Profit: Gross profit increased $23.2 million, or 4.5%, from $515.2
million in fiscal 1993 to $538.4 million in fiscal 1994. Gross profit increased
as a percentage of sales from 22.1% in fiscal 1993 to 22.3% in fiscal 1994, due
to an increase in Omni's gross profit which was offset by a slight decrease in
Dominick's gross profit. The decrease in Dominick's gross profit reflected
slightly more promotional activity, partially offset by improvements in product
procurement and an increase in vendor participation in the Company's promotional
costs. The increase in Omni's gross profit resulted primarily from improvements
in product procurement, as well as an increase in vendor participation in the
Company's promotional costs.

Selling, General and Administrative Expense: SG&A increased $14.9 million,
or 3.2%, from $469.4 million in fiscal 1993 to $484.3 million in fiscal 1994.
SG&A as a percentage of sales remained unchanged at 20.1%. The increase in SG&A
is primarily due to the increased sales levels in fiscal 1994 and increased
advertising expenses at the Fresh Stores, offset somewhat by lower utility costs
due to $4.5 million of energy credits and better management of store-level labor
costs.

Operating Income: Operating income increased $8.3 million, or 18.1%, from
$45.8 million in fiscal 1993 to $54.1 million in fiscal 1994 as a result of the
factors discussed above.

Interest Expense: Interest expense decreased from $34.1 million in fiscal
1993 to $30.0 million in fiscal 1994. The decrease in interest expense was due
primarily to the reduction in the Company's overall interest expense resulting
from the prepayment of $60 million principal amount of Dominick's 11.78% Senior
Notes.

Net Income (Loss): Net income decreased slightly to $7.5 million in fiscal
1994 from $7.6 million in fiscal 1993. Net income in fiscal 1994 was adversely
affected by an extraordinary charge of $6.3 million associated with the
prepayment of $60 million principal amount of Dominick's 11.78% Senior Notes and
a

21
<PAGE> 23

$1.0 million charge to reflect the cumulative effect on prior years of a change
in the Company's accounting for income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Following the consummation of the Offering, the Company's principal sources
of liquidity will be cash flow from operations, borrowings under the New
Revolving Facility and capital and operating leases. The Company's principal
uses of liquidity are to provide working capital, finance capital expenditures
and meet debt service requirements.

In connection with the Offering, the Company intends to enter into the New
Credit Facility which will provide for a $100 million amortizing term loan (the
"New Term Loan") and a $225 million revolving credit facility, including a $105
million term loan subfacility (the "New Revolving Facility"), each of which has
a six and one-half year term. The New Revolving Facility will be available for
working capital and general corporate purposes, including up to $50 million to
support letters of credit. The Company utilizes letters of credit to cover
workers' compensation self-insurance liabilities and for other general purposes.
Letters of credit for approximately $17.2 million were issued under the Old
Credit Facility at August 3, 1996. Up to $20 million of the New Revolving
Facility will be available as a swingline facility. There will not be any annual
cleandown in the New Revolving Facility. The New Term Loan will require
quarterly amortization payments commencing in the second year following the
consummation of the Offering in amounts ranging from $2.5 million to $7.5
million per quarter. The Company will also be required to make prepayments under
the New Credit Facility, subject to certain exceptions, with a percentage of its
consolidated excess cash flow and with the proceeds from certain asset sales,
issuances of debt securities and any pension plan reversions. See "Description
of Certain Indebtedness."

The Company will use approximately $50.4 million of the estimated net
proceeds of the Offering to redeem all of its outstanding 15% Redeemable
Exchangeable Cumulative Preferred Stock, including accrued dividends.
Approximately $ million of the Offering proceeds, together with available
cash and borrowings under the New Term Loan and the New Revolving Facility will
be used to repay all outstanding borrowings under the Old Credit Facility. The
remaining net proceeds of the Offering will be used to terminate the Company's
obligation under its consulting agreement with Yucaipa. See "Certain
Transactions."

The Company (and the Predecessor Company) generated approximately $81.8
million of cash from operating activities during the 52-week period ended
October 28, 1995 compared to $73.2 million during the 52-week period ended
October 29, 1994. During the 40-week period ended August 3, 1996 the Company
generated approximately $32.4 million of cash from operating activities compared
to $61.0 million generated by the Company (and the Predecessor Company) during
the 40-week period ended August 5, 1995. One of the principal uses of cash in
the Company's operating activities is inventory purchases. However, supermarket
operators typically require small amounts of working capital since inventory is
generally sold prior to the time that payments to suppliers are due. This
reduces the need for short-term borrowings and allows cash from operations to be
used for non-current purposes such as financing capital expenditures and other
investing activities. Consistent with this pattern, the Company had a working
capital deficit of $34.2 million at October 28, 1995 and $6.0 million at August
3, 1996.

The Company (and the Predecessor Company) used $479.2 million in investing
activities for the 52 weeks ended October 28, 1995. Investing activities
consisted primarily of $442.8 million related to the Acquisition (net of cash
acquired) and capital expenditures of $45.5 million. Capital expenditures
related to store remodels, Fresh Store conversions and new store openings and,
to a lesser extent, expenditures for warehousing, distribution, and
manufacturing facilities and equipment, including data processing and computer
systems. The Company used $25.0 million in investing activities for the 40 weeks
ended August 3, 1996, primarily for capital expenditures.

The Company plans to make gross capital expenditures of approximately $56
million (or $23 million net of expected capital leases) in fiscal 1996. Such
expenditures consist of approximately $45 million related to remodels and new
stores, as well as ongoing store expenditures for equipment and maintenance, and
approximately $11 million related to warehousing, distribution and manufacturing
facilities and equipment,

22
<PAGE> 24

including data processing and computer equipment. Management expects that these
capital expenditures will be financed primarily through cash flow from
operations and capital leases. The capital expenditure budget for fiscal 1996
does not include certain environmental remediation costs which are estimated to
range from approximately $4.0 million to $5.5 million (the Company's net share
of which is presently estimated at approximately $2.3 million, after
contributions by the prior owners of the Predecessor Company pursuant to the
terms of the stock purchase agreement associated with the Acquisition (the
"Stock Purchase Agreement"), and for which an accrual has been provided in the
Company's financial statements) and which are expected to be incurred over the
next several years. In December 1995, the Company sold and leased back under
capital leases approximately $17 million of certain existing owned equipment.
The Company currently anticipates gross capital expenditures of approximately
$75 million (or $60 million net of expected capital leases) in fiscal 1997.

The Company has historically utilized leasing facilities to finance the
cost of new store equipment and fixtures. At August 3, 1996, the Company had an
$18 million lease facility available which it anticipates will be substantially
utilized in connection with its new store program in the fourth quarter of
fiscal 1996 and the first quarter of fiscal 1997. The Company will seek
additional lease facilities as required to support its capital expenditure
program.

The capital expenditure plans discussed above do not include potential
acquisitions which the Company could make to expand within its existing market
or contiguous markets. The Company may consider such acquisition opportunities
from time to time. Any such future acquisition may require the Company to seek
additional debt or equity financing.

Upon the consummation of the Offering, Dominick's will be a wholly owned
subsidiary of the Company. Dominick's principal debt instruments permit
Dominick's to make distributions to the Company under certain circumstances,
including for the payment of taxes and, subject to limitations, for general
administrative purposes. See "Risk Factors -- Limitations on Access to Cash Flow
of Dominick's."

The Company is highly leveraged. Based upon current levels of operations
and anticipated cost savings and future growth, the Company believes that its
cash flow from operations, together with available borrowings under the New
Revolving Facility and its other sources of liquidity (including leases) will be
adequate to meet its anticipated requirements for working capital, debt service
and capital expenditures over the next few years.

EFFECTS OF INFLATION

The Company's primary costs, inventory and labor, are affected by a number
of factors that are beyond its control, including the availability and price of
merchandise, the competitive climate and general and regional economic
conditions. As is typical of the supermarket industry, the Company has generally
been able to maintain gross profit margins by adjusting its retail prices, but
competitive conditions may from time to time render it unable to do so while
maintaining its market share.

23
<PAGE> 25

BUSINESS

The Company is the second largest supermarket operator in the greater
Chicago metropolitan area, with 97 stores and fiscal 1995 revenues of
approximately $2.4 billion. Through its 70 years of operation, the Company has
developed a valuable and strategically located store base, strong name
recognition, customer loyalty and a reputation as a quality and service leader
among Chicago-area supermarket chains. The Company operates 80 full-service
supermarkets under the Dominick's(R) name, including 18 Fresh Stores, and 17
price impact supermarkets under the Omni name. The Company is the only
Chicago-area supermarket chain to operate both full-service and price impact
formats, which allows it to serve a broader customer base and to tailor its
stores to the demographic characteristics of individual store locations. The
Company has a well-maintained and modern store base, with approximately 73% of
its stores new or remodeled since 1989. While the Company's total number of
stores has remained relatively constant since 1989, the Company's average
selling square feet per store has increased by approximately 24%. The Company
also owns and operates two primary distribution facilities totaling
approximately 1.4 million square feet, a satellite facility of approximately
285,000 square feet and a dairy processing plant. In addition, the Company's
management team has proven experience in successfully developing and operating
both full-service and price impact supermarkets. The Company believes these
factors have helped it to increase its market share among Chicago area
supermarkets from 19.0% in 1989 to 25.4% in 1995.

STORE FORMATS

DOMINICK'S. The Company's Dominick's format stores are full-service
supermarkets that emphasize quality, freshness and service. The Company
classifies its Dominick's stores into three categories:

Conventional Supermarkets. Dominick's 24 conventional supermarkets are
typically located in higher density population areas, average approximately
43,400 square feet in size (including approximately 29,100 square feet of
selling space) and offer approximately 35,000 SKUs. All of the Company's
conventional supermarkets include a variety of service departments
typically found in full-service supermarkets such as delicatessen, bakery,
meat and seafood departments and a limited selection of health and beauty
care products. In addition, many stores also offer salad bars, prepared
foods, floral departments, film processing and liquor. In fiscal 1991, the
Company began to rationalize its base of 53 conventional stores. Since
then, in addition to the Fresh Store conversions, the Company closed
certain underperforming conventional stores. The Company's 24 remaining
conventional stores are stores which are primarily in locations where
either replacement sites are not available or the demographics of the area
do not justify a conversion to a different format.

Combination Food and Drug Stores. Dominick's 38 combination food and
drug stores average approximately 57,600 square feet (including
approximately 40,300 square feet of selling space) and offer approximately
60,000 SKUs. The combination food and drug stores offer all products and
services typically found in a conventional supermarket and, by virtue of
their large size, include a full service drug store complete with a
pharmacy, a broader line of health and beauty care products and a larger
selection of seasonal merchandise.

Fresh Stores. Dominick's 18 Fresh Stores are enhanced combination food
and drug stores designed to create a European-style fresh market atmosphere
and emphasize the store's visual appeal and quality merchandise perception.
The Company's Fresh Stores feature significant upgrades in store design and
fixtures in order to emphasize an expanded assortment of high quality fresh
produce and other perishables, a large selection of restaurant-quality
prepared foods for carry-out and in-store dining and a superior line of
freshly baked goods and pastry items. Fresh Stores also typically offer
expanded delicatessen, bakery, meat, seafood and floral departments, and
additional service departments such as a gourmet coffee cafe. The first
Fresh Store was introduced in 1993 through the conversion of an existing
conventional store. A total of 14 stores have been converted to date,
resulting in an average increase in customer counts, sales per square foot
and store contribution margins for the converted stores over pre-conversion
levels. Converted Fresh Stores average approximately 53,000 square feet in
size (including approximately 39,300 square feet of selling space) while
new Fresh Stores are expected to average

24
<PAGE> 26

approximately 70,000 square feet (including approximately 55,000 square
feet of selling space). In addition to the 14 converted stores, four new
Fresh Stores have been opened and an estimated 20 additional Fresh Stores
are expected to be opened or converted by the end of fiscal 1998. In
addition, certain elements of the Fresh Store concept, including expanded
produce and perishable departments, are currently being incorporated into
many of the remaining Dominick's stores as part of the chain-wide emphasis
on high quality perishables.

OMNI. The Company's 17 Omni stores are high-volume, price impact
combination food and drug stores emphasizing low prices and a broad selection of
products while offering less extensive service departments than traditional
full-service supermarkets. Omni stores average approximately 92,300 square feet
(including approximately 65,300 square feet of selling space). The Omni format
has enabled the Company to expand its overall share of the market, as it
attracts the price-conscious shopper who typically would choose a price-oriented
food store over a traditional full-service supermarket. Omni stores have an
approximate 7.2% market share, giving Omni the third largest market share among
Chicago-area supermarkets on a stand-alone basis.

Introduced in 1987 as a response to the entrance of warehouse stores into
the Chicago area, Omni stores offer modified everyday low prices and compete
effectively with warehouse formats and other discount retailers in the Chicago
area. The Company believes that Omni's prices are approximately 10% below those
offered by traditional full-service supermarkets. Omni's marketing program
emphasizes its low prices and reinforces its image with merchandising
presentations such as a "Wall of Values" located near the entrance of the store
which presents the customer with a selection of specially priced merchandise. To
support its low prices, Omni is managed with a strict focus on cost control.
This is achieved through labor efficiencies created by the implementation of
time and cost saving measures such as presenting selected merchandise on
pallets, offering a limited number of service departments and eliminating
certain services such as bagging and customer pickup. The Omni stores also
eliminate certain capital improvements such as more expensive in-store graphics
and fixtures.

All of the Omni stores include service departments in deli, bakery and
seafood, in addition to self-service meat, produce, liquor, bulk foods and club
merchandise departments and a pharmacy. Each Omni store also offers a large
selection of high-turnover general merchandise items typically found in drug and
discount stores, including seasonal items for holiday and back-to-school
seasons. The expanded general merchandise selection is utilized to increase
variety for higher customer draw. All Omni stores also include in-store banking.
Unlike the Dominick's format, the Omni format does not offer salad bars, special
promotions or extensive front-end services.

STORE DEVELOPMENT

The Company's 70 years of operation in the Chicago area have allowed it to
build its store locations selectively, and management believes that the
Company's current locations include many prime store sites in developed urban
and suburban areas which would be difficult to replicate. From 1987 through
fiscal 1991, the Company's store development program was focused primarily on
developing combination food and drug stores or converting existing conventional
Dominick's stores to the combination format, closing underperforming stores and
creating a critical mass of new Omni stores. In addition to upgrading its store
base through capital expenditures, the Company began to focus on rationalizing
its conventional store base. Between November 1990 and October 1995, 15
conventional stores were closed. This store rationalization program also
included an evaluation of its perishable departments. In order to maximize the
effectiveness of the remaining conventional stores, the Company began to focus
on upgrading their perishable departments and developing new prototypes to
convey a stronger image of quality, selection and freshness to the customer.
Capital investment was directed toward selectively adding improvements such as
European-style bakeries and enhanced deli departments to existing Dominick's
stores. These efforts led to the introduction of the Fresh Store concept at the
beginning of fiscal 1994. In addition to its remodeling and store
rationalization initiatives, the Company continued to build new stores on a
selective basis. From the start of fiscal 1991 through the end of fiscal 1995
the Company opened four combination food and drug stores and nine Omni stores.

25
<PAGE> 27

The Company introduced its first Fresh Store in November 1993. To date, the
Company has converted 14 stores to Fresh Stores at a total capital cost of
approximately $70 million and has opened four new Fresh Stores. The Fresh Store
conversions were very extensive, as these stores required complete overhauls and
expansion of selling space. The results of the Company's 14 conversions of
existing stores to Fresh Stores have been highly favorable and have resulted in
an average increase in annualized sales of approximately 27% compared to such
stores prior to their conversion. The Company expects to open or convert an
estimated 20 additional Fresh Stores by the end of fiscal 1998. It is currently
anticipated that substantially all of the Company's new Dominick's combination
food and drug stores will be Fresh Stores. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- General -- Fresh
Store Conversions."

The following table sets forth additional information concerning changes in
the Company's store base.

<TABLE>
<CAPTION>
40 WEEKS
FISCAL YEAR ENDED
---------------------------------------- AUG. 3,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
TOTAL STORES:
Beginning of period.......................... 99 98 101 101 101 97
Opened.................................... 6 5 1 1 0 4
Closed.................................... (7) (2) (1) (1) (4) (4)
-- --- --- --- --- --
End of period................................ 98 101 101 101 97 97
== === === === === ==
REMODELS AND CONVERSIONS:
Major remodels............................... 3 4 1 1 4 3
Fresh Store conversions...................... 0 0 0 6 8 0
STORES BY FORMAT (END OF PERIOD):
Dominick's:
Conventional.............................. 53 47 45 38 27 24
Combination food and drug................. 33 39 40 40 39 38
Fresh Stores.............................. 0 0 0 6 14 18
-- --- --- --- --- --
Subtotal............................. 86 86 85 84 80 80
Omni......................................... 12 15 16 17 17 17
-- --- --- --- --- --
Total................................ 98 101 101 101 97 97
== === === === === ==
</TABLE>

MARKET AREA

Chicago is the nation's third largest metropolitan area, with a population
of approximately 7.7 million people and approximately 2.8 million households.
Chicago has a stable and diverse economic base which includes major
manufacturing, transportation, finance and other business centers. The
population base of Chicago is relatively young and affluent compared to the
national average and compared with other leading population centers. The average
Chicago household economic buying income ("EBI") is approximately 24% above the
national average EBI and has increased approximately 80% since 1984, exceeding
the national average household EBI increase of approximately 60%. In addition to
its attractive demographics, the Chicago metropolitan area has had a relatively
stable economic environment with more stable inflation and unemployment rates
than many other major urban markets. According to the U.S. Bureau of the Census,
the population of suburban Chicago, where nearly 80% of the Company's stores are
located, has grown by approximately 12% since 1986. According to a recent report
issued by the U.S. Department of Commerce, by the year 2005 the Chicago area is
also expected to have a population of 8.3 million residents and the largest
increase in jobs of all of the nation's major metropolitan areas. The Company
believes that its existing market share and its plans to add new stores will
allow it to benefit from the continuing growth of the Chicago area.

26
<PAGE> 28

WAREHOUSING, DISTRIBUTION AND PURCHASING

The Company currently owns and operates two primary distribution facilities
with an aggregate of approximately 1.4 million square feet and an approximately
285,000 square foot satellite facility for storage of forward buy inventory.
Each store submits orders to the distribution facilities through a centralized
processing system, and merchandise ordered from the warehouses is normally
received at the stores the next day.

The Company's primary warehouse facility is located in Northlake, Illinois
and handles dry grocery, produce, dairy, delicatessen, meat and frozen foods. In
addition, goods prepared at the on-site commissary are cross-docked for delivery
to the stores. The Company's other primary distribution facility, a general
merchandise facility located on the south side of Chicago approximately 15 miles
from the Company's Northlake facility, handles health and beauty care products
and other general merchandise. The Company also owns and operates Ludwig Dairy,
a dairy processing plant in Dixon, Illinois (approximately 100 miles west of
Chicago) that manufactures cultured dairy products and ice cream. A satellite
facility also located in Northlake is currently used only for the storage of
forward buy products and operates at less than 10% of capacity. The Company is
currently evaluating the feasibility of selling one of its warehouse facilities
and consolidating its warehousing operations in its remaining facilities.

The stores receive prepared foods, such as salads and cooked meats, from
the Company's commissary. The commissary also distributes "Chef's Collection"
products, which offer customers restaurant-quality, fully prepared entrees for
carry-out. The commissary is operated as a profit center and charges individual
stores for its services. Management believes that the Company is the only
Chicago-area supermarket chain to operate its own commissary, which gives it
certain competitive advantages, such as higher margins on prepared food,
increased quality control and the ability to develop "signature items" not found
in other supermarkets.

Distribution is accomplished through a Company-operated fleet of tractors
and trailers. Stores are located an average of 15 miles from the principal
distribution center, with the furthest store located approximately 35 miles
away. Management believes this close proximity of the stores to the distribution
facilities results in lower distribution costs and enables the Company to
maintain lower levels of inventory and achieve more efficient warehousing than
would otherwise be possible.

