Report: Friendly’s may file for bankruptcy

By Erin Ailworth, Globe Staff

Friendly’s, the restaurant chain known for its ice cream, is considering a potential bankruptcy reorganization and sale, according to a published report.

The Wall Street Journal reported today on its web site that Friendly Ice Cream Corp. of Wilbraham could seek Chapter 11 protection from creditors as early as next week, and could then try to sell itself through a bankruptcy auction. The Journal cited unnamed sources in its report.

In a statement, Friendly’s said, it would not comment on “on rumors in the media or marketplace.”

But the chain conceded it had been hurt by the weak economy. “Like many restaurant chains, we are feeling the impact of the economic downturn and rising commodity prices and a challenging marketplace,” the statement said. “ We are working with our lenders, board and management team to explore alternatives to strengthen our financial base.”

The chain, which has more than 500 locations nationwide, is owned by Sun Capital Partners Inc., a buyout firm in Boca Raton, Fla. that bought Friendly’s for $337.2 million in 2007. The firm also invests in other restaurants, including Boston Market Corp.

The potential bankruptcy is the latest bout of trouble for the popular restaurant chain.

Friendly’s was co-founded by brother’s Prestley and Curtis Blake, who started a neighborhood ice cream shop in Springfield during the Great Depression in 1935. Over the next several decades, the brothers opened hundreds of restaurants, carving a niche in the market as a family-friendly hangout serving ice cream treats.

But by the 1970s, the brothers were feuding over the direction their business would take, and sold it to Hershey’s Co. in 1979.

Under the candy giant, Friendly’s grew but struggled with high labor costs and intense competition. The chain changed hands again, went public for a time, but continued to struggle with poor management, and a reputation for bad service.

Since it was bought by Sun Capital, Friendly’s has had a revolving door for chief executives. The current CEO, Harsha Agadi, formerly of Church’s Chicken, joined Friendly’s last year.

In the company statement, Friendly’s officials said, “It is business as usual at our restaurants, our manufacturing and distribution facilities. What we do know is that we have a great Company, a great workforce and our owners are committed to the long term future of Friendly’s. “