Report: Friendly's Restaurants Headed to Bankruptcy
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Report: Friendly's Restaurants Headed to Bankruptcy

October 14, 2011


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East coast restaurant chain Friendly's may be on the brink of filing for Chapter 11 bankruptcy protection, according to reports from The Huffington Post and The Wall Street Journal.

Currently juggling debt in excess of $250 million, the restaurant apparently plans to work with Wells Fargo bank to operate as a debtor-in-possession during bankruptcy court proceedings. The restaurant may enter into a restructuring deal with Wells Fargo worth nearly $75 million.

The chain reportedly plans to keep its more than 500 locations open and operating during the bankruptcy proceedings.

The bankruptcy speculation comes just two years after the chain ventured into fast food with Friendly's Express, hoping to attract customers looking to eat out for less money during the recession.

Feeling the Pinch

The family-centric restaurant's reputation has reportedly suffered a number of blows in recent years. Among them was a ranking of restaurants in Consumer Reports that reportedly placed Friendly's at the very bottom of the list. In other venues, critics have apparently complained of the restaurant's service and food quality.

In addition to fewer Americans eating in restaurants, the Friendly's chain has been hurt by rising costs of commodities such as butter, corn, and other staples ingredients of its menu items.

Sources report that the restaurant chain may attempt to sell itself during or following its bankruptcy, which might help alleviate some of its debt.

Of its total obligations, it reportedly owes about $30 million to Wells Fargo and about $225 million in secured debt to Sun Capital Partners, Inc., which bought all of Friendly's stock four years ago.

At present, the restaurant apparently has about $3.5 million in liquid assets and borrowing capability, which insiders believe will allow it to operate in the short run.

History of Friendly's

Founded by two brothers in 1935 as an ice cream parlor in Springfield, Massachusetts, Friendly's established itself as a casual dining restaurant and has since expanded to 16 states along the East Coast.

The restaurant's founding brothers sold the operation to Hershey in 1979. Between then and 2007, the restaurant chain underwent a series of ownership changes.

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