The Company has historically purchased merchandise from a large number of
third party suppliers, none of which supplies a material portion of the
Company's goods and services. The Company is a party to certain exclusivity
contracts for the purchase of products from vendors. While these contracts have
become common in the food retailing industry, the Company has not historically
emphasized such contracts. The Company has begun to focus on such agreements
more aggressively since the Acquisition and is also coordinating its purchasing
efforts with other Yucaipa-managed supermarket chains in an effort to reduce its
product costs. The Company also is pursuing forward buying and secondary
sourcing opportunities. The Company actively participates in a Best Practices
program with all other Yucaipa-managed supermarket chains that is intended to
reduce costs and improve business processes. The Company believes that
additional procurement savings may be realized in the future.

ADVERTISING AND PROMOTION

The Company advertises primarily through direct mail circulars distributed
every Thursday, in addition to Sunday newspaper and radio advertisements.
Television advertising is employed around holidays and other seasonal events to
reaffirm the Company's reputation for high quality perishables.

The Company's advertising and promotion strategy for its Dominick's stores
stresses their quality, assortment of products, customer service and competitive
prices. Since 1990, the Company has focused its Dominick's print media
advertising on direct mail, which permits highly targeted marketing and supports
the Company's store-specific merchandising goals. On average, the Company
circulates approximately 30 different versions of its Dominick's circular each
week, including eight to ten versions for stores which incorporate the Fresh
Store concept. While all store departments share portions of the weekly
circular, the Company tailors its advertisements to a particular store's trade
area and store type. Management believes direct mail allows for distribution of
the weekly advertising circular at a lower cost and provides more

27
<PAGE> 29

complete coverage than print advertising in newspapers. The Dominick's stores
also utilize both television and radio advertising.

The Company also employs point-of-sale couponing whereby the Company
provides coupons which are printed with the customer's receipt upon purchase of
certain selected items. Manufacturers pay the Company to print a coupon for one
product when another product is purchased in order to promote complementary or
substitute products. The Company's stores also utilize this type of targeted
marketing to promote items of its choice and to obtain information about
purchasing behavior. To better facilitate the Company's target marketing
programs for its Dominick's stores, the Company is also developing a frequent
shopper card program.

The Company utilizes direct mail circulars as its primary form of
advertising for the Omni stores. By distributing multiple versions of an
advertisement, management believes the Omni stores have been successful in
targeting multiple specific demographic zones from which customers for a
particular store are drawn. Weekly circulars focus on Omni's everyday low prices
and include a variety of weekly specials to draw customers into the store. On
average, the Company circulates approximately six different versions of the Omni
circular each week.

PRIVATE LABEL PROGRAM

The Company's private label program represented 11.9% of fiscal 1995 sales
(excluding meats, service delicatessen and produce items) and management intends
to focus on increasing private label sales. Gross margins on private label goods
are generally eight to ten percent higher than on national brands, while
offering comparable quality at prices that are approximately 25% lower. Through
its private label program, the Company currently offers approximately 1,750
private label items at Dominick's stores and approximately 800 private label
items at Omni stores. By the end of calendar 1996, the Company intends to
introduce the "Private Selection" label as the premium private label at
Dominick's stores. The "Private Selection" label is owned by Ralph's, a
Yucaipa-managed supermarket chain, and will be licensed to the Company. The
Company procures grocery, deli, meat and health and beauty private label
products through Topco Associates, Inc. ("Topco"), a large, national food buying
cooperative. In addition to its "Dominick's" and "Omni" brand names, the Company
features Topco-branded products under the "Valutime" brand name at its
Dominick's stores, under the "Kingston" and "Mega" brand names at its Omni
stores and under the "Top Care" brand name at all of its stores.

MANAGEMENT INFORMATION AND TRAINING SYSTEMS

Beginning in 1989, the Company began modernizing its management information
systems by adopting a "multi-platform" strategy. This entailed upgrading or
moving certain applications from the mainframe to a mid-range or a micro format.
The upgrade of the Company's financial software is substantially complete, while
the upgrade of purchasing software is expected to be completed in approximately
one year. The Company has also initiated an upgrade of its warehousing system
and plans to install radio frequency technology, which will enhance warehouse
space utilization, manpower planning and store service levels. At the store
level, all point-of-sale equipment has been upgraded in the past three years at
a cost in excess of $4 million. Pharmacy terminals that keep detailed patient
records and handle third party billing adjudication have been installed and
direct store delivery receiving and time-and-attendance systems have been
largely implemented at the store level. In addition, new PC-based store-level
training systems have been configured in the Company's stores.

COMPETITION

The Company's competitors include national and regional supermarket chains,
independent and specialty grocers, drug and convenience stores, warehouse club
stores, deep discount drug stores and supercenters. The supermarket industry is
highly competitive and characterized by narrow profit margins. Supermarket
chains generally compete on the basis of location, quality of products, service,
price, product variety and store

28
<PAGE> 30

condition. The Company regularly monitors its competitors' prices and adjusts
its prices and marketing strategy as management deems appropriate in light of
existing conditions.

The Company and Jewel Food Stores ("Jewel"), a subsidiary of American
Stores, Inc., are the leading chains in the Chicago-area market. In 1995, the
Company had a market share of approximately 25.4% among Chicago-area
supermarkets, compared to Jewel which had a market share of approximately 35.6%.
The majority of the Company's other supermarket competitors are regional
supermarket chains or small independent operators, none of which has greater
than a 5% market share. The Company, through its efforts to establish the Omni
format and upgrade its Dominick's format stores, has increased its market share
from approximately 19.0% in 1989 to approximately 25.4% in 1995. A combination
of the strength of Dominick's franchise in the region and the expansion and
successful format differentiation of Omni has helped the Company increase its
market share despite the fact that a substantial number of competitive store
openings occurred in the Chicago metropolitan area between 1989 and 1995.

Beginning in the late 1980's and peaking in the early 1990's, a number of
non-traditional competitors opened locations in the Chicago metropolitan area.
These competitors introduced a number of new formats to the Chicago consumer,
including warehouse club stores, mass merchants and supercenters. Though the
Company has traditionally competed primarily with other supermarket chains, the
Company's business strategy has been to compete with these new entrants through
the introduction of its Omni format and continued growth of the Dominick's
combination food and drug stores.

EMPLOYEES AND LABOR RELATIONS

As of August 3, 1996, the Company employed 17,734 people, of whom
approximately 26% were full-time and 74% were part-time. The following table
sets forth additional information concerning the Company's employees.

<TABLE>
<CAPTION>
UNION NON-UNION TOTAL
------ --------- ------
<S> <C> <C> <C>
Salaried....................................... 143 890 1,033
Hourly:
Full-time.................................... 3,157 416 3,573
Part-time.................................... 12,903 225 13,128
------ ----- ------
Total..................................... 16,203 1,531 17,734
====== ===== ======
</TABLE>

Substantially all of the Company's store employees are unionized. Employees
covered by union contracts are represented by six major unions: (i) United Food
and Commercial Workers Union ("UFCW"), (ii) UFCW Union, Meat Division, (iii)
International Brotherhood of Teamsters, (iv) International Brotherhood of
Electrical Workers, (v) Automobile Mechanics Union (International Association of
Machinists and Aerospace Workers) and (vi) Chicago and Northeast Illinois
District Council of Carpenters.

The Company's contracts with its Dominick's retail clerks (covering
approximately 9,400 employees at August 3, 1996) and its Omni meatcutters
(covering approximately 550 employees at August 3, 1996) have expired and
although the Company is currently negotiating with the respective unions for
such employees, no new agreements have been reached. The Company's contract with
the Omni retail clerks has been ratified by the union and is anticipated to be
signed in the near future. The Company's contracts are generally negotiated in
three-year cycles. The Company's contract with the Dominick's meatcutters
expires in July 1997 and the Company's primary Teamsters contract expires in
March 1999. See "Risk Factors -- Labor Relations."

The Company has never experienced a work stoppage and considers its
relations with its employees to be good. Pursuant to their collective bargaining
agreements, Dominick's contributes to various union-sponsored, multi-employer
pension plans.

TRADE NAMES, SERVICE MARKS AND TRADEMARKS

The Company uses a variety of trade names, service marks and trademarks.
Except for "Dominick's," "Dominick's Finer Foods" and "Omni Superstores," the
Company does not believe any of such trade names,

29
<PAGE> 31

service marks or trademarks is material to its business. The Company is
presently seeking federal registration of the "Omni Superstores" trademark, and
has filed an application to renew the federal registration for "Dominick's Finer
Foods."

GOVERNMENT REGULATION

The Company is subject to regulation by a variety of governmental agencies,
including but not limited to, the U.S. Food & Drug Administration, the U.S.
Department of Agriculture, the Illinois Department of Alcoholic Beverage
Control, the Illinois Department of Agriculture, the Illinois Department of
Professional Regulation and state and local health departments and other
agencies. At present, local regulations prevent the Company from selling liquor,
or certain types of liquor, at certain of its stores.

ENVIRONMENTAL MATTERS

The Company is subject to federal, state and local environmental laws that
(i) govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous wastes and (ii) impose liability for the costs of
cleaning up certain damages resulting from sites of past spills, disposals or
other releases of hazardous materials. The Company believes that it currently
conducts its operations, and in the past has operated its business, in
substantial compliance with applicable environmental laws. From time to time,
operations of the Company have resulted, or may result, in noncompliance with or
liability for cleanup pursuant to environmental laws. However, the Company
believes that any such noncompliance or liability under current environmental
laws would not have a material adverse effect on its results of operations and
financial condition. The Company has not incurred material capital expenditures
for environmental controls during the previous three years.

In connection with the Acquisition, the Company and Dominick's conducted
certain investigations (including in some cases, reviewing environmental reports
prepared by others) of the Company's operations and its compliance with
applicable environmental laws. The investigations, which included Phase I and
Phase II assessments by independent consultants, and subsequent studies found
that certain facilities have had or may have had releases of hazardous materials
that may require remediation, particularly due to releases of hazardous
materials from underground storage tanks and hydraulic equipment. Pursuant to
the Stock Purchase Agreement, the prior owners of Dominick's have agreed to pay
one-half of such remediation costs up to $10 million and 75% of such remediation
costs between $10 million and $20 million. Based in part on the investigations
conducted and the cost-sharing provisions of the Stock Purchase Agreement with
respect to environmental matters, the Company believes, although there can be no
assurance, that its liabilities relating to these environmental matters will not
have a material adverse effect on its future financial position or results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

PROPERTIES

The Company operates a total of 97 stores in the Chicago metropolitan area,
as described in the following table:

<TABLE>
<CAPTION>
AVERAGE SQUARE
NUMBER OF STORES FOOTAGE
-------------------------------- -------------------
OWNED LEASED TOTAL TOTAL SELLING
------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Dominick's:
Conventional............................ 2 22 24 43,400 29,100
Combination food and drug............... 8 30 38 57,600 40,300
Fresh Stores............................ 0 18 18 54,300 40,600
--- --- --- ------ ------
Dominick's total..................... 10 70 80 52,600 37,000
Omni...................................... 3 14 17 92,300 65,300
--- --- --- ------ ------
Company total........................ 13 84 97 59,600 42,000
=== === === ====== ======
</TABLE>

30
<PAGE> 32

At its leased stores, the Company generally enters into long-term net
leases which obligate the Company to pay its proportionate share of real estate
taxes, common area maintenance charges and insurance costs. In addition, such
leases generally provide for contingent rent based upon a percentage of sales
when sales from the store exceed a certain dollar amount. The average remaining
term (including renewal options with increasing rents) of the Company's
supermarket leases is approximately 30 years. Two of the three Omni stores owned
by the Company are subject to long-term ground leases. There are mortgages on
the Company's owned stores totalling approximately $9.3 million at October 28,
1995.

The Company's administrative offices currently occupy a small portion of an
approximately 285,000 square foot facility at 505 Railroad Avenue (which also
includes a satellite distribution facility) and approximately 171,300 square
feet of space at 333 N. Northwest Avenue in Northlake, Illinois. The Company
also owns and operates two primary warehouse and distribution facilities
totaling 1.4 million square feet and the Ludwig Dairy plant. See "Warehousing,
Distribution and Purchasing."

LEGAL PROCEEDINGS

On March 16, 1995, a lawsuit was filed in the United States District Court
for the Northern District of Illinois against Dominick's by two employees of
Dominick's. The plaintiffs' original complaint asserted allegations of gender
discrimination and sought compensatory and punitive damages in an unspecified
amount. The plaintiffs filed an amended complaint on May 1, 1995. The amended
complaint added four additional plaintiffs and asserted allegations of gender
and national origin discrimination. The plaintiffs filed a second amended
complaint on August 16, 1996 adding three additional plaintiffs. There are
currently several outstanding motions before the court, including the
plaintiffs' motion for class certification. The parties are conducting discovery
with respect to the pending motion for class certification. The Company believes
that there is no merit to the allegations made by the plaintiffs and plans to
vigorously defend this lawsuit. Due to the numerous legal and factual issues
which must be resolved during the course of this litigation, however, the
Company is unable to predict the ultimate outcome of this lawsuit. If Dominick's
were held liable for the alleged discrimination, it could be required to pay
monetary damages which, depending on the outcome of the class certification
motion (and the size of any class certified), the theory of recovery or the
resolution of the plaintiffs' claims for compensatory and punitive damages,
could be substantial.

The Company, in its ordinary course of business, is party to various legal
actions. Management believes these are routine in nature and incidental to its
operations. Management believes that the outcome of any such proceedings to
which the Company currently is a party will not have a material adverse effect
upon its business, financial condition or results of operations.

31
<PAGE> 33

MANAGEMENT

The following table sets forth certain information with respect to the
members of the Board of Directors and the executive officers of the Company.
Executive officers of the Company are chosen by the Board of Directors and serve
at its discretion.

<TABLE>
<CAPTION>
NAME TITLE AGE
<S> <C> <C>
Ronald W. Burkle Chairman of the Board (l) 44
Robert A. Mariano President, Chief Executive Officer and Director (l) 45
Darren W. Karst Executive Vice President, Finance and 36
Administration, Chief Financial Officer, Secretary
and Director
Robert E. McCoy Executive Vice President of Operations 48
John W. Boyle Group Vice President -- Information Planning and 38
Store Development
Robert R. DiPiazza Group Vice President -- Perishable Merchandising 45
Donald G. Fitzgerald Group Vice President -- Non-perishable Merchandising 35
and Logistics
Donald S. Rosanova Group Vice President -- Omni Division 47
Herbert R. Young Group Vice President -- Sales, Marketing and 55
Advertising
Peter P. Copses Director 38
Linda McLoughlin Figel Director 32
Patrick L. Graham Director 46
David B. Kaplan Director 29
Mark A. Resnik Director 49
Antony P. Ressler Director 35
</TABLE>

- ------------------------------

(1) Member of the Executive Committee of the Board of Directors.

In accordance with the terms of the Company's Restated Certificate of
Incorporation, effective upon the closing of the Offering, the terms of office
of the Board of Directors will be divided into three classes: Class I, Class II
and Class III. The terms of office of the respective classes of directors will
be as follows: Class I will expire at the annual meeting of stockholders to be
held in 1997; Class II will expire at the annual meeting of stockholders to be
held in 1998; and Class III will expire at the annual meeting of stockholders to
be held in 1999. At each annual meeting of stockholders beginning in 1997, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election and until successors will have been duly elected and will
have qualified. In addition, the Company's Restated Certificate of Incorporation
provides that the authorized number of directors may be changed only by
resolution of the Board of Directors. Any additional directorships resulting
from an increase in the number of directors will be distributed among the three
classes so that, as nearly as possible, each class will consist of one-third of
the directors. Although directors of the Company may be removed for cause by the
affirmative vote of the holders of a majority of the Common Stock, the Company's
Restated Certificate of Incorporation provides that holders of 66 2/3% of the
Common Stock must vote to approve the removal of a director without cause.

The Company has undertaken to appoint an additional director who is not
affiliated with the Company or its principal stockholders promptly following the
consummation of the Offering. The Company has also undertaken to appoint a
second director who is not affiliated with the Company or its principal
stockholders within one year following the consummation of the Offering. Such
persons have not yet been identified. The Board of Directors has an Executive
Committee and intends to establish a Compensation Committee and an Audit
Committee. There are no family relationships among the executive officers or
Directors of the Company.

For a description of certain voting agreements with respect to the Board of
Directors, see "Description of Capital Stock -- Stockholders Agreements."

32
<PAGE> 34

The Company intends to pay customary fees to its outside directors for
service on the Board, and the Company anticipates that it will reimburse
directors for their out-of-pocket expenses incurred in connection with attending
meetings of the Board of Directors.

RONALD W. BURKLE -- Mr. Burkle has been the Chairman of the Company since
March 1995 and served as Chief Executive Officer from March 1995 to January
1996. Mr. Burkle co-founded Yucaipa in 1986 and has served as Director and
Chairman of the Board of Food 4 Less Holdings, Inc. ("Food 4 Less") whose
principal operating subsidiary is Ralphs Grocery Company, and Chairman of the
Board and Chief Executive Officer of its predecessor, Food 4 Less Supermarkets,
Inc. since 1987. Mr. Burkle has been a director and the Chief Executive Officer
of Smith's Food & Drug Centers, Inc. ("Smith's") since May 1996 and was Chairman
of the Board of Smitty's Supermarkets, Inc. ("Smitty's") from 1994 until its
merger into Smith's in May 1996. Mr. Burkle also serves as a director of Kaufman
and Broad Home Corporation. Before founding Yucaipa, Mr. Burkle held a number of
supermarket executive positions and was a private investor in Southern
California.

ROBERT A. MARIANO -- Mr. Mariano has been the President and a Director of
the Company since March 1995 and Chief Executive Officer since January 1996. Mr.
Mariano also served as Chief Operating Officer from March 1995 until January
1996. Mr. Mariano joined the Company in 1972 and was Senior Vice President of
Marketing and Merchandising from 1994 to 1995, Senior Vice President of
Perishable Merchandising from 1989 to 1994, Senior Vice President of Operations
from 1987 to 1989, and held a number of managerial positions prior to 1987.

DARREN W. KARST -- Mr. Karst joined the Company in March 1995 as Senior
Vice President, Chief Financial Officer, Secretary and a Director and was
appointed Executive Vice President, Finance and Administration in March 1996.
Mr. Karst joined Yucaipa in 1988 and has been a general partner since 1991.
Prior to 1988, he was a manager at Ernst & Young LLP.

ROBERT E. MCCOY -- Mr. McCoy has been Executive Vice President of
Operations of the Company since 1996 and served as Senior Vice President of
Operations from 1989 to 1996. Prior to that time, he was Vice President of
Operations at Jewel, where he began his career in 1969.

JOHN W. BOYLE -- Mr. Boyle has been Group Vice President -- Information
Planning and Store Development at Dominick's since March 1996. Mr. Boyle joined
the Company in January 1995 as the Vice President -- Management Information
Systems and became the Vice President -- Administration in March 1995. Prior to
joining Dominick's, Mr. Boyle had been employed as the Vice
President -- Information Systems at Food 4 Less Supermarkets, Inc. since 1993,
and, before that, had been employed as a Senior Vice President at Thrifty
Drugstores.

ROBERT R. DIPIAZZA -- Mr. DiPiazza has been Group Vice
President -- Perishables since March 1996, and, prior to that, had served as
Vice President -- Produce Operations since 1990. Before 1990, Mr. DiPiazza held
a number of other managerial positions at the Company.

DONALD G. FITZGERALD -- Mr. Fitzgerald has been Group Vice
President -- Non-Perishables and Logistics since March 1996. Prior to that time
Mr. Fitzgerald had served as the Vice President -- Grocery Merchandising since
1994, as a director of grocery merchandising from 1993 to 1994 and as a director
of grocery purchasing since 1990. Before 1990 Mr. Fitzgerald held several other
managerial positions at the Company.

