Friendly Ice Cream Corp., parent to the Friendly’s family-dining chain, said Wednesday it has filed for Chapter 11 bankruptcy protection, closed 63 of its nearly 500 locations and secured about $70 million in debtor-in-possession financing to begin restructuring.
The company said it will undertake a sale process and that its current owner, private-equity firm Sun Capital Partners, is the lead bidder.
Wilbraham, Mass.-based Friendly Ice Cream said 424 Friendly’s restaurants will be open for business as usual during the company’s financial restructuring and that there is expected to be no impact to manufacturing and distribution operations. The company expects to continue paying employee salaries and benefits, meet the needs of its guests and retail customers, and honor all gift cards.
Friendly said the decision to file Chapter 11 was driven by “the challenges of the current economic downturn, significantly increased costs, particularly in commodities such as cream, rents that exceed current market rates and certain of the company’s current unrelated liabilities.”
“Thanks to our dedicated employees and franchisees, we have made a lot of progress, but our company continued to face significant financial challenges,” Harsha V. Agadi, chairman and chief executive of Friendly’s, said in a statement. “This was exacerbated by the weak economy and rapidly rising commodity costs that have impacted the entire restaurant industry.
“The strategic decision to pursue a financial restructuring will allow us to proactively and quickly improve our financial position, and ensure we have the resources to build a better and stronger Friendly’s for our loyal guests, retail customers, suppliers and other business partners,” Agadi said.
Friendly Ice Cream said the 63 restaurant closures would enable it to realize important cost savings and operational efficiencies that will improve its financial foundation.