* Friendly's To close 63 weaker restaurants
* 424 restaurants to stay open for business
* Plans sale to a unit of current owner Sun Capital
(Adds details and background, expert comment, byline)
By Tom Hals
Oct 5 Friendly's, an ice cream parlor chain
known for its Happy Ending sundaes, filed for bankruptcy on
Wednesday as the sluggish economy and slow consumer spending
claimed another casual dining operator.
Friendly's Ice Cream Corp blamed rising prices for cream
and high rents for its problems. The company, which operates or
franchises restaurants in the eastern United States, plans to
close 63 of its weaker restaurants; 424 will remain open.
The company, in its Chapter 11 bankruptcy filing, said it
intends to sell the business to an affiliate of its current
owner, Sun Capital Partners Inc. A restructuring expert said
the planned sale was a sign of confidence in the long-term
Friendly's has struggled to cut prices to lure back
recession-weary families who prefer cheaper counter-service
The company's debt load also prevented it from sprucing up
its restaurants, which got their start in Springfield,
Massachusetts, in 1935.
"It's horrible," Gene Baldwin, a turnaround specialist with
CRG Partners, said of the quality of Friendly's restaurants.
"The facilities are terrible and need to be redone."
Friendly's and other restaurant chains that were built on
traditional American fare and hearty meals have struggled to
keep up with shifts in consumer tastes.
"It's a comfortable place for families, but we do actually
have people watching calories and fat," said Jerry Mozian, a
restructuring adviser with Tatum LLC.
Sit-down casual dining operators have been hit hard this
year. On Tuesday another Sun Capital investment, Mexican
restaurant operator Real Mex Restaurants [REALM.UL], filed for
Chapter 11 bankruptcy. [ID:nL3E7L417S]
Other casual dining bankruptcies this year include Perkins
& Marie Callender's Inc, Fuddruckers and Charlie Brown's
Harsha Agadi, Friendly's chief executive, said in a
statement the bankruptcy would "quickly improve our financial
position and ensure we have the resources to build a better and
Sun Capital likely sees the bankruptcy as an opportunity to
quickly close weaker restaurants while holding onto the
potentially lucrative franchise business, said David Pauker of
Goldin Associates LLC, a turnaround advisory firm.
"It's likely that Sun believes that the crisis in consumer
confidence which has reduced revenues in the casual dining
sector cannot continue indefinitely," he said.
Friendly's said it received a commitment for about $70
million in financing. Along with cash flow, this will provide
the working capital needed to meet its obligations during the
restructuring, it said.
Friendly Ice Cream Corp listed both liabilities and assets
of $100 million to $500 million.
The case is in re: Friendly's, Case No. 11-13167, U.S.
Bankruptcy Court, District of Delaware.
(Reporting by Tom Hals in Wilmington, Delaware; additional
reporting by Sakthi Prasad in Bangalore; editing by John