DONALD S. ROSANOVA -- Mr. Rosanova has been Group Vice President -- Omni
since March 1996, and, prior to that, had been a Vice President and General
Manager -- Distribution since 1992. Before 1992 Mr. Rosanova held several other
managerial positions at the Company.

HERBERT R. YOUNG -- Mr. Young has been Group Vice President -- Sales,
Marketing and Advertising of the Company since March 1996 and served as Senior
Vice President of Marketing from March 1995 to 1996. Prior to that time, Mr.
Young was Senior Vice President and General Manager of Omni from 1994 to 1995
and was Senior Vice President of Marketing and Non-Perishable Merchandising from
1990 to 1994. Before joining the Company, he was Executive Vice President of
Topco, from 1986 to 1990.

33
<PAGE> 35

PETER P. COPSES -- Mr. Copses has served as a Director of the Company since
March 1995. Mr. Copses also has served as a Director of Food 4 Less and Ralphs
since 1995. Since 1990, Mr. Copses has been a limited partner of Apollo
Advisors, L.P. which, together with an affiliate, serves as the managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P., and Apollo Investment
Fund III, L.P., which are private securities investment funds, and of Lion
Advisors, L.P., which acts as financial advisor to and representative for
certain institutional investors with respect to securities investments. From
March to September 1990, Mr. Copses was a Vice President in the investment
banking department of Donaldson, Lufkin & Jenrette Securities Corporation. Prior
to 1990, he was employed by Drexel Burnham Lambert Incorporated. Mr. Copses is a
Director of Family Restaurants, Inc. and Zale Corporation.

LINDA MCLOUGHLIN FIGEL -- Ms. Figel has been a Director of the Company
since August 1996. Ms. Figel also has served as a director of Smith's since May
1996. She joined Yucaipa in 1989 and became a general partner in 1991. Prior to
1989, she was employed by Bankers Trust Company in its Structured Finance Group.

PATRICK L. GRAHAM -- Mr. Graham has served as a Director of the Company
since March 1995. Mr. Graham has served as a Director of Food 4 Less and Ralphs
since 1995 and served as Vice President and a Director of Smitty's from June
1994 until its merger with Smith's in May 1996. Mr. Graham joined Yucaipa as a
general partner in 1993. Prior to that time he was a Managing Director in the
corporate finance department of Libra Investments, Inc. from 1992 to 1993 and
PaineWebber Inc. from 1990 to 1992. Prior to 1990, he was a Managing Director in
the corporate finance department of Drexel Burnham Lambert Incorporated.

DAVID B. KAPLAN -- Mr. Kaplan has served as a Director of the Company since
March 1995. Since 1991, Mr. Kaplan has been associated with and is a limited
partner of Apollo Advisors, L.P. and Lion Advisors, L.P. Prior to 1991, Mr.
Kaplan was a member of the corporate finance department of Donaldson, Lufkin &
Jenrette Securities Corporation. Mr. Kaplan also serves as a Director of PRI
Holdings, Inc. and BDK Holdings, Inc.

MARK A. RESNIK -- Mr. Resnik has served as a Director of the Company since
March 1995. Mr. Resnik co-founded Yucaipa in 1986, and has served as a Director
of Food 4 Less and Ralphs since 1995 and as Director and Vice President of its
predecessor, Food 4 Less Supermarkets, Inc., since 1987. Mr. Resnik served as
Vice President and a Director of Smitty's from June 1994 until its merger with
Smith's in May 1996. From 1986 until 1988, Mr. Resnik served as a Director and
Vice President of Jurgensen's.

ANTONY P. RESSLER -- Mr. Ressler has served as a Director of the Company
since March 1995. In 1990, Mr. Ressler was one of the founding principals of
Apollo Advisors, L.P. and Lion Advisors, L.P. Prior to 1990, Mr. Ressler was a
Senior Vice President in the high yield bond department of Drexel Burnham
Lambert Incorporated. Mr. Ressler is a Director of Family Restaurants, Inc.,
United International Holdings, Vail Resorts, Inc. and PRI Holdings, Inc.

All of the directors named above also serve on the Board of Directors of
Dominick's.

34
<PAGE> 36

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table sets forth information concerning
the compensation of the Chief Executive Officer and the other four most highly
compensated executive officers of the Company (the "Named Executive Officers"),
whose total annual salary and bonus for the 52 weeks ended October 28, 1995
exceeded $100,000 for services rendered in all capacities to the Company and its
subsidiaries for the same period.

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(1)
---------------
ANNUAL COMPENSATION SECURITIES
UNDERLYING
FISCAL YEAR -------------------- OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION ENDED SALARY($) BONUS($) SARS(#) COMPENSATION($)
--------------------------- ---------------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Ronald W. Burkle(2)(3) October 28, 1995 $ -- $ -- -- $ --
Chairman October 29, 1994 -- -- -- --
October 30, 1993 -- -- -- --
Robert A. Mariano(4) October 28, 1995 $334,159 $216,000 146,379 $3,463,718(5)(6)
President and October 29, 1994 216,000 216,000 -- 22,414(5)
Chief Executive Officer October 30, 1993 181,102 23,567 -- 20,631(5)
Darren W. Karst(7) October 28, 1995 $151,570 $ -- 73,189 $ 1,671(8)
Executive Vice President, October 29, 1994 -- -- -- --
Finance and Administration, October 30, 1993 -- -- -- --
Chief Financial Officer and Secretary
Robert E. McCoy October 28, 1995 $236,923 $216,000 146,379 $2,916,273(6)(8)
Executive Vice President October 29, 1994 216,000 216,000 -- 14,484(6)
of Operations October 30, 1993 176,094 21,945 -- 3,777(6)
Herbert R. Young October 28, 1995 $225,617 $210,927 146,379 $2,923,026(6)(8)
Group Vice President October 29, 1994 210,927 210,927 -- 21,045(6)
of Sales, Marketing and October 30, 1993 204,783 17,021 -- 7,620(6)
Administration
</TABLE>

- ------------------------------

(1) Information for Messrs. Mariano, McCoy and Young excludes equity-based
compensation of the Predecessor Company which was extinguished in connection
with the Acquisition.

(2) Mr. Burkle provides services to the Company pursuant to the consulting
agreement between Yucaipa and the Company. See "Certain Transactions."
Pursuant to the consulting agreement, the Company paid Yucaipa $1.5 million
in the 32 weeks ended October 28, 1995 for the services of Messrs. Burkle,
Resnik, Graham and other Yucaipa personnel. Such payments to Yucaipa are not
reflected in the table set forth above.

(3) Mr. Burkle served as Chairman and Chief Executive Officer from March 1995 to
January 1996.

(4) Mr. Mariano was appointed President and Chief Operating Officer in March
1995 and was subsequently appointed Chief Executive Officer in January 1996.

(5) Includes (i) insurance premiums paid under senior management benefit plans,
(ii) benefits paid under a senior management financial planning plan, (iii)
profit sharing plan contributions made by the Company, (iv) other employee
benefits and (v) for Mr. Mariano, interest forgiven on a promissory note.
The respective amount paid for Messrs. Mariano, McCoy and Young,
respectively, are as follows: (A) insurance premiums: $3,394, $2,612, $5,820
for 1995; $3,394, $2,612, $5,820 for 1994; none in 1993, (B) financial
planning benefits: $0, $8,000, $8,000 for 1995; $0, $8,000, $8,000 for 1994;
none in 1993, (C) forgiven interest: $2,633, $0, $0 for 1995; $12,014, $0,
$0 for 1994; $12,014, $0, $0 for 1993, (D) profit sharing contributions:
$3,288, $3,288, $3,288 for 1995; $2,824, $2,824, $2,824 for 1994; $4,690,
$2,724, $3,162 for 1993; and (E) other benefits: $4,310, $913, $4,458 for
1995; $4,182, $1,048, $4,401 for 1994; $3,927, $1,053, $4,458 for 1993.

(6) Includes the redemption for cash of all Predecessor Company SARs held by
Messrs. Mariano, McCoy and Young at the time of the Acquisition in the
amounts of $3,450,093, $2,901,460, and $2,901,460, respectively.

(7) Mr. Karst was appointed Senior Vice President, Chief Financial Officer and
Secretary in March 1995 and was appointed Executive Vice President, Finance
and Administration in March 1996.

(8) Includes employee benefits of $1,671.

EMPLOYMENT AGREEMENTS

Concurrently with the consummation of the Acquisition, the Company entered
into new employment agreements with certain executive officers of the Company.
All rights of such executive officers under their previous employment
agreements, including all rights to receive severance benefits upon a change of
control of

35
<PAGE> 37

the Company, terminated at the closing of the Acquisition in consideration of
the new employment agreements described below.

Mariano Employment Agreement. The Company and Mr. Mariano entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr.
Mariano was employed as President and Chief Operating Officer of the Company (or
such other offices as the Board of Directors may designate) at an annual base
salary of $400,000 (subject to increases at the discretion of the Board). In
January 1996, the Board appointed Mr. Mariano to the office of Chief Executive
Officer and raised his annual base salary to $500,000. If the Company meets
certain financial targets determined by the Board of Directors of the Company,
Mr. Mariano will also be entitled to receive an annual incentive bonus not to
exceed 200% of his annual base salary. Mr. Mariano is eligible to participate in
employee benefit plans generally made available by the Company to its executive
officers. At the closing of the Acquisition, Mr. Mariano received a payment of
$864,000 in consideration of the cancellation of certain rights under his prior
employment agreement. Concurrently with the closing of the Acquisition, Mr.
Mariano exchanged 1,200 shares of Dominick's common stock for 190,293 shares of
Common Stock of the Company in a tax-deferred transaction. The employment
agreement may be terminated by either party upon 30 days' notice for any reason,
or immediately by the Company for cause. If during the term of the employment
contract, Mr. Mariano resigns or his employment is terminated by the Company for
any reason other than for cause, he will be entitled to receive a cash payment
equal to three times his annual base salary, less $864,000, and maintenance at
the Company's expense of medical, dental and other benefits for 24 months
following such employment termination.

McCoy Employment Agreement. The Company and Mr. McCoy entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr. McCoy
was employed at an annual base salary of $250,000. In March 1996, the Board
appointed Mr. McCoy to Executive Vice President of Operations and raised his
annual base salary to $300,000. Mr. McCoy is also entitled to receive an annual
incentive bonus, not to exceed 100% of base salary, if the Company meets certain
financial targets determined by the Board of Directors of the Company. Mr. McCoy
is entitled to participate in employee benefit plans generally made available by
the Company to its executive officers. The employment agreement may be
terminated by either the Company or Mr. McCoy upon 30 days' notice for any
reason, or immediately by the Company for cause. In consideration of the
cancellation of certain rights under his prior employment agreement, Mr. McCoy
received a payment of $864,000 on March 22, 1996. If Mr. McCoy resigns or his
employment is terminated by the Company other than for cause subsequent to March
22, 1996, he is entitled to receive the discounted present value of the
aggregate base salary for the remaining term of the employment agreement less
$864,000, plus the maximum bonus payable in the year of termination. Unless
terminated for cause, Mr. McCoy is also entitled to continue to receive medical,
dental and other employee benefits for the full three-year term of the
employment agreement.

Young Employment Agreement. The Company and Mr. Young entered into a
three-year employment agreement dated March 22, 1995 pursuant to which Mr. Young
is employed at an annual base salary of $225,000. Mr. Young is also entitled to
receive an annual incentive bonus, not to exceed 100% of base salary, if the
Company meets certain financial targets determined by the Board of Directors of
the Company. Mr. Young is also entitled to participate in employee benefit plans
generally made available by the Company to its executive officers. The
employment agreement may be terminated by the Company or Mr. Young upon 30 days'
notice for any reason, or immediately by the Company for cause. In consideration
of the cancellation of certain rights under his prior employment agreement, Mr.
Young received a payment of $843,708 on March 22, 1996. In the event Mr. Young
resigns or is terminated other than for cause subsequent to March 22, 1996, he
is entitled to receive the discounted present value of the aggregate base salary
for the remaining term of the employment agreement less $843,708, plus the
maximum bonus payable in the year of termination. Unless terminated for cause,
Mr. Young will also continue to receive medical, dental and other employee
benefits for the full three-year term of the employment agreement.

FORMER SENIOR MANAGEMENT LONG TERM INCENTIVE PLAN

Prior to the consummation of the Acquisition, the Predecessor Company
maintained a Senior Management Long Term Incentive Plan which awarded SARs to
certain senior executives based upon the individual's

36
<PAGE> 38

length of tenure at the Predecessor Company and the annual performance of both
the individual and the Predecessor Company. Prior to the consummation of the
Acquisition, the Predecessor Company had approximately 20,800 SARs outstanding,
which were held by 18 current and former officers of the Predecessor Company,
including Messrs. Mariano, Young and McCoy.

Concurrently with the consummation of the Acquisition, approximately $29.5
million of outstanding SARs were redeemed for cash. An additional $2.6 million
of SARs payments that would otherwise have been payable upon consummation of the
Acquisition were cancelled in exchange for the issuance of the Reinvestment
Options (as defined). See "-- 1995 Stock Option Plan."

1995 STOCK OPTION PLAN

On March 19, 1995, the Company adopted the 1995 Stock Option Plan (the
"Stock Option Plan"), designed to motivate certain executives to remain in the
employ of the Company and to focus their efforts on long-term financial
objectives. Under the Stock Option Plan, the Company may, from time to time,
grant incentive stock options or nonqualifying options to officers and other key
employees of the Company or its subsidiaries upon the terms, conditions and
provisions of the Stock Option Plan. Concurrently with the consummation of the
Acquisition, the Company granted each of Messrs. Mariano, McCoy and Young
options with a term of ten years, exercisable for 146,379 shares of Common Stock
representing 1% of the Company's Common Stock outstanding as of the consummation
of the Acquisition. In the case of Mr. Mariano, such options vest 20% per year
over five years beginning one year from the date of grant, with an exercise
price equal to $6.83 per share. Messrs. McCoy and Young each received options to
purchase 97,591 shares at an exercise price of $1.71 per share which were fully
vested and exercisable on the date of grant, and additional options to purchase
48,788 shares at an exercise price of $6.83 per share which vest 25% per year
over four years beginning two years from the date of grant. Together, such
options entitle each of Messrs. McCoy and Young to purchase 146,379 shares for
an aggregate purchase price of $500,000.

Upon the consummation of the Acquisition, options representing an aggregate
of 2.6% of the total equity of the Company outstanding at such time were issued
to holders of SARs in exchange for the cancellation of approximately $2.6
million of the SARs payments which would otherwise be payable upon consummation
of the Acquisition (the "Reinvestment Options"). The value of the SARs payments
cancelled were credited against the exercise price for each Reinvestment Option.
The Reinvestment Options were fully vested upon issuance and are immediately
exercisable.

OPTION GRANTS TABLE

The following Option Grants Table sets forth, as to the Named Executive
Officers, certain information relating to stock options granted during the
fiscal year ended October 28, 1995.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR (2) ($/SHARE) DATE (3) 5% ($) 10% ($)
----------- --------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald W. Burkle........ -- -- -- -- -- --
Robert A. Mariano....... 146,379 15.4% $6.83 3/2005 $628,895 $1,593,742
Darren W. Karst......... 73,189 7.7% $6.83 3/2005 314,447 796,871
Robert E. McCoy......... 97,591 10.3% $1.71 3/2005 919,309 1,562,573
48,788 5.1% $6.83 3/2005 209,610 531,194
Herbert R. Young........ 97,591 10.3% $1.71 3/2005 919,309 1,562,573
48,788 5.1% $6.83 3/2005 209,610 531,194
</TABLE>

- ------------------------------

(1) The 5% and 10% assumed annual compound rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices. There can be no assurance that the amounts reflected in this table
will be achieved.

(2) The total number of shares subject to options granted to employees in the
fiscal year ended October 28, 1995 was 950,379.

(3) Options may terminate before their expiration date if the optionee's status
as an employee or consultant is terminated or upon such optionee's death.

37
<PAGE> 39

YEAR-END OPTION VALUE TABLE

No Named Executive officer exercised stock options during the fiscal year
ended October 28, 1995. The following table sets forth certain information
concerning the number of stock options held by the Named Executive Officers as
of October 28, 1995, and the value (based on the fair market value of a share of
stock at fiscal year-end) of in-the-money options outstanding as of such date.

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT OCTOBER 28, 1995 AT OCTOBER 28, 1995(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald W. Burkle........................... -- -- -- --
Robert A. Mariano.......................... 29,276 117,103 -- --
Darren W. Karst............................ 14,638 58,552 -- --
Robert E. McCoy............................ 97,591 48,788 $ 500,000 --
Herbert R. Young........................... 97,591 48,788 $ 500,000 --
</TABLE>

- ------------------------------

(1) Value is based upon the fair market value of the stock at October 28, 1995
minus the exercise price (the "Fair Market Value"). Fair Market Value has
been determined in good faith by the Board of Directors.

SENIOR MANAGEMENT SHORT TERM DISABILITY PLAN

The Company maintains a Short Term Disability Plan ("STD Plan") for its
senior management. Under the STD Plan, an eligible employee who is disabled will
receive payments equal to either 66.67% or 100% of base salary, depending upon
the length of service with the Company, for a period of up to 26 weeks. An
eligible employee is considered disabled if, as a result of injury, covered
illness or pregnancy, the officer is unable to perform the duties of the
officer's regular occupation.

SENIOR MANAGEMENT LONG TERM DISABILITY PLAN

The Company maintains a Long Term Disability Plan ("LTD Plan") for its
senior management, which is designed to provide salary continuation beyond the
coverage extended through the STD Plan. Under the LTD Plan, an eligible employee
who is disabled for 180 days will receive monthly payments equal to 60% of the
employee's monthly earnings (base salary plus bonus), not to exceed a maximum of
$30,000 per month, for the benefit duration specified in the LTD Plan. An
eligible employee is considered disabled if, as a result of injury or illness
for which the employee is under a doctor's care, the employee cannot perform all
of the material and substantial duties of the employee's regular occupation.

38
<PAGE> 40

PRINCIPAL AND SELLING STOCKHOLDERS

The Company's authorized common equity consists of Common Stock and Class B
Common Stock (together, the "Company Common Stock"). Except as otherwise
described herein, all shares of Common Stock and Class B Common Stock are
identical and entitle the holders thereof to the same rights and privileges
(except with respect to voting privileges). Holders of Class B Common Stock may
elect at any time to convert any or all of such shares into Common Stock, on a
share-for-share basis, to the extent the holder thereof is not prohibited from
owning additional voting securities by virtue of regulatory restrictions. The
holders of Common Stock are entitled to one vote per share on all matters to be
voted upon by the stockholders. Except as required by law, holders of Class B
Common Stock do not have the right to vote on any matters to be voted upon by
the stockholders.

