Friendly's files for bankruptcy as the iconic chain struggles amid the 'catastrophic impact of COVID-19'
- Friendly's filed for chapter 11 bankruptcy on Sunday.
- The chain simultaneously announced it had reached an agreement to be acquired for nearly $2 million by the parent company of Red Mango and Smoothie Factory.
- "Unfortunately, like many restaurant businesses, our progress was suddenly interrupted by the catastrophic impact of COVID-19," Friendly's CEO George Michel said in a statement.
Friendly's filed for bankruptcy, as the restaurant industry continues to struggle amid the pandemic.
The chain — which is officially called FIC Restaurants, Inc — filed for chapter 11 bankruptcy on Sunday. According to a press release, nearly all of the 130 Friendly's locations across the US are expected to remain open.
Friendly's simultaneously announced it has an agreement to be acquired by restaurant investor group Amici Partners Group, LLC for just under $2 million. Amici is associated with BRIX Holdings, which is the parent company of franchises including Red Mango, Smoothie Factory, and Souper Salad.
$2 million is a low price for a restaurant chain. For comparison, un-redeemed Friendly's gift cards are expected to be valued at roughly $1.2 million, according to a filing on Monday.
Friendly's price tag is so low because the company has a significant amount of debt. As part of the deal, Friendly's lenders will waive nearly $88 million in secured debt.
"While the purchase price is not substantial, the Sale allows the business to continue," saving jobs and protecting franchisees, Friendly's chief restructuring officer Marc Pfefferle wrote in a filing on Monday.
Over the last two years, Friendly's has been trying to return its business to profitability by closing restaurants, updating its menu, and emphasizing its take-out and delivery business, the company said in the filing.
George Michel, CEO of FIC Restaurants, said in a statement that the company made "important strides toward reinvigorating our beloved brand in the face of shifting demographics, increased competition, and rising costs."
"Unfortunately, like many restaurant businesses, our progress was suddenly interrupted by the catastrophic impact of COVID-19, which caused a decline in revenue as dine-in operations ceased for months and re-opened with limited capacity," Michel said.
At least 10 other major chains have filed for bankruptcy during the pandemic, including Chuck E. Cheese's, California Pizza Kitchen, and Sizzler.
Friendly's previously filed for bankruptcy in 2011, closing 63 stores at the time. After closing those stores, Friendly's had 424 locations remaining — nearly 300 more than exist today.