Friendly's Bankruptcy Filing Imminent, Says Report [UPDATE]
UPDATE (10-5 10:52 a.m.): It's official: Friendly's has filed for bankruptcy. Consumerist reports that the company confirmed this morning that the Chapter 11 process has been set in motion. The chain has already closed 63 of its around 500 locations. Consumerist has the full list of Friendly's being closed in the early stages of the bankruptcy; the longer-term fate of the chain will assumedly be decided in bankruptcy court.
UPDATE (10-5-11 11:39 a.m.): The AP is also reporting that Friendly's has filed for Bankruptcy. Here's the AP report:
NEW YORK (AP) -- The parent of the Friendly's restaurant chain filed for Chapter 11 bankruptcy protection on Wednesday and said that it has already closed 63 of its stores. Each store employed about 20 people, so about 1,260 jobs were lost.
The 76-year-old company known for its ice cream and hamburgers is the latest restaurant chain to file for bankruptcy, as consumers continue to eat out less, a habit they picked up during the recession, and food costs remain high.
Other companies that have sought bankruptcy protection this year include Perkins & Marie Callender's; Real Mex, which operates El Torito Restaurant and Chevys Fresh Mex, and SSI Group Holding Corp., which operates Souper Salad and Grandy's restaurant.
Friendly's said the economic downturn coupled with higher costs and high rents drove it to file for bankruptcy protection.
"The strategic decision to pursue a financial restructuring will allow us to proactively and quickly improve our financial position," said CEO Harsha V. Agadi.
Friendly Ice Cream Corp., based in Wilbraham, Mass., says it has secured $70 million in financing and that its 424 remaining restaurants will stay open and pay employee salaries and benefits as it reorganizes under bankruptcy protection. Gift cards will continue to be honored. Friendly's now employs about 9,000 workers.
Its current owners, Sun Capital Partners, will be the lead, or "stalking horse" bidders, in an auction process.
The company filed for bankruptcy protection at the United States Bankruptcy Court for the District of Delaware.
Friendly's is on the verge of bankruptcy, according to a report from the Wall Street Journal. The ice cream and casual dining chain will apparently file for Chapter 11 protection as early as next week. The Journal reports that the over 500 Friendly's location will likely remain open during bankruptcy proceedings, with the help of a $75 million financing deal with Wells Fargo bank.
Friendly's has been owned by private equity firm Sun Capital Partners since 2007. It was founded by brothers Prestley and Curtis Blake, pictured above, in 1935. In between the two owners, the chain was owned by several different partners, including, during the '70s and '80s, Hershey's.
In recent years, Friendly's has tried several schemes to drum up new revenue. In August of 2009, it opened the first of a planned chain of fast food restaurants called Friendly's Express, assumedly a bid to capture business from customers hurt by the recession. But Friendly's has been hampered by consistent complaints about service and food quality. A recent ranking of medium-sized restaurant chains by Consumer Reports placed Friendly's dead last, with a score of 68, matched only by Buffalo Wild Wings and Joe's Crab Shack.
Friendly's bankruptcy rumors come on heels of several other high-profile restaurant chain bankruptcy filings. Sbarro, Charlie Brown's Steakhouse and Fuddruckers have all filed papers in recent months. Like Quiznos, which has not officially filed for Chapter 11 protection despite persistant rumors, Friendly's was not eligible for inclusion on a recent list of restaurant chains likely to go bankrupt because its stock is not publicly traded.
A slideshow about the corporate history of Friendly's on the company website ends with the note, "With 75 years of creating great family experiences, Friendly's is the brand that brings our guests quality meals, ice cream the way it should be, and everlasting family memories for generations to come." Yesterday's Friendly's bankruptcy rumors make this conclusion seem almost laughably optimistic -- and increasingly unrealistic.