The following table sets forth, as of August 27, 1996, the ownership of
Company Common Stock by (i) each person known by the Company to be the owner of
5% or more of the Company Common Stock, (ii) by each person who is a director or
Named Executive Officer of the Company, (iii) by all directors and executive
officers of the Company as a group, and (iv) by each Selling Stockholder.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING
---------------------- SHARES ----------------------
NUMBER OF BEING NUMBER OF
SHARES PERCENT OFFERED SHARES PERCENT
--------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND 5%
STOCKHOLDERS:
Yucaipa and affiliates:
Yucaipa Blackhawk Partners, L.P. .... 2,018,106 13.1%
Yucaipa Chicago Partners, L.P. ...... 253,470 1.6
Yucaipa Dominick's Partners, L.P. ... 663,333 4.3
The Yucaipa Companies(2)............. -- --
Yucaipa Management L.L.C.(3)......... -- --
Ronald W. Burkle(4).................. -- --
Linda McLoughlin Figel(5)............ -- --
Patrick L. Graham(6)................. -- --
Darren W. Karst(7)................... 14,637 0.1
Mark A. Resnik(8).................... -- --
Total........................ 2,949,546 19.0
Robert A. Mariano(9)................... 219,568 1.4
Robert E. McCoy(10).................... 97,591 0.6
Herbert R. Young(11)................... 97,591 0.6
Apollo and affiliates:
Peter P. Copses(12).................. -- --
David B. Kaplan(12).................. -- --
Antony P. Ressler(12)................ -- --
Apollo Investment Fund, L.P. ........ 2,927,591 18.9
Apollo Investment Fund III, L.P. .... 2,668,412 17.3
Apollo Overseas Partners III,
L.P. ............................. 160,036 1.0
Apollo (U.K.) Partners III, L.P. .... 99,142 0.7
Total (13)................... 5,855,181 37.9
BT Investment Partners, Inc.(14)(15)... 1,332,054 8.6
Bankers Trust New York
Corporation(14)(15).................. 193,733 1.3
Chase Manhattan Investment
Holdings, Inc.(15)(16)............... 2,272,996 14.7
All directors and executive officers as
a group (15 persons)................. 9,219,477 58.7
</TABLE>

39
<PAGE> 41

- ------------------------------

(1) Except as otherwise indicated, each beneficial owner has the sole power to
vote, as applicable, and to dispose of all shares of Company Common Stock
owned by such beneficial owner.

(2) Share amounts and percentages for Yucaipa do not include shares issuable
upon exercise of warrant issued to Yucaipa to purchase 3,874,492 shares of
Common Stock (less a number of shares equal to the aggregate exercise
price) at an exercise price of $20.73 per share. See "Description of
Capital Stock -- Yucaipa Warrant." Yucaipa is controlled by Ronald W.
Burkle. The address of Yucaipa and such affiliates is 10000 Santa Monica
Blvd., Los Angeles, California 90067.

(3) Yucaipa Management L.L.C. is a Delaware limited liability company
controlled by Ronald W. Burkle. Yucaipa Management L.L.C. is the sole
general partner of Yucaipa Blackhawk Partners, L.P., Yucaipa Chicago
Partners, L.P., and Yucaipa Dominick's Partners, L.P., which own 2,018,106,
253,470 and 663,333 shares of Common Stock, respectively. The foregoing
limited partnerships are parties to the Stockholders Agreement with certain
other stockholders which gives Yucaipa Management L.L.C. the right to elect
a majority of the directors of the Company. See "Description of Capital
Stock -- Stockholders Agreements."

(4) Represents shares owned by Yucaipa Blackhawk Partners, L.P., Yucaipa
Chicago Partners, L.P., and Yucaipa Dominick's Partners, L.P. These
entities are affiliated partnerships controlled indirectly by Ronald W.
Burkle. Mr. Burkle is the controlling general partner of The Yucaipa
Companies and the controlling managing member of Yucaipa Management L.L.C.
See notes (2) and (3).

(5) Ms. Figel is a general partner of The Yucaipa Companies and a limited
partner of Yucaipa Dominick's Partners, L.P. See notes (2) and (3).

(6) Mr. Graham is a general partner of The Yucaipa Companies and a limited
partner of Yucaipa Blackhawk Partners, L.P. See notes (2) and (3).

(7) Excludes options for 58,551 shares which are not exercisable within 60
days. Mr. Karst is a general partner of The Yucaipa Companies and a limited
partner of Yucaipa Blackhawk Partners, L.P. See notes (2) and (3).

(8) Mr. Resnik is a general partner of The Yucaipa Companies, a member of
Yucaipa Management L.L.C. and a limited partner of Yucaipa Blackhawk
Partners, L.P. See notes (2) and (3).

(9) Excludes options for 117,103 shares which are not exercisable within 60
days.

(10) Excludes options for 48,788 shares which are not exercisable within 60
days.

(11) Excludes options for 48,788 shares which are not exercisable within 60
days.

(12) Does not include shares beneficially held by Apollo Investment Fund, L.P.,
Apollo Investment Fund III, L.P., Apollo Overseas Partners III, L.P. or
Apollo (U.K.) Partners III, L.P. (collectively, the "Apollo Funds").
Messrs. Copses, Kaplan and Ressler are associated with Apollo Advisors,
L.P. and Apollo Advisors II, L.P., (collectively, "Advisors"), the managing
general partners of the Apollo Funds. Messrs. Copses, Kaplan and Ressler
disclaim beneficial ownership of the Common Stock and the Class B Common
Stock held by the Apollo Funds.

(13) The address of Advisors is 2 Manhattanville Road, Purchase, New York 10577.

(14) The address of BT Investment Partners, Inc. and Bankers Trust New York
Corporation is 130 Liberty Street, New York, New York 10006. Bankers Trust
New York Corporation is an affiliate of BT Investment Partners, Inc.

(15) Consists of shares of Class B Common Stock. The holder disclaims beneficial
ownership of shares of Common Stock issuable upon conversion of such Class
B Common Stock.

(16) The address of Chase Manhattan Investment Holdings, Inc. is One Chase
Manhattan Plaza, New York, New York 10006.

(17) All shares held by the Other Selling Stockholders (other than Crescent
Shared Opportunity Fund and Crescent/Mach I Partners, L.P.) are Class B
Common Stock. All such shares being sold pursuant to this Offering will be
converted to Common Stock when sold.

40
<PAGE> 42

CERTAIN TRANSACTIONS

YUCAIPA CONSULTING AGREEMENT

On March 22, 1995, the Company and Dominick's entered into a five-year
consulting agreement (the "Consulting Agreement") with Yucaipa for certain
management and financial advisory services to be provided to the Company and its
subsidiaries. The services of Messrs. Burkle, Resnik and Graham and Ms. Figel,
acting in their capacities as directors and/or officers, and the services of
other Yucaipa personnel are provided to the Company, Dominick's and their
respective subsidiaries pursuant to the Consulting Agreement. See "Management."
Messrs. Burkle, Resnik and Graham and Ms. Figel, together with Mr. Karst, are
general partners of Yucaipa. The Consulting Agreement provided for the payment
to Yucaipa of annual management fees in an amount equal to two percent (2.0%) of
EBITDA (as defined in the Consulting Agreement) of Dominick's. In connection
with this Offering the Company will pay $10.5 million to Yucaipa to terminate
its obligations under the Consulting Agreement. Pursuant to the Consulting
Agreement, Yucaipa received a fee of $14.0 million for advisory and other
services provided in connection with the Acquisition. Fees paid or accrued under
the Consulting Agreement in connection with management services were
approximately $1.5 million during the 32 weeks ended October 28, 1995 and $2.0
million during the 40 weeks ended August 3, 1996.

MANAGEMENT AGREEMENT

In order to obtain future services from Yucaipa, the Company and Dominick's
will enter into a five-year management agreement (the "Management Agreement")
with Yucaipa upon the consummation of this Offering. In light of the reduced
levels of services anticipated following the consummation of this Offering, the
Management Agreement will provide for the payment of an annual fee to Yucaipa in
the amount of $1,000,000 per year. In addition, the Company may retain Yucaipa
in an advisory capacity in connection with certain acquisition or sale
transactions, in which case the Company will pay Yucaipa an advisory fee equal
to one percent (1.0%) of the transaction value. The term of the agreement will
be automatically renewed on April 1 of each year for a five-year term unless 90
days' notice is given by either party. The Management Agreement may be
terminated at any time by the Company upon 90 days' written notice, provided
that Yucaipa will be entitled to full payment under the agreement for the
remaining term thereof, unless the Company terminates for cause pursuant to the
terms of the agreement. Yucaipa may terminate the agreement if the Company fails
to make a payment due thereunder, or if there occurs a Change of Control (as
defined in the Management Agreement) of the Company, and upon any such
termination Yucaipa will be entitled to full payment for the remaining term of
the agreement.

DESCRIPTION OF CAPITAL STOCK

GENERAL MATTERS

The total amount of authorized capital stock of the Company consists of 50
million shares of Common Stock, par value $0.01 per share, 10 million shares of
Class B Common Stock, par value $0.01 per share, and 200,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"). Upon completion of the
Offering, shares of Common Stock will be issued and outstanding,
shares of Class B Common Stock will be issued and outstanding, and no
shares of Preferred Stock will be outstanding. The discussion herein describes
the Company's capital stock, the Restated Certificate of Incorporation and
Bylaws as anticipated to be in effect upon consummation of the Offering. The
following summary of certain provisions of the Company's capital stock describes
all material provisions of, but does not purport to be complete and is subject
to, and qualified in its entirety by, the Restated Certificate of Incorporation
and the Bylaws of the Company that are included as exhibits to the Registration
Statement of which this Prospectus forms a part and by the provisions of
applicable law.

COMMON STOCK

As of August 27, 1996, there were 7,024,654 shares of Common Stock
outstanding held by 43 holders of record. The issued and outstanding shares of
Common Stock are, and the shares of Common Stock being

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<PAGE> 43

offered will be upon payment therefor, validly issued, fully paid and
nonassessable. Subject to the prior rights of the holders of any Preferred
Stock, the holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in such
amounts as the Board may from time to time determine. See "Dividend Policy."

The shares of Common Stock are not redeemable or convertible, and the
holders thereof will have no preemptive or subscription rights to purchase any
securities of the Company. Upon liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to receive pro rata, along
with the holders of Class B Common Stock, the assets of the Company which are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding.

Application will be made for the approval for listing of the Common Stock
on the New York Stock Exchange under the symbol "DFF."

The transfer agent and registrar for the Common Stock will be .

CLASS B COMMON STOCK

Unless otherwise required by law, holders of the Class B Common Stock are
not entitled to vote on matters submitted to a vote of stockholders, including
the election of directors. Upon the consummation of this Offering, holders of
Class B Common Stock may elect at any time to convert any or all of such shares
into Common Stock, on a share for share basis, to the extent such holder is not
prohibited from owning additional voting securities by virtue of regulatory
restrictions.

As of August 27, 1996, there were 8,434,381 shares of Class B Common Stock
outstanding held by 14 holders of record. The issued and outstanding shares of
Class B Common Stock are validly issued, fully paid and nonassessable. Subject
to the prior rights of the holders of any Preferred Stock, the holders of
outstanding shares of Class B Common Stock are entitled to receive dividends out
of assets legally available therefor at such times and in such amounts as the
Board may from time to time determine. See "Dividend Policy."

The shares of Class B Common Stock are not redeemable or convertible other
than into shares of Common Stock, and the holders thereof will have no
preemptive or subscription rights to purchase any securities of the Company.
Upon liquidation, dissolution or winding up of the Company, the holders of Class
B Common Stock are entitled to receive pro rata, along with the holders of
Common Stock, the assets of the Company which are legally available for
distribution, after payment of all debts and other liabilities and subject to
the prior rights of any holders of Preferred Stock then outstanding.

PREFERRED STOCK

The Board may, without further action by the Company's stockholders, from
time to time, direct the issuance of additional shares of Preferred Stock in
series and may, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding shares of Preferred Stock would reduce the amount of funds available
for the payment of dividends on shares of Common Stock. Holders of shares of
Preferred Stock may be entitled to receive a preference payment in the event of
any liquidation, dissolution or winding-up of the Company before any payment is
made to the holders of shares of Common Stock. Under certain circumstances, the
issuance of shares of Preferred Stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the assumption of control by
a holder of a large block of the Company's securities or the removal of
incumbent management. The Board, without stockholder approval, may issue shares
of Preferred Stock with voting and conversion rights which could adversely
affect the holders of shares of Common Stock. Upon consummation of the Offering,
there will be no shares of Preferred Stock outstanding, and the Company
currently has no present intention to issue any shares of Preferred Stock.

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<PAGE> 44

CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS

The Restated Certificate of Incorporation provides that stockholder action
can be taken only at an annual or special meeting of stockholders and cannot be
taken by written consent in lieu of a meeting. The Restated Certificate of
Incorporation and the Bylaws provide that, except as otherwise required by law,
special meetings of the stockholders can only be called pursuant to a resolution
adopted by a majority of the Board of Directors or by the Chief Executive
Officer of the Company or the holders of a majority of the Company's outstanding
Common Stock. Stockholders will not be permitted to call a special meeting or to
require the Board to call a special meeting.

The Bylaws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders of the Company, including
proposed nominations of persons for election to the Board. Stockholders at an
annual meeting may only consider proposals or nominations specified in the
notice of meeting or brought before the meeting by or at the direction of the
Board or by a stockholder who was a stockholder of record on the record date for
the meeting, who is entitled to vote at the meeting and who has given to the
Company's Secretary timely written notice, in proper form, of the stockholder's
intention to bring that business before the meeting. Although the Bylaws do not
give the Board the power to approve or disapprove stockholder nominations of
candidates or proposals regarding other business to be conducted at a special or
annual meeting, the Bylaws may have the effect of precluding the conduct of
certain business at a meeting if the proper procedures are not followed or may
discourage or defer a potential acquiror from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of the Company.

SECTION 203 OF DELAWARE LAW

Following the consummation of the Offering, the Company will be subject to
the "business combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly-held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless (i) the transaction
in which the person became an "interested stockholder" or the business
combination is approved by the Board of Directors prior to the date the
interested stockholder obtained such status, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," the "interested stockholder" owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned by (a) persons who are directors and also officers and (b) employee
stock plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer, or (iii) on or subsequent to such date the "business
combination" is approved by the board of directors and authorized at an annual
or special meeting of stockholders by the affirmative vote of at least 66 2/3%
of the outstanding voting stock which is not owned by the "interested
stockholder." A "business combination" is defined to include mergers, asset
sales and other transactions resulting in financial benefit to a stockholder. In
general, an "interested stockholder" is a person who, together with affiliates
and associates, owns (or within three years, did own) 15% or more of a
corporation's voting stock. The statute could prohibit or delay mergers or other
takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Restated Certificate of Incorporation limits the liability of directors
to the fullest extent permitted by the Delaware General Corporation Law. In
addition, the Restated Certificate of Incorporation provides that the Company
shall indemnify directors and officers of the Company to the fullest extent
permitted by such law.

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<PAGE> 45

STOCKHOLDERS AGREEMENTS

Under the terms of the Stockholders Agreement entered into by the Company,
certain affiliates of Yucaipa, Apollo and certain other stockholders of the
Company, a Yucaipa affiliate is entitled to nominate six directors to the Board
of Directors of each of the Company and Dominick's. Yucaipa's right to nominate
members to such boards of directors will be reduced by three if Mr. Burkle
ceases to beneficially own at least 33 1/3% of the shares beneficially owned by
Yucaipa on the date of the Acquisition and shall terminate if Mr. Burkle ceases
to beneficially own at least 25% of the shares beneficially owned by Yucaipa on
such date. The Stockholders Agreement entitles an Apollo affiliate to nominate
three directors to the Board of Directors of each of the Company and Dominick's.
Apollo's right to nominate members to such boards of directors will be reduced
by one if Apollo ceases to own at least 33 1/3% of the shares beneficially owned
by Apollo on the date of the Acquisition and shall terminate if Apollo ceases to
beneficially own at least 25% of the shares beneficially owned by Apollo on such
date. If Apollo ceases to own at least 25% of the shares beneficially owned by
Apollo on the date of the Acquisition and the parties to the Stockholders
Agreement other than Apollo beneficially own at least 33 1/3% of the shares of
Common Stock beneficially owned by such stockholders on the date of the
Acquisition, a Yucaipa affiliate will be entitled to nominate an additional
member to the Board of Directors of each of the Company and Dominick's. The
Stockholders Agreement provides that the parties thereto shall vote their shares
and take all actions otherwise necessary to ensure the election to such boards
of the Yucaipa nominees and the Apollo nominees. The Yucaipa nominees to such
boards are Messrs. Burkle, Resnik, Karst, Graham and Mariano and Ms. Figel. The
Apollo nominees are Messrs. Copses, Kaplan and Ressler. In addition, Apollo and
certain other stockholders will have the right to participate in any bona fide
transfer of the pecuniary interests in Common Stock beneficially owned by
Yucaipa and its affiliates. In certain circumstances, Yucaipa will have the
right to compel the participation of Apollo and other stockholders in sales of
all the outstanding shares of Company stock.

Each member of management of the Company holding shares of Common Stock,
Reinvestment Options or other Company stock options (collectively, the
"Management Stockholders") executed a management stockholders agreement with the
Company (collectively, the "Management Stockholders Agreements"). The Management
Stockholders Agreements generally provide the Company with a right of first
refusal in the event of proposed sales of Company stock acquired by the
Management Stockholders upon the exercise of stock options and an option,
exercisable following any termination for cause of a Management Stockholder's
employment or if the Management Stockholder commences employment with a
competitor, to repurchase at Fair Market Value (as defined in the Management
Stockholders Agreements) any Common Stock acquired by such Management
Stockholder upon the exercise of Company stock options. Each Management
Stockholders Agreement contains certain rights of the Management Stockholders to
participate in sales by Yucaipa of Company stock and certain obligations of the
Management Stockholders to sell their Company stock in the case of a sale for
cash of all outstanding Common Stock. Finally, the Management Stockholders are
required to vote their Company stock to elect to the Company Board of Directors
the directors nominated by Yucaipa and Apollo. The Management Stockholders
Agreements, and all rights and obligations of the Management Stockholders
thereunder described above, will terminate following the Offering.

YUCAIPA WARRANT

Upon the closing of the Acquisition, the Company issued to Yucaipa a
warrant to purchase shares of Common Stock (the "Yucaipa Warrant"). The Yucaipa
Warrant will become exercisable at the election of Yucaipa upon the consummation
of this Offering at an exercise price of $20.73 per share. If not exercised, the
Yucaipa Warrant will expire on March 22, 2000; provided, however, that if on
such date certain financial performance requirements are satisfied, the
expiration date will be extended to March 22, 2002 and, in such case, the
exercise price is increased daily at a rate of 25% per annum. Pursuant to the
cashless exercise provisions of the Yucaipa Warrant , upon exercise in full
Yucaipa would be entitled to receive a number of shares equal to the difference
between 3,874,492 shares and that number of shares having a market value as of
the exercise date equal to $80.3 million (i.e., the aggregate exercise price).
For example, if the Yucaipa Warrant were exercised in full at such time as the
market value of the Common Stock is $ per share, Yucaipa would be entitled
to receive shares of Common Stock.

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<PAGE> 46

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
shares of Company Common Stock. All of the shares sold in this
Offering will be freely tradeable by persons other than affiliates of the
Company.

RULE 144

In general, Rule 144, as currently in effect, provides that a person (or
persons whose sales are aggregated) who is an affiliate of the Company or who
has beneficially owned shares which are issued and sold in reliance upon certain
exemptions from registration under the Securities Act ("Restricted Shares") for
at least two years is entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent (1%) of the then
outstanding shares of Common Stock (beginning on the 91st day immediately after
this Offering) or the average weekly trading volume in the Common Stock during
the four calendar weeks preceding the filing of a notice of intent to sell.
Sales under Rule 144 are also subject to certain manner-of-sale provisions,
notice requirements and the availability of current public information about the
Company. However, a person who is not deemed to have been an "affiliate" of the
Company at any time during the three months preceding a sale, and who has
beneficially owned Restricted Shares for at least three years, would be entitled
to sell such shares under Rule 144 without regard to volume limitations,
manner-of-sale provisions, notice requirements or the availability of current
public information about the Company. If a proposed amendment to Rule 144 is
adopted, the two- and three-year holding period requirements described above
would be reduced to one and two years, respectively. The Company and each of the
Company's present stockholders, executive officers and directors have agreed,
subject to certain exceptions relating to the Company, that they will not,
directly or indirectly, offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any shares of Common Stock, Class B Common
Stock or any securities convertible into or exercisable or exchangeable for such
Common Stock, or to cause a registration statement covering any shares of Common
Stock to be filed, for a period of 180 days after the date of this Prospectus,
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. See "Underwriting."

