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Friendly’s files for bankruptcy in Delaware

By Tiffany Kary
Bloomberg News / October 5, 2011

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Friendly Ice Cream Corp., the 76- year-old restaurant chain known for its ice cream and burgers, sought bankruptcy protection from creditors four years after being bought by private equity firm Sun Capital Partners Inc.

The bankruptcy filing is the latest bout of trouble for the popular restaurant chain with about 500 locations.

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.

Industry analysts note that Friendly operates in a casual family restaurant category that has been under pressure for years. It’s challenged on the lower end by more aggressive fast-food restaurants and on the higher end by casual dining competitors, most recently by so-called fast casual restaurants like Panera Bread and Chipotle Mexican Grill.

But Friendly’s restaurants may have an even bigger problem. Their time may have simply come and gone, analysts say.

"Restaurants have a life cycle, and Friendly’s has hit it," said industry analyst Ron Paul, president of Technomic Inc. in Chicago. “I don’t think there is any marketing fix when you are a model of a restaurant that went out of style."

Even among its direct competitors, Friendly’s ranked 10th among 12 chains across the country in a consumer-preference survey published last month by Nation’s Restaurant News. Friendly’s scored poorly on questions on value, food quality, and reputation. Only one chain among the dozen ranked lower when consumers were asked if they were likely to return.

Reporting from Erin Ailworth, Steven Syre, and Beth Healy of The Boston Globe was used in this article.

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