Dive Brief:
- FIC Restaurants, which operates Friendly’s Restaurants, has entered into a sales agreement with Amici Partners Group, an entity affiliated with Brix Holdings. Brix operates Red Mango, Smoothie Factory, RedBrick Pizza and Souper Salad, according to a press release. Amici will purchase Friendly's for just under $2 million, according to a court document.
- As part of the sales process, Friendly’s has filed for Chapter 11 bankruptcy. The company has sufficient cash on hand to continue operations and meet its obligations to employees, franchisees and vendors. Nearly all 130 restaurants are expected to remain open, according to the press release. Secured lenders have also agreed to waive about $88 million in secured debt, according to a separate court document.
- Friendly’s previously declared bankruptcy in 2011, when it operated over 400 units and saw sales slow due to fewer people dining out and rising food prices. In recent years, the company began shifting its strategy to appeal to more people ordering off-premise, including adding more drive-thrus, but the pandemic stopped the company’s progress.
Dive Insight:
Like many casual dining chains, Friendly’s had been struggling in recent years following headwinds caused by shifting demographics, increased competition and rising costs, according to court filings. The restaurant, which had been losing money, began restructuring initiatives a few years ago, which included closing unprofitable locations, reducing occupancy and other fixed costs and improving business at remaining restaurants with menu innovation, re-energized marketing and improving the customer experience.
The company also increased its focus on takeout, catering and third-party delivery, George Michel, CEO of FIC Restaurants, said in the press release.
"Unfortunately, like many restaurant businesses, our progress was suddenly interrupted by the catastrophic impact of COVID-19, which caused a decline in revenue as dine-in operations ceased for months and re-opened with limited capacity," Michel said.
While these initiatives improved results prior to the pandemic, the company and its advisors came to the conclusion that a sale was the only way to preserve the brand, according to court filings. Sales efforts began in 2019 and ended on Sunday with a deal with Brix Holdings.
"We believe the voluntary bankruptcy filing and planned sale to a new, deeply experienced restaurant group will enable Friendly’s to rebound from the pandemic as a stronger business, with the leadership and resources needed to continue to invest in the business and serve loyal patrons, as well as compete to win new customers over the long-term," Michel said.
Friendly’s joins a long list of casual chains to take the route of bankruptcy, including California Pizza Kitchen, Ruby Tuesday, Sizzler USA and CEC Entertainment, which were greatly impacted by dining room closures throughout the pandemic. Friendly’s does have a leg up as it was already in the sales process with a buyer even though the sales price is extremely low for the more than $200 million in annual sales the chain produces. Other chains are being sold for low prices, including Le Pain Quotidien U.S.'s $3 million sale to Aurify Brands in May.