After the expiration of the lock-up period, (a) shares of Common
Stock and Class B Common Stock will be eligible for sale pursuant to Rule 144,
subject to certain volume limitation and other requirements, and (b)
shares of Common Stock and Class B Common Stock will be eligible for sale
pursuant to Rule 144 following satisfaction of the Rule's holding period and
other requirements (including Common Stock issuable upon conversion of the Class
B Common Stock, but excluding shares issuable upon exercise of the Yucaipa
Warrant or any employee stock options). After the expiration of the lock-up
period, a maximum of shares issuable upon exercise of currently
outstanding employee stock options will become freely tradeable, except that
persons deemed "affiliates" of the Company will be required to comply with the
terms and conditions of Rule 144 under the Securities Act when selling such
shares.

Prior to the Offering, there has been no public market for the shares of
Company Common Stock, and no predictions can be made as to the effect that sales
of Company Common Stock under Rule 144, pursuant to a registration statement or
otherwise, or the availability of shares of Common Stock for sale, will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market, or the perception that
such sales could occur, could adversely affect prevailing market prices and
could impair the Company's future ability to raise capital through an offering
of its equity securities.

REGISTRATION RIGHTS

Pursuant to a Registration Rights Agreement entered into in connection with
the Acquisition (the "Registration Rights Agreement"), Apollo, and certain other
investors as a group, were each granted two demand and unlimited piggyback
registration rights with respect to Common Stock. Upon the closing of this
Offering, there will be shares of Common Stock owned by such investors
subject to the Registration Rights Agreement. Registration rights can be
exercised at any time after the date of this Prospectus subject to the 180-day
lock-up period described under "Underwriting."

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<PAGE> 47

THE ACQUISITION

On March 22, 1995, the Company consummated the Acquisition for an aggregate
purchase price of approximately $692.9 million, including assumed and refinanced
indebtedness (but excluding the Company's fees and expenses and working
capital). The Company effected the Acquisition by acquiring 100% of the capital
stock of Dominick's parent, formerly known as Dodi, Inc. ("Dodi"), for $346.6
million in cash and $40 million of the Company's 15% Redeemable Exchangeable
Cumulative Preferred Stock. In addition, the Company repaid $34.3 million of
secured promissory notes issued by Dominick's prior to the Acquisition to
discharge all obligations under its SARs plan and to repurchase shares of
Dominick's restricted stock held by certain management employees (the
"Management Stock Transactions"). In connection with the Acquisition, the
Company refinanced $135.7 million of Dominick's existing indebtedness (including
premiums and accrued interest), assumed $124.5 million of existing capital
leases and other indebtedness and paid $11.8 million of employment termination,
seller advisory and other seller fees and expenses.

The principal sources of cash to finance the Acquisition were (i) $330
million in term loans under the Old Credit Facility, consisting of the $140
million six-year amortizing Tranche A Loans, the $60 million seven-year
amortizing Tranche B Loans, the $65 million eight-year amortizing Tranche C
Loans and the $65 million eight and one-half year amortizing Tranche D Loans
(collectively, the "Term Loan Facilities"); (ii) the $150 million unsecured
Senior Subordinated Credit Facility; (iii) a $100 million cash investment in the
Company Common Stock by certain affiliates of Yucaipa and certain other
institutional investors, including affiliates of Apollo and affiliates of BT
Securities Corporation and Chase Securities, Inc. In addition, certain members
of the Company's management made a $5 million equity investment in the Company
by cancelling SARs or exchanging restricted stock of Dominick's for Common Stock
or stock options of the Company.

Prior to the Acquisition, Dominick's distributed two parcels of owned real
estate to its parent, Dodi, which, in turn, distributed these parcels, together
with several parcels of real estate owned by two other subsidiaries of Dodi, to
one of its shareholders (the "Excluded Properties Transactions"). Dominick's
entered into new leases for the stores located on the two Dominick's owned
parcels which were distributed. Pursuant to the terms of a tax matters agreement
dated as of March 22, 1995 the sellers agreed, subject to certain conditions and
limitations, to indemnify the Company for any taxable gains resulting from the
Excluded Properties Transactions, to the extent such gains are not offset by
certain specified deductions related to the Management Stock Transactions.

DESCRIPTION OF CERTAIN INDEBTEDNESS

NEW CREDIT FACILITY

In connection with this Offering, the Company intends to enter into the New
Credit Facility with a syndicate of financial institutions. The following is a
summary of the material terms and conditions presently anticipated with respect
to the New Credit Facility. This summary does not purport to be a complete
description of the New Credit Facility, however, and is subject to the detailed
provisions of the loan agreement (the "Loan Agreement") and various related
documents to be entered into in connection with the New Credit Facility, copies
of which will be filed as exhibits to the Registration Statement.

General

The New Credit Facility will provide for a $100 million amortizing term
loan (the "New Term Loan") and a $225 million revolving credit facility,
including a $105 million term loan subfacility (the "New Revolving Facility"),
each of which has a six and one-half year term. The New Revolving Facility will
be available for working capital and general corporate purposes, including up to
$50 million which may be used to support letters of credit. The Company utilizes
letters of credit to cover workers' compensation, self-insurance liabilities and
for other general purposes.

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<PAGE> 48

Interest Rate; Fees

Borrowings under (i) the New Revolving Facility and the New Term Loan will
bear interest at a rate equal to the Base Rate (as defined in the Loan
Agreement) plus 0.50% per annum or the reserve adjusted Euro-Dollar Rate (as
defined in the Loan Agreement) plus a maximum 1.50% per annum (subject to
reduction as certain financial tests are satisfied). Up to $20 million of the
New Revolving Facility will be available as a swingline facility and loans
outstanding under the swingline facility shall bear interest at the Base Rate
minus 0.375% per annum. Applicable interest rates on the New Term Loan, the
swingline loans and the New Revolving Facility and the fees payable under the
New Revolving Facility on letters of credit, will be reduced by up to 0.75% per
annum if the Company meets certain financial tests. The Company will pay the
issuing bank a fee of 0.25% per annum on each standby letter of credit and
commercial letter of credit and will pay the lenders under the New Revolving
Facility a letter of credit fee for standby letters of credit equal to the
applicable margin for Euro-dollar loans under the New Revolving Facility and a
fee to be determined for commercial letters of credit. Each of these fees will
be calculated based on the amount available to be drawn under a letter of
credit. In addition, the Company will pay a commitment fee on the unused
portions of the New Revolving Facility and for purposes of calculating this fee,
the swingline facility shall not be deemed to be outstanding. The New Credit
Facility may be prepaid in whole or in part without premium or penalty.

Amortization Prepayments

The New Term Loan matures in six and one-half years and is subject to
amortization on a quarterly basis, commencing in the second year of the
facility, in aggregate annual amounts of $10 million in the second year of the
facility; $10 million in the third year; $15 million in the fourth year; $20
million in the fifth year; $30 million in the sixth year and $15 million in the
final six months. The New Revolving Facility will also mature in six and
one-half years. There will not be any annual cleandown provisions in the New
Revolving Facility. The Company will be required to make certain prepayments,
subject to certain exceptions, on the New Credit Facility with a specified
percentage (which may be reduced to zero if certain financial tests are
satisfied) of its Consolidated Excess Cash Flow (as defined in the Loan
Agreement) and with the proceeds from certain asset sales, issuances of debt
securities and any pension plan reversions.

Guarantees and Collateral

The Company, Dominick's and all active subsidiaries of Dominick's will
guarantee the Company's obligations under the New Credit Facility. The Company's
obligations and the guarantees of its subsidiaries will be secured by
substantially all personal property of the Company and its subsidiaries,
including a pledge of the stock of all subsidiaries of the Company. The
Company's guarantee will be secured by a pledge of the stock of Dominick's. The
Company's obligations will also be secured by first priority liens on certain
unencumbered real property fee interests of the Company and its subsidiaries.
The Company and its subsidiaries will use their reasonable economic efforts to
provide the lenders with a first priority lien on certain unencumbered leasehold
interests of the Company and its subsidiaries.

Covenants

It is anticipated that the obligation of the lenders under the New Credit
Facility to advance funds will be subject to the satisfaction of certain
conditions customary in agreements of this type. In addition, the Company will
be subject to certain customary affirmative and negative covenants contained in
the New Credit Facility, including, without limitation, covenants that restrict,
subject to specified exceptions, (i) the incurrence of additional indebtedness
and other obligations, (ii) the granting of liens, (iii) the making of certain
investments and joint ventures, (iv) the incurrence of certain contingent
obligations, (v) the payment of certain dividends and restricted payments, (vi)
mergers and acquisitions and other fundamental corporate changes, (vii) cash
capital expenditures, (viii) the incurrence of lease obligations and (ix)
engaging in transactions with affiliates.

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<PAGE> 49

It is anticipated that the New Credit Facility will also impose on the
Company and its subsidiaries certain financial tests and minimum ratios which,
among other things, require that the Company (a) maintain a Minimum Fixed Charge
Ratio (as defined in the Loan Agreement) and (b) maintain, during each fiscal
quarter, a ratio of Consolidated Total Debt (as defined in the Loan Agreement)
to Consolidated Adjusted EBITDA (as defined in the Loan Agreement).

Events of Default

The New Credit Facility will also provide for customary events of default.
The occurrence of any of such events of default could result in acceleration of
the Company's obligations under the New Credit Facility and foreclosure on the
collateral securing such obligations, which could have material adverse results
to holders of the Common Stock.

SENIOR SUBORDINATED NOTES DUE 2005

Dominick's 10 7/8% Senior Subordinated Notes (the "Senior Subordinated
Notes") were issued on May 4, 1995 in an aggregate principal amount of $200.0
million. The Senior Subordinated Notes are subordinated to the prior payment
when due of all Senior Indebtedness (as defined in the Note Indenture) governing
the Senior Subordinated Notes) and are guaranteed on a senior subordinated basis
by Dominick's wholly-owned subsidiaries. The Senior Subordinated Notes bear
interest at a rate of 10 7/8% per annum, payable on May 1 and November 1 of each
year. The Senior Subordinated Notes mature on May 1, 2005. On or after May 1,
2000, the Senior Subordinated Notes may be redeemed in whole or in part, at any
time, or in part from time to time, at the option of Dominick's, at a redemption
price equal to the applicable percentage of the principal amount thereof set
forth below, plus accrued and unpaid interest to the redemption date, if
redeemed during the 12 months commencing on May 1, of the years set forth below:

<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
----------
<S> <C>
2000...................................................... 104.833%
2001...................................................... 103.765%
2002...................................................... 102.417%
2003...................................................... 101.208%
2004 and thereafter....................................... 100.000%
</TABLE>

In addition, on or prior to May 1, 1998 Dominick's may, at its option, use
the net cash proceeds from one or more Public Equity Offerings (as defined in
the Note Indenture) to redeem up to an aggregate of 33 1/3% of the principal
amount of the Senior Subordinated Notes originally issued, at a redemption price
equal to 109.667% of the principal amount thereof if redeemed during the 12
months commencing on May 1, 1996, and 108.458% of the principal amount thereof
if redeemed during the 12 months commencing on May 1, 1997, in each case plus
accrued and unpaid interest, if any, to the redemption date.

The Note Indenture provides that if a Change of Control (as defined
therein) occurs, each holder will have the right to require Dominick's to
repurchase such holder's Senior Subordinated Notes pursuant to a Change of
Control Offer (as defined therein) at 101% of the principal amount thereof plus
accrued interest, if any, to the date of repurchase.

The Note Indenture contains certain covenants, including, but not limited
to, covenants with respect to the following matters: (i) limitations on
dividends and other restricted payments; (ii) limitations on incurrences of
additional indebtedness; (iii) limitations on liens; (iv) limitations on asset
sales; (v) limitations on dividend and other payment restrictions affecting
subsidiaries; (vi) limitations on transactions with affiliates; (vii)
limitations on preferred stock of subsidiaries; (viii) limitations on mergers
and certain other transactions; (ix) limitations on other senior subordinated
indebtedness; and (x) limitations on guarantees of certain indebtedness.

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<PAGE> 50

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation,
Morgan Stanley & Co. Incorporated, BT Securities Corporation and Chase
Securities, Inc. are acting as representatives (the "Representatives") have
severally agreed to purchase from the Company and the Selling Stockholders an
aggregate of shares of Common Stock. The number of shares of Common Stock
that each Underwriter has agreed to purchase is set forth opposite its name
below:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..............
Morgan Stanley & Co. Incorporated................................
BT Securities Corporation........................................
Chase Securities, Inc............................................
Total..................................................
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. If any shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, all such shares (other than
shares covered by the over-allotment option described below) must be purchased.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

The Underwriters have advised the Company that they propose to offer the
shares of Common Stock to the public initially at a price to the public set
forth on the cover page of this Prospectus and to certain dealers (who may
include the Underwriters) at such price less a concession not to exceed $ per
share. The Underwriters may allow, and such dealers may re-allow, discounts not
in excess of $ per share to any other Underwriter and certain other dealers.

The Selling Stockholders have granted to the Underwriters an option to
purchase up to an aggregate of additional shares of Common Stock, at
the initial public offering price net of underwriting discounts and commissions,
solely to cover over-allotments. Such option may be exercised at any time within
30 days after the date of this Prospectus. To the extent that the Underwriters
exercise such option, each of the Underwriters will be committed, subject to
certain conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table.

Subject to certain exceptions, the Company, the Selling Stockholders and
certain other stockholders who are parties to the Stockholders Agreement have
agreed not to directly or indirectly, offer, sell, contract to sell, grant any
option to purchase or otherwise dispose of any Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or to cause a
registration statement covering any shares of Common Stock to be filed, for a
period of 180 days from the date of this Prospectus, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation.

Because an affiliate of Chase Securities, Inc. beneficially owns in excess
of 10% of the common equity of the Company, the underwriting arrangements for
the Offering must be made in compliance with certain requirements of Rule 2720
(the "Rule") of the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD"). In this regard, Donaldson, Lufkin & Jenrette
Securities Corporation will act as "qualified independent underwriter" within
the meaning of the Rule and is assuming the responsibilities of acting as a
qualified independent underwriter in pricing the Offering and conducting due
diligence. As compensation for the services of Donaldson, Lufkin & Jenrette
Securities Corporation as a qualified independent underwriter, the Company has
agreed to pay the amount of $5,000.

Affiliates of BT Securities Corporation and Chase Securities, Inc. are
co-arrangers and lenders under the Old Credit Facility and will be co-arrangers
and lenders under the New Credit Facility for which they have

49
<PAGE> 51

received and will receive customary fees. A portion of the proceeds of the
Offering is being used to repay amounts outstanding under the Old Credit
Facility. From time to time the Representatives and their affiliates have
provided, and may in the future provide, financial advisory, investment banking
or banking services to the Company and its affiliates.

Pursuant to the requirements of the Rule, the Underwriters will not confirm
sales of Common Stock to any accounts over which they exercise discretionary
authority without the prior specific written approval of the transaction by the
customer.

Prior to this Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined by
negotiations between the Company and the Underwriters. Among the factors to be
considered in determining the initial public offering price will be the history
of, and prospects for, the Company and the supermarket industry generally, an
assessment of the Company's management, its past and present operations and
financial performance, the prospects for future earnings of the Company, the
general condition of the securities markets at the time of the offering, and the
market prices of and demand for publicly traded common stock of comparable
companies in recent periods.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Latham & Watkins, Los Angeles, California. Certain legal matters in
connection with the Offering will be passed upon for the Underwriters by Cahill
Gordon & Reindel (a partnership including a professional corporation), New York,
New York.

EXPERTS

The consolidated financial statements of Dominick's Supermarkets, Inc. as
of October 28, 1995 and October 29, 1994 (Predecessor Company) and for the
period October 30, 1994 through March 21, 1995 (Predecessor Company), the period
March 22, 1995 through October 28, 1995, and for the two years in the period
ended October 29, 1994 (Predecessor Company) appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-1 under the Securities Act, with respect to the
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock, reference
is hereby made to the Registration Statement and the exhibits and schedules
thereto. The Registration Statement may be inspected, without charge, and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
also maintains a Web site that contains registration statements, reports, proxy
and information statements and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval system. This Web
site can be accessed at http://www.sec.gov.

50
<PAGE> 52

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors........................................................ F-2
Consolidated Balance Sheets as of October 29, 1994 (Predecessor Company), October 28,
1995 and August 3, 1996 (unaudited)................................................. F-3
Consolidated Statements of Operations for the 52 weeks ended October 30, 1993, the 52
weeks ended October 29, 1994, the 20 weeks ended March 21, 1995 (Predecessor
Company), the 32 weeks ended October 28, 1995, the 20 weeks ended August 5, 1995
(unaudited) and the 40 weeks ended August 3, 1996 (unaudited)....................... F-4
Consolidated Statements of Stockholders' Equity for the 52 weeks ended October 30,
1993, the 52 weeks ended October 29, 1994, the 20 weeks ended March 21, 1995
(Predecessor Company), the 32 weeks ended October 28, 1995 and the 40 weeks ended
August 3, 1996 (unaudited).......................................................... F-5
Consolidated Statements of Cash Flows for the 52 weeks ended October 30, 1993, the 52
weeks ended October 29, 1994, the 20 weeks ended March 21, 1995 (Predecessor
Company), the 32 weeks ended October 28, 1995, the 20 weeks ended August 5, 1995
(unaudited) and the 40 weeks ended August 3, 1996 (unaudited)....................... F-6
Notes to Consolidated Financial Statements............................................ F-7
Unaudited Pro Forma Financial Statements.............................................. P-1
</TABLE>

F-1
<PAGE> 53

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Dominick's Supermarkets, Inc.

We have audited the accompanying consolidated balance sheets of Dominick's
Supermarkets, Inc. as of October 28, 1995 and October 29, 1994 (Predecessor
Company), and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period October 30, 1994 through March 21, 1995
(Predecessor Company), the period March 22, 1995 through October 28, 1995, and
for the two years in the period ended October 29, 1994 (Predecessor Company).
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Dominick's
Supermarkets, Inc. at October 28, 1995 and October 29, 1994 (Predecessor
Company), and the results of its operations and its cash flows for the period
October 30, 1994 through March 21, 1995 (Predecessor Company), the period March
22, 1995 through October 28, 1995, and for the two years in the period ended
October 29, 1994 (Predecessor Company), in conformity with generally accepted
accounting principles.

As discussed in Note 1 to the consolidated financial statements, in 1994,
the Predecessor Company changed its method of accounting for income taxes.

Chicago, Illinois
January 5, 1996
except for Note 12, as to which
the date is , 1996

- --------------------------------------------------------------------------------

The foregoing is in the form that will be signed when the stock split
becomes effective prior to the effective date of the Registration Statement as
described in Note 12 to the financial statements.

/s/ ERNST & YOUNG LLP

August 30, 1996

F-2
<PAGE> 54

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- -----------------------------
OCTOBER 29, OCTOBER 28, AUGUST 3,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 18,094 $ 55,551 $ 66,827
Receivables, net................................ 24,051 25,314 11,787
Inventories..................................... 168,241 182,880 179,962
Prepaid expenses & other........................ 17,622 10,573 14,166
--------- ----------- -----------
Total current assets.................... 228,008 274,318 272,742
Property and equipment, net..................... 429,699 353,015 350,789
Other assets:
Deferred financing costs, net................... 942 22,567 20,667
Goodwill, net................................... -- 419,298 422,707
Other, net...................................... 10,316 31,011 28,031
--------- ----------- -----------
Total other assets...................... 11,258 472,876 471,405
--------- ----------- -----------
Total assets...................................... $ 668,965 $ 1,100,209 $ 1,094,936
========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 147,588 $ 171,209 $ 141,062
Accrued payroll and related liabilities......... 37,431 31,579 29,668
Taxes payable................................... 25,623 7,958 23,150
Other accrued liabilities....................... 34,404 83,422 75,048
Current portion of long-term debt............... 862 9,771 2,108
Current portion of capital lease obligations.... 4,381 4,565 7,738
--------- ----------- -----------
Total current liabilities............... 250,289 308,504 278,774
Long-term debt:
Term loans...................................... 141,977 281,109 273,789
Senior Subordinated Notes....................... -- 200,000 200,000
Capital lease obligations......................... 108,486 103,921 121,075
Deferred income taxes and other liabilities....... 51,540 66,730 78,291
Redeemable Exchangeable Cumulative Preferred Stock
Series A preferred stock, $.01 par value, 40,000
shares authorized, 40,000 issued and
outstanding, liquidation and redemption at
$1,000 per share plus accumulated and unpaid
dividends....................................... -- 43,722 48,951
Stockholders' equity:
Common Stock - $.10 par value, 300,000 shares
authorized, 263,600 shares issued and
outstanding at October 29, 1994.............. 26 -- --
Common Stock - $.01 par value 36,594,895 shares
authorized, 6,996,505 shares issued and
outstanding at October 28, 1995, 7,012,607
shares issued and outstanding at August 3,
1996......................................... -- 70 70
Class B Common Stock - $.01 par value,
36,594,895 shares authorized, 8,434,392
shares issued and outstanding at October 28,
1995, 8,434,392 shares issued and outstanding
at August 3, 1996............................ -- 84 84
Additional paid-in capital...................... 334 107,739 107,688
Retained earnings (deficit)..................... 116,313 (11,670) (13,786)
--------- ----------- -----------
Total stockholders' equity.............. 116,673 96,223 94,056
--------- ----------- -----------
Total liabilities and stockholders' equity........ $ 668,965 $ 1,100,209 $ 1,094,936
========= =========== ===========
</TABLE>

See accompanying notes.

F-3
<PAGE> 55

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

PREDECESSOR COMPANY COMPANY
------------------------------------------ -------------------------------------------
52 WEEKS ENDED 20 WEEKS 32 WEEKS 20 WEEKS 40 WEEKS
--------------------------- ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28, AUGUST 5, AUGUST 3,
1993 1994 1995 1995 1995 1996
----------- ----------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>

Sales..................... $2,330,231 $2,409,911 $958,742 $1,474,982 $ 930,351 $1,900,550
Cost of sales............. 1,814,951 1,871,535 747,561 1,136,600 719,738 1,463,514
---------- ---------- -------- ---------- ---------- ----------
Gross profit.............. 515,280 538,376 211,181 338,382 210,613 437,036
Selling, general and
administrative
expenses................ 469,499 484,288 191,999 293,872 185,152 372,376
SARs termination costs.... -- -- 26,152 -- -- --
---------- ---------- -------- ---------- ---------- ----------
Operating income (loss)... 45,781 54,088 (6,970) 44,510 25,461 64,660
Interest expense:
Interest expense,
excluding amortization
of deferred financing
costs................. 33,811 29,857 11,238 44,480 24,789 51,272
Amortization of deferred
financing costs....... 351 135 69 1,460 1,361 2,137
---------- ---------- -------- ---------- ---------- ----------
34,162 29,992 11,307 45,940 26,150 53,409
Income (loss) before
income taxes,
extraordinary loss and
cumulative effect of
accounting change....... 11,619 24,096 (18,277) (1,430) (689) 11,251
Income tax expense
(benefit)............... 4,026 9,236 (7,135) 1,933 1,373 8,138
---------- ---------- -------- ---------- ---------- ----------
Income (loss) before
extraordinary loss and
cumulative effect of
accounting change....... 7,593 14,860 (11,142) (3,363) (2,062) 3,113
Extraordinary loss on
extinguishment of debt,
net of applicable tax
benefit of $3,896 in
fiscal 1994 and $2,824
in the 1995 periods..... -- (6,324) -- (4,585) (4,585) --
Cumulative effect of
accounting change....... -- (1,019) -- -- -- --
---------- ---------- -------- ---------- ---------- ----------
Net income (loss)......... $ 7,593 $ 7,517 $(11,142) (7,948) (6,647) 3,113
========== ========== ========
Preferred stock
accretion............... 3,722 2,265 5,229
---------- ---------- ----------
Net loss available to
common stockholders..... $ (11,670) $ (8,912) $ (2,116)
========== ========== ==========
PER SHARE DATA
Loss before extraordinary
loss.................... $ (0.46) $ (0.29) $ (0.14)
Extraordinary loss........ (0.30) (0.30) --
---------- ========== ==========
Loss per common share..... $ (0.76) $ (0.59) $ (0.14)
========== ========== ==========
Average number of shares
outstanding............. 15,385,221 15,098,483 15,462,002
========== ========== ==========
</TABLE>

See accompanying notes.

F-4
<PAGE> 56

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
-------------------- PAID-IN EARNINGS
PREDECESSOR COMPANY SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
---------- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1992.............. 265,300 $ 26 $ 573 $102,896 $103,495
Net income............................... -- -- -- 7,593 7,593
Cash dividend -- $2.00 per share......... -- -- -- (531) (531)
Common stock purchased and retired....... (1,000) -- (177) (136) (313)
---------- ---- --------- -------- --------
BALANCE AT OCTOBER 30, 1993.............. 264,300 26 396 109,822 110,244
Net income............................... -- -- -- 7,517 7,517
Cash dividend -- $3.00 per share......... -- -- -- (793) (793)
Common stock purchased and retired....... (700) -- (62) (233) (295)
---------- ---- --------- -------- --------
BALANCE AT OCTOBER 29, 1994.............. 263,600 26 334 116,313 116,673
Net loss................................. -- -- -- (11,142) (11,142)
Cash dividend -- $3.00 per share......... -- -- -- (791) (791)
---------- ---- --------- -------- --------
BALANCE AT MARCH 21, 1995................ 263,600 $ 26 $ 334 $104,380 $104,740
========== ==== ========= ======== ========
COMPANY
BALANCE AT MARCH 22, 1995
Issuance of common stock................. 14,985,610 $150 $ 104,850 $ -- $105,000
Net income (loss)........................ -- -- -- (7,948) (7,948)
Preferred stock accretion................ -- -- -- (3,722) (3,722)
Other.................................... 445,287 4 2,889 -- 2,893
---------- ---- --------- -------- --------
BALANCE AT OCTOBER 28, 1995.............. 15,430,897 154 107,739 (11,670) 96,223
---------- ---- --------- -------- --------
Net income (unaudited)................... -- -- -- 3,113 3,113
Preferred stock accretion (unaudited).... -- -- -- (5,229) (5,229)
Other (unaudited)........................ 16,102 -- (51) -- (51)
---------- ---- --------- -------- --------
BALANCE AT AUGUST 3, 1996 (UNAUDITED).... 15,446,999 $154 $ 107,688 $(13,786) $ 94,056
========== ==== ========= ======== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 57

DOMINICK'S SUPERMARKETS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
------------------------------------- ---------------------------------------
52 WEEKS
ENDED 20 WEEKS 32 WEEKS 20 WEEKS 40 WEEKS
------------------------- ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28, AUGUST 5, AUGUST 3,
1993 1994 1995 1995 1995 1996
----------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................... $ 7,593 $ 7,517 $(11,142) $ (7,948) $ (6,647) $ 3,113
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Extraordinary loss on debt
extinguishment......................... -- -- -- 7,409 7,409 --
Depreciation and amortization............ 51,075 52,862 20,499 25,364 17,740 34,722
Amortization of deferred financing
costs.................................. 351 135 69 1,460 1,361 2,137
Stock appreciation rights................ 369 1,966 26,825 -- -- --
Deferred income taxes.................... (2,194) (645) (3,890) 7,625 -- --
Cumulative effect of accounting change... -- 1,019 -- -- -- --
Loss (gain) on disposal of capital
assets................................. 1,948 74 1,149 (25) -- 5
Changes in operating assets and
liabilities, net of acquisition:
Receivables............................ (788) 6,794 2,546 (5,218) (775) 13,427
Inventories............................ 8,862 (10,780) 7,209 (683) 21,493 2,918
Prepaid expenses....................... (643) 1,072 (1,890) 2,783 279 (2,063)
Accounts payable....................... 13,623 10,296 (10,217) 31,246 (7,698) (30,148)
Accrued liabilities and taxes
payable.............................. 9,659 2,848 (11,147) (241) 7,799 8,324
-------- -------- -------- ---------- ---------- --------
Total adjustments...................... 82,262 65,641 31,153 69,720 47,608 29,322
-------- -------- -------- ---------- ---------- --------
Net cash provided by operating
activities............................... 89,855 73,158 20,011 61,772 40,961 32,435
CASH FLOWS FROM INVESTING ACTIVITIES
Construction advances...................... 2,560 1,949 -- -- -- --
Proceeds from sale of capital assets....... 929 3,995 380 1,317 -- 293
Capital expenditures....................... (31,100) (60,056) (22,423) (23,125) (9,479) (25,264)
Proceeds from sale of investments.......... -- -- 7,300 -- -- --
Business acquisition cost, net of cash
acquired................................. -- -- -- (442,777) (442,777) --
Other -- net............................... (272) (1,406) 116 (31) 34 --
-------- -------- -------- ---------- ---------- --------
Net cash (used in) investing activities.... (27,883) (55,518) (14,627) (464,616) (452,222) (24,971)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments for long-term debt and
capital lease obligations................ (49,509) (68,303) (5,363) (131,145) (129,300) (20,052)
Proceeds from sale-leaseback of assets..... -- -- -- -- -- 24,702
Proceeds from debt issuances............... -- 40,214 -- 480,000 480,000 --
Proceeds from issuance of capital stock.... -- -- -- 100,000 100,000 --
Debt issuance costs and other.............. (1,049) (1,329) (791) (7,784) (7,905) (838)
-------- -------- -------- ---------- ---------- --------
Net cash (used in) provided by financing
activities............................... (50,558) (29,418) (6,154) 441,071 442,795 3,812
-------- -------- -------- ---------- ---------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 11,414 (11,778) (770) 38,227 31,534 11,276
Cash and cash equivalents at beginning of
period................................... 18,458 29,872 18,094 17,324 17,324 55,551
-------- -------- -------- ---------- ---------- --------
Cash and cash equivalents at end of
period................................... $29,872 $18,094 $ 17,324 $ 55,551 $ 48,858 $ 66,827
======== ======== ======== ========== ========== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Acquisition of business:
Fair value of assets acquired, net of
cash acquired.......................... $1,056,627 $1,056,627
Net cash paid in acquisition............. (442,777) (442,777)
Exchange of capital stock................ (40,000) (40,000)
Management equity investment............. (5,000) (5,000)
---------- --------
Liabilities assumed...................... $ 568,850 $ 568,850
========== ========
Contribution of capital in exchange for
debt financing fees...................... $ 2,647 $ 2,647
========== ========
Preferred stock accretion.................. $ 3,722 $ 2,265 $ 5,229
========== ======== ========
</TABLE>

See accompanying notes.

F-6
<PAGE> 58

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Dominick's Supermarkets, Inc. (the "Company") acquired Dominick's Finer
Foods, Inc. ("Dominick's") on March 22, 1995 for total consideration of
approximately $693 million (excluding the Company's fees and expenses and
working capital) in a transaction accounted for as a purchase (the
"Acquisition"). The Company effected the Acquisition by acquiring 100% of the
capital stock of Dominick's parent, DFF Supermarkets, Inc. ("DFF"), formerly
known as Dodi Inc. ("Dodi") for $346.6 million in cash and $40 million of the
Company's 15% Redeemable Exchangeable Cumulative Preferred Stock. In addition,
the Company repaid $34.3 million of secured promissory notes issued by
Dominick's prior to the Acquisition to discharge all obligations under its stock
appreciation rights ("SARs") plan and to repurchase shares of Dominick's
restricted stock held by certain management employees. In connection with the
Acquisition, the Company refinanced $135.7 million of Dominick's existing
indebtedness (including premiums and accrued interest) assumed $124.5 million of
existing capital leases and other indebtedness and paid $11.8 million of
employment termination, seller advisory and other seller fees and expenses. The
principal sources of cash to finance the Acquisition were (i) $330 million in
term loans consisting of $140 million of six-year amortizing Tranche A Loans,
$60 million of seven-year amortizing Tranche B Loans, $65 million of eight-year
amortizing Tranche C Loans and $65 million of eight and one-half year amortizing
Tranche D Loans (collectively, the "Term Loan Facilities); (ii) a $150 million
unsecured senior subordinated credit facility; and (iii) a $105 million equity
investment in Company common stock by certain affiliates of The Yucaipa
Companies ("Yucaipa"), certain institutional and private investors and certain
members of the Dominick's management. On May 4, 1995, Dominick's used the
proceeds of an offering (the "Note Offering") of $200 million of 10.875% Senior
Subordinated Notes due 2005 (the "Senior Subordinated Notes") to repay the $150
million unsecured senior subordinated credit facility and to prepay $50 million
of the Term Loan Facilities. In addition, Dominick's obtained a $100 million
revolving credit facility (the "Revolving Credit Facility") available for
working capital and general corporate purposes (together with the Term Loan
Facilities, the "Credit Facility").

The Acquisition was accounted for as a purchase of Dominick's by the
Company. As a result, all financial statements for periods subsequent to March
22, 1995, the date the Acquisition was consummated, will reflect Dominick's
assets and liabilities at their estimated fair market values as of March 22,
1995. The purchase price in excess of the fair market value of the Company's
assets was recorded as goodwill and is being amortized over a 40-year period.
For purposes of the financial statement presentation set forth herein, the
Predecessor Company refers to Dominick's prior to the consummation of the
Acquisition.

The following unaudited pro forma information presents the results of the
Company's operations adjusted primarily to reflect interest expense and
depreciation and amortization, as though the Acquisition had been made at the
beginning of each period (dollars in thousands):

<TABLE>
<CAPTION>
52 WEEKS ENDED
---------------------------
OCTOBER 29, OCTOBER 28,
1994 1995
----------- -----------
<S> <C> <C>
Sales......................................................... $ 2,409.9 $ 2,433.7
Loss before extraordinary loss and
cumulative effect of accounting change...................... (8.9) (6.0)
Net loss...................................................... (16.2) (10.6)
Net loss available to common stockholders..................... (22.5) (16.9)
</TABLE>

The Company uses a 52-53 week fiscal year ending on the Saturday closest to
October 31. The Company operates supermarkets in Chicago, Illinois, and its
suburbs. The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries.

F-7
<PAGE> 59

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost, primarily using the last-in,
first-out (LIFO) method, or market. If inventories had been valued using
replacement cost, inventories would have been higher by $22,511,000 at October
28, 1994 and $1,937,000 at October 28, 1995, and gross profit and operating
income would have been greater by $435,000, $1,089,000, $750,000 and $1,694,000
for fiscal year 1993, fiscal year 1994, the 20 weeks ended March 21, 1995, and
the 32 weeks ended October 28, 1995, respectively.

Pre-Opening Costs

The costs associated with opening new and remodeled stores are deferred and
amortized over one year following the opening of each new store.

Property and Equipment

Property and equipment, including buildings capitalized under capital
leases, are recorded at cost. Depreciation and amortization is computed on the
straight-line method over the following estimated useful lives:

<TABLE>
<S> <C>
Buildings and improvements.............................. 10-33 years
Fixture and equipment................................... 3-12 years
Property under capital leases and lease rights.......... 15-25 years
</TABLE>

Deferred Financing Costs

Costs incurred in connection with the issuance of debt are amortized over
the term of the related debt using the effective interest method.

Goodwill and Trademarks

The excess of the purchase price over the fair value of the net assets
acquired is amortized on a straight-line basis over 40 years beginning at the
date of acquisition. Current and undiscounted future operating cash flows are
compared to current and undiscounted future goodwill amortization on a periodic
basis (not less than annually) to determine if an impairment of goodwill has
occurred. Trademarks, which are included in other assets, are amortized on a
straight-line basis over 40 years. Accumulated amortization related to goodwill
and trademarks at October 28, 1995 was $6,342,000 and $523,000, respectively.

Income Taxes

The Company changed its method of accounting for income taxes from the
deferred method to the liability method as required by the Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes." As permitted
by Statement 109, prior-year financial statements have not been restated to
reflect the change in accounting method. The cumulative effect on prior years of
adopting Statement 109 as of October 31, 1993 was to decrease 1994 net income by
$1,019,000. Under Statement 109, deferred income taxes reflect the net tax
effect of temporary differences between the carrying amounts of assets and
liabilities used for financial reporting purposes and the amounts used for
income tax purposes.

F-8
<PAGE> 60

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Closed Store Reserves

The Company provides a reserve for the net book value of any store assets,
net of salvage value, and the net present value of the remaining lease
obligation, net of estimated sublease income for stores that have closed or are
expected to close. Included in liabilities assumed in the purchase price
allocation are certain closed store reserves. Such reserves were $24.2 million
at October 28, 1995.

Self-Insurance Reserves

The Company is self-insured for its workers' compensation and general
liability claims. The Company establishes reserves based on an independent
actuary's review of claims filed and an estimate of claims incurred but not yet
filed.

Discounts and Promotional Allowances

Promotional allowances and vendor discounts are recorded as a reduction of
cost of sales in the accompanying consolidated statements of operations.
Allowance proceeds received in advance are deferred and recognized over the
period earned.

Extraordinary Loss

During fiscal year 1994, the Predecessor Company retired $60 million of its
11.78% Senior Notes, which resulted in a net loss on early extinguishment of
debt of $6,324,000 net of applicable tax benefit of $3,896,000. During fiscal
year 1995, the Company used the proceeds from the Note Offering to repay in full
the $150 million senior subordinated credit facility and to prepay $50 million
of its Term Loan Facilities which resulted in a net loss on early extinguishment
of debt of $4,585,000, net of tax benefit of $2,824,000. The accompanying
financial statements reflect both of these charges as extraordinary items.

Advertising

The Company expenses its advertising costs as incurred. Advertising
expenses were $29,252,000, $30,086,000, $11,472,000 and $16,540,000 for fiscal
year 1993, fiscal year 1994, the 20 weeks ended March 21, 1995 and the 32 weeks
ended October 28, 1995, respectively.

Income (Loss) Per Common Share

Income (loss) per common share is computed based upon the weighted average
number of shares outstanding during the period. Income (loss) per common share
is computed based upon net income or loss adjusted for accretion on preferred
stock.

Supplemental Cash Flow Disclosure

Cash paid for income taxes was $6,936,000, $5,555,000, $3,115,000 and
$4,230,000 for fiscal year 1993, fiscal year 1994, the 20 weeks ended March 21,
1995 and the 32 weeks ended October 28, 1995, respectively. Interest payments
were $37,625,000, $37,704,000, $15,835,000 and $35,638,000 for fiscal year 1993,
fiscal year 1994, the 20 weeks ended March 21, 1995 and the 32 weeks ended
October 28, 1995, respectively. Capital lease obligations of $3,422,000 and
$235,000 were entered into in fiscal year 1993 and fiscal year 1994,
respectively. None were entered into in fiscal year 1995.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

F-9
<PAGE> 61

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Reclassifications

Certain amounts in the 1993 and 1994 consolidated financial statements have
been reclassified to conform to the October 28, 1995 presentation.

New Accounting Pronouncements

In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company will adopt Statement 121 in fiscal 1997 and, based on current
circumstances, does not believe the effect of the adoption will be material.

Unaudited Interim Financial Statements

The accompanying consolidated balance sheet and the consolidated statements
of stockholders' equity as of August 3, 1996 (Company) and the consolidated
statements of operations and cash flows for the 20 week period ended August 5,
1995 (Predecessor Company) and the 40-week period ended August 3, 1996 (Company)
are unaudited and have been prepared on the same basis as the audited
consolidated financial statements included herein. In the opinion of management,
such unaudited consolidated financial statements include all adjustments
necessary to present fairly the information set forth therein, which consist
solely of normal recurring adjustments. The results of operations for such
interim period are not necessarily indicative of results for the full year.

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- ---------------------------
OCTOBER 29, OCTOBER 28, AUGUST 3,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land..................................................... $ 27,500 $ 37,795 $ 35,952
Buildings and leasehold improvements..................... 146,870 72,518 71,693
Fixtures and equipment................................... 411,311 113,733 119,092
Capital leases........................................... 141,473 94,501 94,941
Construction in progress................................. 18,716 2,471 23,449
Lease rights............................................. 12,650 50,229 46,465
--------- -------- --------
758,520 371,247 391,592
Less: Accumulated depreciation and amortization.......... (328,821) (18,232) (40,803)
--------- -------- --------
$ 429,699 $ 353,015 $ 350,789
========= ======== ========
</TABLE>

Accumulated depreciation and amortization related to capital leases,
primarily for certain buildings, was $57,086,000 at October 29, 1994, $5,072,584
at October 28, 1995 and $13,056,000 at August 3, 1996. Accumulated amortization
related to lease rights was $6,001,000 at October 29, 1994, $1,667,722 at
October 28, 1995 and $3,386,000 at August 3, 1996.

F-10
<PAGE> 62

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. LONG-TERM DEBT

Long-term senior debt consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- ---------------------------
OCTOBER 29, OCTOBER 28, AUGUST 3,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Tranche A Loans, principal due quarterly through 2001,
with interest payable quarterly........................ $ -- $ 105,574 $ 98,478
Tranche B Loans, principal due quarterly through March
2002, with interest payable quarterly.................. -- 54,807 54,012
Tranche C Loans, principal due quarterly through March
2003, with interest payable quarterly.................. -- 59,374 58,629
Tranche D Loans, principal due quarterly through
September 2003, with interest payable quarterly........ -- 59,374 58,680
Revolving Credit Facility................................ 40,000 -- --
11.78% Senior Notes...................................... 90,000 -- --
Other.................................................... 12,839 11,751 6,098
-------- -------- --------
142,839 290,880 275,897
Less: Current portion.................................... 862 9,771 2,108
-------- -------- --------
$ 141,977 $ 281,109 $ 273,789
======== ======== ========
</TABLE>

In connection with the Acquisition, the Company and its subsidiaries
entered into the Credit Facility with a syndicate of financial institutions. The
Credit Facility initially provided for (i) term loans in the aggregate amount of
$330 million, comprised of the $140 million Tranche A Loans, the $60 million
Tranche B Loans, the $65 million Tranche C Loans, and the $65 million Tranche D
Loans; and (ii) the $100 million Revolving Credit Facility under which working
capital loans may be made and commercial or standby letters of credit in the
maximum aggregate amount of up to $30 million may be issued. At October 28,
1995, no amount was outstanding under the Revolving Credit Facility and $19.2
million of standby letters of credit had been issued on behalf of the Company.

Borrowings under (i) the Revolving Credit Facility and the Tranche A Loans
bear interest at a rate equal to the Base Rate (as defined in the loan
agreement) plus a 1.50% per annum or the reserve adjusted Euro-Dollar Rate (as
defined in the loan agreement) plus 2.75% per annum; (ii) the Tranche B Loans
bear interest at the Base Rate plus 2.00% per annum or the reserve adjusted
Euro-Dollar Rate plus 3.25% per annum; (iii) the Tranche C Loans bear interest
at the Base Rate plus 2.50% per annum or the reserve adjusted Euro-Dollar Rate
plus 3.75% per annum; and (iv) the Tranche D Loans bear interest at the Base
Rate plus 2.75% per annum or the reserve adjusted Euro-Dollar Rate plus 4.00%
per annum, in each case as selected by the Company. The Company will pay the
issuing bank a fee of 0.25% per annum (but not less than $500) on each standby
letter of credit and commercial letter of credit and will pay the lenders under
the Credit Facility a letter of credit fee of 2.25% per annum for standby
letters of credit and a fee equal to 1.25% per annum for commercial letters of
credit. In addition, the Company will pay a commitment fee of 0.50% per annum on
the unused portions of the Revolving Credit Facility.

In connection with the original issuance of the Senior Subordinated Notes,
the Company entered into certain amendments to the Credit Facility (the "Credit
Facility Amendments") in order to, among other things, modify the mandatory
prepayment provisions of the Credit Facility. After giving effect to these
modifications, $50 million of proceeds from the Note Offering were applied to
prepay $34.4 million of the

F-11
<PAGE> 63

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Tranche A Loans, $4.9 million of the Tranche B Loans, $5.3 million of the
Tranche C Loans and $5.3 million of the Tranche D Loans.

The Tranche A Loans mature on March 31, 2001 and are subject to
amortization on a quarterly basis, commencing on June 30, 1996, in aggregate
annual amounts of $4.6 million in the second year of the facility, $9.2 million
in the third year, $23.0 million in the fourth year, $27.5 million in the fifth
year, and $41.3 million in the sixth year. The Tranche B Loans mature on March
31, 2002 and are subject to amortization on a quarterly basis, commencing on
June 30, 1995, in aggregate annual amounts of $551,000 for the first six years
and $51.8 million in the seventh year. The Tranche C Loans mature on March 31,
2003 and are subject to amortization on a quarterly basis, commencing on June
30, 1995, in aggregate annual amounts of $597,000 for the first seven years and
$55.5 million in the eighth year. The Tranche D Loans mature on September 30,
2003 and are subject to amortization on a quarterly basis in aggregate annual
amounts of $597,000 for the first eight years and $54.9 million in the ninth
year. The amortization requirements described above give effect to the Credit
Facility Amendments and the application of $50 million of Note Offering proceeds
to prepay the Term Loan Facilities. The Revolving Credit Facility will mature on
March 31, 2001.

The debt agreements, among other things, require the Company to maintain
minimum levels of net worth (as defined), to maintain minimum levels of earnings
(as defined), to maintain a hedge agreement to provide interest rate protection,
and to comply with certain ratios related to interest expense (as defined),
fixed charges (as defined) and indebtedness (as defined). In addition, the debt
agreements limit, among other things, additional borrowings, dividends on, and
redemption of, capital stock, certain other payments to DFF and Supermarkets,
capital expenditures, incurrence of lease obligations, and the acquisition and
disposition of assets. At October 28, 1995, the Company was in compliance with
the financial covenants of its debt agreements. At October 28, 1995, the Company
was restricted from paying dividends on its capital stock under the terms of the
debt agreements.

Substantially all of the assets of the Company and its subsidiaries are
pledged as security under the Credit Facility or other long-term debt.

Maturities of long-term debt at October 28, 1995, excluding capital lease
obligations, for each of the next five fiscal years are as follows (dollars in
thousands):

For the period ended October 28, 1995, the Company's effective interest
rate was 10.5%.

Senior Subordinated Notes

On May 4, 1995, the Company issued $200 million principal amount of Senior
Subordinated Notes in connection with the Acquisition. The Senior Subordinated
Notes bear interest, payable semi-annually on May 1 and November 1, at an annual
rate of 10.875%. The Senior Subordinated Notes, which are due on May 1, 2005,
are subordinated to all Senior Indebtedness (as defined) of the Company, and may
be redeemed beginning in fiscal year 2000 at a redemption price of 104.833%. The
redemption price declines ratably to 100% in fiscal 2004. In addition, on or
prior to May 1, 1998, the Company may, at its option, use the net cash proceeds
of one or more Public Equity Offerings (as defined) to redeem up to an aggregate
of 33 1/3% of the principal amount of the originally issued Senior Subordinated
Notes at redemption prices of 110.875% in 1995, declining ratably to 108.458% in
1997.

F-12
<PAGE> 64

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. LEASES

The Company leases land, retail stores, and equipment. Many of the property
leases obligate the Company to pay real estate taxes, insurance, and maintenance
costs and contain multiple renewal options generally covering additional periods
ranging from 15 to 30 years. Many of the leases require contingent rental
payments, which are based primarily upon sales at the various retail stores,
adjusted for certain expenses paid by the Company. Rent expense totaled
$17,188,000 including $263,000 for contingent rentals, for fiscal year 1993,
$17,704,000 and $275,000 respectively for fiscal year 1994, $6,511,000 and
$167,000, respectively for the 20 weeks ended March 21, 1995 and $10,419,000 and
$271,000, respectively for the 32 weeks ended October 28, 1995.

The future minimum lease payments under noncancelable operating and capital
leases, as of October 28, 1995 for each of the next five fiscal years and
thereafter, are as follows (dollars in thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
<S> <C> <C>
1996.......................................................... $ 16,300 $ 18,440
1997.......................................................... 16,001 18,414
1998.......................................................... 16,017 18,354
1999.......................................................... 16,001 18,301
2000.......................................................... 16,361 17,945
Thereafter.................................................... 126,831 129,079
-------- --------
Total minimum lease payments.................................. $ 207,511 220,533
========
Less: Amount representing interest............................ (112,047)
--------
Present value of net minimum lease payments................... $ 108,486
========
</TABLE>

The present value of net minimum lease payment includes $29,419,000 due to
related parties.

5. CAPITAL STOCK

The authorized capital stock of the Company consists of 36,594,895 shares
of Common Stock $.01 par value common stock and 36,594,895 shares of Class B
$.01 par value common stock. All common stock is entitled to dividends, if any,
as may be declared by the Board of Directors. Certain dividend restrictions
exist as more fully described in Note 3. The Common Stock is voting, and the
Class B Common Stock is non-voting. Additionally, the Class B Common Stock is
convertible at the option of the holder, on a one-for-one basis, into Common
Stock if certain conditions are met.

Each member of management holding shares of common stock or holding stock
options (collectively the "Management Stockholders") have signed a stockholders
agreement (the "Agreement"). The Agreement, among other things, provides the
company with a right of first refusal to purchase stock subject to a proposed
sale by a Management Stockholder. The Agreement also provides the Company with
an option, in certain events as defined, to repurchase stock owned by Management
Stockholders under a company stock option. The Agreement will terminate upon an
initial public offering of the Company's Common Stock if certain conditions are
met.

Stock Option Plans

The Company maintains a stock option plan (the "Plan") for the officers and
key employees which provides for non-qualified and incentive options. The Board
of Directors determines the option price (not to be less than fair value for
incentive options) at the date of grant. The options generally expire on the
tenth

F-13
<PAGE> 65

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

anniversary of their respective grant date and become exercisable over a
specified vesting period. The total number of shares that may be issued under
the Plan is 1,116,144.

A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C>
Grants at March 22, 1995.......................................... 926,473
Granted......................................................... 43,914
Exercised....................................................... --
Cancelled....................................................... --
--------
Outstanding at October 28, 1995................................... 970,387
========
</TABLE>

Of the options outstanding at October 28, 1995, 459,516 were non-qualified
options and 510,871 were incentive options. All of the incentive options have an
option price per share of $6.83 and all of the non-qualified options have an
option price per share of $1.71. As of October 28, 1995 459,516 shares were
exercisable and 145,757 shares were available for future grants under the Plan.

The Company follows Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related interpretations in
accounting for its stock options. Under APB 25, when the exercise price of
employee stock options equals or exceeds the market price of the underlying
stock on the date of grant, no compensation expense is recognized.

Warrant

At the time of the Acquisition, the Company issued to Yucaipa a warrant
(the "Warrant") to purchase up to 3,874,492 shares of Common Stock at an
exercise price of $20.732 per share. The Warrant is exercisable only in the
event of an initial public offering that meets certain conditions or in
connection with certain sales transactions (collectively the "Trigger Events")
on or prior to March 22, 2000.

The Warrant terminates on March 22, 2000. In the event that certain
financial performance conditions are met, however, both the termination date and
the deadline for a Trigger Event may be extended. Additionally, the Warrant is
exercisable without the payment of cash consideration, pursuant to which the
Company will withhold from the shares otherwise issuable upon exercise thereof,
the number of shares having a market value as of the exercise date equal to the
exercise price.

The Predecessor Company had a SARs plan for certain officers and key
management employees. The plan provided for additional compensation to be
accrued on the difference between the book value per share of common stock at
the end of each fiscal year and the book value per share at the later of the
grant date or the last day of the prior fiscal year. As a result of the
Acquisition, the SARs became fully vested and were valued at market value.
Compensation expense incurred related to all SARs outstanding was $369,000 in
fiscal year 1993, $1,966,000 in fiscal year 1994 and $673,000 during the 20
weeks ended March 21, 1995. In connection with the Acquisition, all obligations
under the Company's stock appreciation rights plan were discharged and the plan
was terminated. As a result of the Acquisition, the Company recorded a charge of
$26,152,000, reflecting the difference in fair market value and book value of
the SARs at March 21, 1995.

F-14
<PAGE> 66

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK

The Company has designated 40,000 of its 200,000 authorized preferred
shares as 15% Redeemable Exchangeable Cumulative Preferred Stock Series A (the
"Preferred Stock"). The remaining 160,000 shares have not been designated.

In connection with the Acquisition, the Company issued 40,000 shares of the
Preferred Stock. The holders of the Preferred Stock are entitled to cumulative
dividends, when and if declared by the Board of Directors, and preference in
liquidation over holders of common stock at $1,000 per share plus accrued but
unpaid dividends, if any. Except in limited circumstances, the holders of the
Preferred Stock have no voting rights.

The Company is required to redeem the Preferred Stock at the earlier of a
change in control (as defined) and March 22, 2007 at $1,000 per share plus
accrued but unpaid dividends, if any (the "Redemption Price"). Prior to the
mandatory redemption, the Company may redeem all or any portion of the preferred
stock at the Redemption Price.

The Company, at its sole option, may exchange the Preferred Stock for 15%
Junior Subordinated Debentures due 2007 having such terms and conditions as
shall be first approved by a majority of the holders of the Preferred Stock. In
addition, the holders of the Preferred Stock are entitled to certain demand
registration rights commencing March 22, 1997.

7. INCOME TAXES

The provision (benefit) for income taxes consists of the following (dollars
in thousands):

PREDECESSOR COMPANY COMPANY
----------------------------------------- -----------
52 WEEKS ENDED 20 WEEKS 32 WEEKS
--------------------------- ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28,
1993 1994 1995 1995
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Current:
Federal..................................... $ 5,188 $8,296 $(2,543) $(4,539)
State....................................... 1,032 1,585 (702) (1,153)
------- ------ ------- -------
6,220 9,881 (3,245) (5,692)
Deferred:
Federal..................................... (1,718) (300) (3,027) 6,214
State....................................... (476) (345) (863) 1,411
------- ------ ------- -------
(2,194) (645) (3,890) 7,625
------- ------ ------- -------
$ 4,026 $9,236 $(7,135) $ 1,933
======= ====== ======= =======
</TABLE>

F-15
<PAGE> 67

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A reconciliation of the provision for income taxes to amounts computed at the
federal statutory rates of 34.83% for fiscal 1993, and 35% for fiscal 1994 and
fiscal 1995 is as follows (dollars in thousands):

PREDECESSOR COMPANY COMPANY
----------------------------------------- -----------
52 WEEKS ENDED 20 WEEKS 32 WEEKS
--------------------------- ENDED ENDED
OCTOBER 30, OCTOBER 29, MARCH 21, OCTOBER 28,
1993 1994 1995 1995
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Federal income taxes at statutory rate on
income before provision for income taxes,
extraordinary loss and cumulative effect of
accounting change........................... $ 4,047 $ 8,434 $(6,397) $ (501)
Non-tax deductible goodwill amortization...... -- -- -- 2,417
State income taxes, net of federal income tax
benefit..................................... 363 805 (828) 10
Other, net.................................... (384) (3) 90 7
------- ------- ------- -------
Total income tax expense............ $ 4,026 $ 9,236 $(7,135) $ 1,933
======= ======= ======= =======
</TABLE>

Significant components of the Company's deferred income tax liabilities and
assets as of October 29, 1994 and October 28, 1995 are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY COMPANY
----------- --------
1994 1995
----------- --------
<S> <C> <C>
Deferred income tax liabilities:
Inventory........................................... $ 2,663 $ 10,773
Property and equipment.............................. 49,508 25,972
State income taxes.................................. 5,532 1,989
Trademarks.......................................... -- 8,917
Other............................................... 776 3,521
------- -------
Total deferred income tax liabilities................. 58,479 51,172
Deferred income tax assets:
Accrued vacation.................................... 2,798 2,830
Capital leases...................................... 8,240 3,937
Alternative minimum tax............................. 6,677 6,386
Accrued self-insurance.............................. 10,313 15,245
Capitalized inventory............................... 2,183 2,111
Accrued stock appreciation rights................... 1,006 --
Other accrued liabilities........................... -- 20,963
Other............................................... 2,812 4,775
------- -------
Total deferred income tax assets...................... 34,029 56,247
------- -------
Net deferred income tax liabilities (assets).......... 24,450 (5,075)
Less valuation allowance............................ -- 11,120
------- -------
Net deferred income tax liabilities................... $24,450 $ 6,045
======= =======
</TABLE>

At October 29, 1994, the Predecessor Company did not record a valuation
allowance as the estimated amount of deferred income tax assets were deemed to
be fully realizable.

8. PROFIT-SHARING AND RETIREMENT PLANS

The Company has trusteed, contributory, profit-sharing plans (the "Plans")
covering substantially all full-time employees. Plan participants are allowed to
contribute a specified percentage of their compensation

F-16
<PAGE> 68

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

into the Plans. The amount of the Company's contribution is at the discretion of
the Board of Directors, subject to limitations of the Plans.

Under the provisions of several collective bargaining agreements covering
hourly paid employees, the Company is required to make pension contributions to
multi-employer retirement plans based primarily on hours worked by such
employees.

Retirement and profit-sharing plan expenses included in the consolidated
statements of operations were $14,217,000 for the fiscal year 1993, $14,572,000
for fiscal year 1994, and $5,950,000 for the 20 weeks ended March 21, 1995 and
$8,638,000 for the 32 weeks ended October 28, 1995.

9. RELATED PARTY TRANSACTIONS

The Company has a five-year consulting agreement with Yucaipa effective
March 22, 1995 for management and financial services. The agreement is
automatically renewed on April 1 of each year for the five-year term unless 90
days notice is given by either party. The agreement provides for annual
management fees equal to 2% of EBITDA (as defined in the consulting agreement).
In addition, the Company may retain Yucaipa in an advisory capacity in
connection with certain acquisition or sale transactions and in such case will
pay an advisory fee equal to 1% of the transaction value. Pursuant to the
agreement, Yucaipa received a fee of $14 million for advisory and other services
provided in connection with the Acquisition. Fees paid or accrued associated
with management services were $1,490,000 during the 32 weeks ended October 28,
1995.

10. COMMITMENTS AND CONTINGENCIES

The Company or its subsidiaries are defendants in a number of cases
currently in litigation or potential claims encountered in the normal course of
business which are being vigorously defended. In the opinion of management, the
resolution of these matters will not have a material effect on the Company's
financial position or results of operations.

The Company self-insures its worker' compensation and general liability.
During fiscal year 1993, fiscal year 1994, and the 20 weeks ended March 21,
1995, the Company discounted its workers' compensation self-insurance liability
using a 7.5% discount rate. During the 32 weeks ended October 28, 1995, all
self-insurance liabilities were discounted using a 7.5% discount rate.
Management believes that this rate approximates the time value of money over the
anticipated payout period (approximately 12 years) for essentially risk-free
investments.

The Company's historical self-insurance liability for the three most recent
fiscal years is as follows (dollars in thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
--------------------------- -----------
OCTOBER 30, OCTOBER 29, OCTOBER 28,
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Self-insurance liability.................. $30,826 $33,235 $55,898
Less: Discount............................ (3,717) (3,985) (8,231)
------- ------- -------
Net self-insurance liability.............. $27,109 $29,250 $47,667
======= ======= =======
</TABLE>

The Company expects that cash payments for claims will aggregate
approximately $19 million, $12 million, $9 million, $6 million and $4 million
for its fiscal years 1996, 1997, 1998, 1999 and 2000, respectively.

F-17
<PAGE> 69

DOMINICK'S SUPERMARKETS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments are as
follows (dollars in thousands):

<TABLE>
<CAPTION>
OCTOBER 28, 1995
-----------------------
CARRYING
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
Cash and cash equivalents.............................. $ 55,551 $ 55,551
Short-term notes and other receivables................. 25,314 25,314
Long-term debt for which it is:
-- Practical to estimate fair values................. 479,129 485,562
-- Not Practical..................................... 11,751 11,751
</TABLE>

The fair value of the Senior Subordinated Notes and the Senior Credit
Facilities are based on quoted market prices. Market quotes for the fair value
of the remainder of the Company's debt are not available. Additional information
pertinent to the value of the unquoted debt is provided in Note 3.

12. SUBSEQUENT EVENT

In August 1996, the Company filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission relating to an initial public offering of
its common stock. In connection with the offering, the Company will record a
pre-tax charge of approximately $10.5 million related to the planned termination
of the consulting agreement with Yucaipa and an extraordinary loss of
approximately $6.4 million (net of applicable income tax benefit of $4.2
million) related to the write-off of deferred financing costs in connection with
the planned extinguishment of debt.

The Company also intends to split each share of its Common Stock and Class
B Common Stock into 14.638 shares of common stock to be effected immediately
prior to the effective date of the Registration Statement. The accompanying
financial statements are presented as if the stock split had occurred at the
date of the Acquisition.

F-18
<PAGE> 70

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following unaudited pro forma financial statements of the Company for
the 52 weeks ended October 28, 1995 and the 40 weeks ended August 5, 1995, give
effect to the Acquisition and certain related events as if such transactions
occurred on October 30, 1994. See "The Acquisition."

The pro forma adjustments are based upon currently available information
and upon certain assumptions that management believes are reasonable. The
Acquisition has been accounted for as a purchase by the Company. The unaudited
pro forma financial statements are not necessarily indicative of either future
results of operations or results that might have been achieved if the foregoing
transactions had been consummated as of the indicated dates. The unaudited pro
forma financial statements should be read in conjunction with the historical
consolidated financial statements of the Company and the Predecessor Company,
together with the related notes thereto, included elsewhere in this Prospectus.

For purposes of the presentation of the unaudited pro forma consolidated
statements of operations, the "Predecessor Company" refers to Dominick's prior
to the consummation of the Acquisition.

P-1
<PAGE> 71

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

52 WEEKS ENDED OCTOBER 28, 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
PREDECESSOR COMPANY COMPANY PRO FORMA
------------------- --------------- -----------
20 WEEKS 32 WEEKS 52 WEEKS
ENDED ENDED ENDED
MARCH 21, OCTOBER 28, PRO FORMA OCTOBER 28,
1995 1995 ADJUSTMENTS 1995
------------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Sales................................. $958.8 $1,475.0 $ -- $2,433.8
Cost of sales......................... 747.6 1,136.6 (2.5)(a) 1,881.7
------ -------- ------ --------
Gross profit.......................... 211.2 338.4 2.5 552.1
Selling, general and administrative
expenses............................ 191.9 287.6 (6.7)(a) 471.2
(1.6)(b)
SARs termination costs................ 26.2 -- (26.2) --
Amortization of goodwill.............. 6.3 4.7 (c) 11.0
------ -------- ------ --------
Operating income (loss)............... (6.9) 44.5 32.3 69.9
Interest expense...................... 11.2 44.5 14.3 (d) 70.0
Amortization of deferred financing
costs............................... 0.1 1.5 0.8 (e) 2.4
------ -------- ------ --------
Income (loss) before income taxes and
extraordinary loss.................. (18.2) (1.5) 17.2 (2.5)
Income tax expense (benefit).......... (7.1) 1.9 8.7 (f) 3.5
------ -------- ------ --------
Income (loss) before extraordinary
loss................................ $(11.1) $ (3.4) $ 8.5 $ (6.0)
====== ======== ====== ========
</TABLE>

See accompanying notes.

P-2
<PAGE> 72

DOMINICK'S SUPERMARKETS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

40 WEEKS ENDED AUGUST 5, 1995
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
PREDECESSOR COMPANY COMPANY PRO FORMA
------------------- --------- ---------
20 WEEKS 20 WEEKS 40 WEEKS
ENDED ENDED ENDED
MARCH 21, AUGUST 5, PRO FORMA AUGUST 5,
1995 1995 ADJUSTMENTS 1995
------------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Sales................................... $958.8 $930.3 $ -- $1,889.1
Cost of sales........................... 747.6 719.7 (1.9)(a) 1,465.4
------ ------ ----- --------

Gross profit............................ 211.2 210.6 1.9 423.7
Selling, general and administrative
expenses.............................. 191.9 181.2 (5.0)(a) 366.5
(1.6)(b)
SARs termination costs.................. 26.2 -- (26.2) --
Amortization of goodwill................ -- 4.0 4.4 (c) 8.4
------ ------ ----- --------
Operating income (loss)................. (6.9) 25.4 30.3 48.8
Interest expense........................ 11.2 24.8 18.3 (d) 54.3
Amortization of deferred financing
costs................................. 0.1 1.3 0.4 (e) 1.8
------ ------ ----- --------
Income (loss) before income taxes and
extraordinary loss.................... (18.2) (0.7) 11.6 (7.3)
Income tax expense (benefit)............ (7.1) 1.3 6.5 (f) 0.7
------ ------ ----- --------
Income (loss) before extraordinary
loss.................................. $(11.1) $ (2.0) $ 5.1 $ (8.0)
====== ====== ===== ========
</TABLE>

See accompanying notes.

P-3
<PAGE> 73

DOMINICK'S SUPERMARKETS, INC.

NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)

(a) Represents the reduction of depreciation expense due to the allocation of
the purchase price of the Acquisition.

(b) Reflects the following adjustments:

<TABLE>
<CAPTION>
52 WEEKS ENDED 40 WEEKS ENDED
OCTOBER 28, 1995 AUGUST 5, 1995
---------------- --------------
<S> <C> <C>
Yucaipa management fees............................... $ 0.6 $ 0.6
Reduction of compensation expense resulting from
differences in management salaries and bonuses paid
to certain former management employees.............. (0.8) (0.8)
Reversal of SARs expense.............................. (0.7) (0.7)
Elimination of seller transaction expenses............ (0.8) (0.8)
Increased rent expense relating to the Excluded
Properties Leases entered into in connection with
the Acquisition..................................... 0.1 0.1
------ ------
$ (1.6) $ (1.6)
====== ======
</TABLE>

(c) Reflects the amortization, on a straight-line basis, of goodwill over a
40-year period. Current and undiscounted future operating cash flows will be
compared to current and future goodwill amortization to determine if an
impairment of goodwill has occurred.

(d) Pro forma interest expense has been calculated based upon pro forma debt
levels and the applicable interest rates. The Senior Subordinated Credit
Facility was assumed to have a fixed interest rate of 12.25% and be
outstanding for one month after the consummation of the Acquisition. One
month after the closing date, the Senior Subordinated Credit Facility is
assumed to have been refinanced with a portion of the proceeds from the
Senior Subordinated Notes being offered with a fixed interest rate of
10 7/8%. Pro forma interest expense on the Term Loan Facilities was
calculated on a monthly basis using an interest rate of 6.25% (LIBOR) plus
2.75% for Tranche A Loans, 3.25% for Tranche B Loans, 3.75% for Tranche C
Loans and 4.0% for Tranche D Loans.

(e) Reflects the net increase in amortization due to additional deferred
financing fees related to the increased levels of debt added in connection
with the Acquisition.

(f) Reflects elimination of income taxes as a result of the pro forma decrease
in pre-tax income. The pro forma income tax rate differs from the statutory
rate because goodwill amortization is not deductible for income tax
purposes.

P-4
<PAGE> 74

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY OF THE SELLING STOCKHOLDERS OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.

-------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 9
Use of Proceeds............................ 13
Dividend Policy............................ 13
Dilution................................... 14
Capitalization............................. 15
Selected Historical Financial Data......... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 18
Business................................... 24
Management................................. 32
Principal and Selling Stockholders......... 39
Certain Transactions....................... 41
Description of Capital Stock............... 41
Shares Eligible for Future Sale............ 45
The Acquisition............................ 46
Description of Certain Indebtedness........ 46
Underwriting............................... 49
Legal Matters.............................. 50
Experts.................................... 50
Additional Information..................... 50
Index to Financial Statements.............. F-1
</TABLE>

-------------------------

UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

LOGO

DOMINICK'S
SUPERMARKETS, INC.

COMMON STOCK

LOGO

------------------------

PROSPECTUS

------------------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MORGAN STANLEY & CO.
INCORPORATED

BT SECURITIES CORPORATION

CHASE SECURITIES, INC.

, 1996

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 75

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 12. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES AND
ACT LIABILITIES

See Item 17 below.

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Set forth below are the estimated expenses to be incurred by the Company in
connection with the sale of the Common Stock (exclusive of underwriting
discounts):

<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 51,725
NASD Filing Fee................................................... 15,500
NYSE Listing Fee.................................................. *
Accounting Fees and Expenses...................................... *
Legal Fees and Expenses........................................... *
Blue Sky Fees and Expenses........................................ *
Transfer Agent's and Registrar's Fee.............................. *
Printing and Engraving Expenses................................... *
Miscellaneous Expenses............................................ *
--------
Total................................................... $ *
========
</TABLE>

- ------------------------------

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") gives Delaware corporations broad powers to
indemnify their present and former directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with threatened, pending or
completed actions, suits or proceedings to which they are parties or are
threatened to be made parties by reason of being or having been such directors
or officers, subject to specified conditions and exclusions; gives a director or
officer who successfully defends an action the right to be so indemnified; and
permits a corporation to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other rights to which those indemnified
may be entitled under any by-law, agreement, vote of stockholders or otherwise.

As permitted by Section 145 of the Delaware Corporation Law, Article
of the Bylaws of the Company provides for the indemnification by the Company of
its directors, officers, employees and agents against liabilities and expenses
incurred in connection with actions, suits or proceeds brought against them by a
third party or in the right of the corporation, by reason of the fact that they
were or are such directors, officers, employees or agents.

Article of the Company's Restated Certificate of Incorporation
provides that to the fullest extent permitted by the Delaware Corporation Law as
the same exists or may hereafter be amended, a director of the Company shall not
be liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director.

The Company has entered into, or intends to enter into, agreements to
indemnify its directors and executive officers in addition to the
indemnification provided for in the Restated Certificate of Incorporation and
Bylaws. These agreements, among other things, will indemnify the Company's
directors and executive officers for certain expenses (including attorneys'
fees) and all losses, claims, liabilities, judgments, fines and settlement
amounts incurred by such person arising out of or in connection with such
person's service as a director or officer of the Company to the fullest extent
permitted by applicable law.

II-1
<PAGE> 76

Policies of insurance may be obtained and maintained by the Company under
which its directors and officers will be insured, within the limits and subject
to the limitations of the policies, against certain expenses in connection with
the defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.

The form of Underwriting Agreement, filed as Exhibit 1.1 hereto, provides
for the indemnification of the Registrant, its controlling persons, its
directors and certain of its officers by the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since January 17, 1995 (the date of incorporation of the Registrant), the
Registrant has sold and issued the following securities which were not
registered under the Securities Act:

(a) Pursuant to a Stock Purchase Agreement dated as of March 22, 1995
among the Company, certain affiliates of The Yucaipa Companies and certain
other institutional investors, the Company issued an aggregate of 450,270
shares of Common Stock and an aggregate of 549,730 shares of Class B Common
Stock, in each case at a purchase price of $100 per share.

(b) On March 22, 1995, the Company issued an aggregate of 23,750
shares of Common Stock to certain management employees of the Company in
exchange for an aggregate of 3,100 restricted shares of common stock of
Dominick's Finer Foods, Inc.

(c) Between September 15, 1995 and February 22, 1996, the Company sold
an aggregate of 51,050 shares of Common Stock, at a purchase price of $100
per share, to a total of 26 employees of the Company pursuant to the terms
of the Dominick's Supermarkets, Inc. Management Equity Program.

(d) On May 4, 1995, the Company issued an aggregate of 26,470 shares
of Class B Common Stock to affiliates of BT Securities Corporation and
Chase Securities, Inc. as partial consideration for certain investment
banking services.

(e) On August 23, 1996, the Company sold an aggregate of 1,025 shares
of Common Stock, at a purchase price of $200 per share, to a total of 10
employees of the Company pursuant to the terms of the Dominick's
Supermarkets, Inc. Management Equity Program.

Any sale of securities described herein and under such captions in the
Prospectus were carried out in reliance on the exemptions from registration
contained in Section 4(2) of the Securities Act of 1933 as transactions not
involving any public offering, except that transactions involving the management
equity program were carried out in reliance upon Rule 701 of the Securities Act
of 1933. The recipients in each case represented their intention to acquire the
securities for investment only and not with a view of the distribution thereof.
All recipients had adequate access, through employment or other relationships,
to information about the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS.

See Index to Exhibits.

(b) FINANCIAL STATEMENT SCHEDULES.

None.

II-2
<PAGE> 77

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Exchange Act of 1934, and is, therefore, unenforceable in the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Exchange Act of 1934 and will be governed by the final adjudication of such
issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or Rule 497(h) under the Securities Act shall be deemed to be a part of
this Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 78

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Dominick's Supermarkets, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Northlake, State of Illinois, on August 30, 1996.

DOMINICK'S SUPERMARKETS, INC.

By: /s/ ROBERT A. MARIANO
--------------------------------
Robert A. Mariano
President and Chief Executive
Officer

POWER OF ATTORNEY

Each person whose signature appears below appoints Robert A. Mariano,
Darren W. Karst and Patrick L. Graham and each of them, as his or her true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments (including post-effective
amendments), to this Registration Statement, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission granting unto each said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing, requisite
and necessary to be done in and about the foregoing, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that each said attorney-in-fact and agent, or his or her
substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>

/s/ RONALD W. BURKLE Chairman of the Board August 30, 1996
- --------------------------------------------
Ronald W. Burkle

/s/ ROBERT A. MARIANO President, Chief Executive August 30, 1996
- -------------------------------------------- Officer, Director
Robert A. Mariano

/s/ DARREN W. KARST Executive Vice President, August 30, 1996
- -------------------------------------------- Chief Financial Officer
Darren W. Karst (Principal Accounting
Officer), Secretary,
Director

/s/ LINDA MCLOUGHLIN FIGEL Director August 30, 1996
- --------------------------------------------
Linda McLoughlin Figel

/s/ PATRICK L. GRAHAM Director August 30, 1996
- --------------------------------------------
Patrick L. Graham

/s/ MARK A. RESNIK Director August 30, 1996
- --------------------------------------------
Mark A. Resnik
</TABLE>

II-4
<PAGE> 79

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ PETER P. COPSES Director August 30, 1996
- ----------------------------------------------
Peter P. Copses

/s/ DAVID B. KAPLAN Director August 30, 1996
- ----------------------------------------------
David B. Kaplan

/s/ ANTONY P. RESSLER Director August 30, 1996
- ----------------------------------------------
Antony P. Ressler
</TABLE>

II-5
<PAGE> 80

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ---------------------------------------------------------------------------------
<S> <C> <C>
*1.1 Form of Underwriting Agreement dated as of , 1996 among
the Company and Donaldson Lufkin & Jenrette Securities Corporation,
Morgan Stanley & Co. Incorporated, BT Securities Corporation and
Chase Securities, Inc. .............................................
*3.1 Form of Restated Certificate of Incorporation of the Company........
*3.2 Form of Restated Bylaws of the Company..............................
*4.1 Indenture, dated as of May 4, 1995, by and among Dominick's Finer
Foods, Inc., Dodi Hazelcrest, Inc., Dominick's Finer Foods, Inc. of
Illinois, Jerry's Deep Discount Centers, Inc., Kohl's of
Bloomingdale, Inc. and Save-It Discount Foods Corporation, as
Subsidiary Guarantors, and United States Trust Company of New York,
as Trustee, with respect to Dominick's 10 7/8% Senior Subordinated
Notes due 2005......................................................
*5.1 Opinion of Latham & Watkins regarding the validity of the Common
Stock, including consent............................................
*10.1 Form of Credit Agreement, dated as of , 1996, by and
among Dominick's Finer Foods, Inc. as Borrower, the Company as
Guarantor, the lenders listed therein, Bankers Trust Company and The
Chase Manhattan Bank, as Co-Arrangers, and Bankers Trust Company, as
Administrative Agent................................................
*10.2 Stock Purchase Agreement dated as of January 17, 1995 by and among
DFF Holdings, Inc., DFF Sub, Inc., Dodi L.L.C., Dodi Family L.L.C.
and Dodi Developments L.L.C.........................................
*10.3 Tax Matters Agreement, dated as of March 22, 1995, by and among the
Company, DFF Supermarkets, Inc., Dominick's Finer Foods, Inc., Dodi
L.L.C., Dodi Family L.L.C., Dodi Developments L.L.C., Dodi, Inc.,
Blackhawk Developments, Inc., Blackhawk Properties, Inc., Dominick's
Finer Foods, Inc. of Illinois, Dodi Hazelcrest, Inc., Kohl's of
Bloomingdale, Inc., Jerry's Deep Discount Centers, Inc. and Save-It
Discount Foods Corporation..........................................
*10.4 Employment Agreement dated as of March 22, 1995 between Dominick's
Finer Foods, Inc. and Robert A. Mariano.............................
*10.5 Employment Agreement dated as of March 22, 1995 between Dominick's
Finer Foods, Inc. and Robert E. McCoy...............................
*10.6 Employment Agreement dated as of March 22, 1995 between Dominick's
Finer Foods, Inc. and Herbert R. Young..............................
*10.7 Form of Management Agreement among The Yucaipa Companies, the
Company and Dominick's Finer Foods, Inc. ...........................
*10.8 Stockholders Agreement, dated as of March 22, 1995, by and among the
Company, DFF Supermarkets, Inc., Dominick's Finer Foods, Inc., and
the stockholders of the Company named therein, as amended...........
*10.9 Registration Rights Agreement, dated as of March 22, 1995, by and
among the Company, DFF Supermarkets, Inc., Dominick's Finer Foods,
Inc., and the stockholders of the Company named therein.............
*10.10 Dominick's Supermarkets, Inc. 1995 Stock Option Plan, as adopted
March 19, 1995......................................................
*21.1 Subsidiaries of the Company.........................................
</TABLE>

E-1
<PAGE> 81

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- -------------
<S> <C> <C>
23.1 Consent of Ernst & Young LLP, independent auditors..................
*23.2 Consent of Latham & Watkins (included in the opinions filed as
Exhibit 5.1 to the Registration Statement)..........................
24.1 Power of Attorney of the Company (included on page II-4 of the
Registration Statement).............................................
27.1 Financial Data Schedule (32 weeks ended October 28, 1995)...........
27.2 Financial Data Schedule (40 weeks ended August 3, 1996).............
</TABLE>

- ------------------------------

* To be filed by amendment.

E-2

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected Historical
and Pro Forma Financial Data" and "Experts" and to the use of our report dated
January 5, 1996 (except Note 12, as to which the date is , 1996), in
the Registration Statement (Form S-1) and related Prospectus of Dominick's
Supermarkets, Inc. for the registration of its common stock.

Chicago, Illinois

- --------------------------------------------------------------------------------

The foregoing consent is in the form that will be signed upon the completion of
the stock split prior to the effective date of the Registration Statement as
described in Note 12 to the financial statements.

/s/ Ernst & Young LLP

Chicago, Illinois
August 30, 1996

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-START> MAR-22-1995
<PERIOD-END> OCT-28-1995
<CASH> 55,551
<SECURITIES> 0
<RECEIVABLES> 25,314
<ALLOWANCES> 0
<INVENTORY> 182,880
<CURRENT-ASSETS> 274,318
<PP&E> 353,015
<DEPRECIATION> (18,232)
<TOTAL-ASSETS> 1,100,209
<CURRENT-LIABILITIES> 308,504
<BONDS> 481,109
43,772
0
<COMMON> 154
<OTHER-SE> 96,069
<TOTAL-LIABILITY-AND-EQUITY> 1,100,209
<SALES> 1,474,982
<TOTAL-REVENUES> 0
<CGS> 1,136,600
<TOTAL-COSTS> 1,136,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<S> <C>
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48,951
0
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