What Friendly's Bankruptcy Filing Really Means For The Chain
On Nov. 1, Friendly's, the beloved East Coast-based chain, declared in a press release that it will sell off its assets amidst filing for relief under Chapter 11 bankruptcy protection. The purchaser of all its assets is Amici Partners Group, LLC, an investor group the press release describes as an affiliate of BRIX Holdings, multi-brand food franchise company.
Fortunately, the statement explains that nearly all of the 130 pre-existing Friendly's corporate owned and franchise restaurants will continue running, albeit under COVID limitations, and that its employees will remain employed. Just as importantly, Friendly's explained that they had sufficient cash to continue both its operations and its obligations to employees and vendors during the time it takes to finalize the deal. If all goes as it should, the bankruptcy and selling of assets should mean little for both the people involved in the chain and its loyal costumer base.
The reason for Friendly's entering this deal is, unsurprisingly, the continued effects of the coronavirus pandemic. "Unfortunately," George Michel, CEO of FIC Restaurants, explained, "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." This is the second time Friendly's has declared bankruptcy. Forbes reported on the previous time in October 2011, during which the company lost a majority of its outlets due to the ongoing disruption of the 2008 financial crash. Until now, however, it had been resurging.
How the pandemic is affecting chain restaurants
Friendly's is not the only company to suffer from the coronavirus. In June, CNN reported that CEC Entertainment, the parent company of Chuck E. Cheese's, had filed for bankruptcy. However, just as Friendly's was still struggling to return to its former glory after the recession, CEC Entertainment had lost money in four out of the five years previous with a loss of $28.9 million in 2019 alone.
A similar story was shared by Eater in May when the New York-based food brand Aurify bought the U.S. operations of Le Pain Quotidien. Though Le Pain Quotidien initially saw an explosion of growth upon entering the U.S. in 1997, recent competition was beginning to cut into its profits. Again, COVID merely provided a pretext for the bankruptcy of this franchise.
Bankruptcy news is set to grow grimmer in the future however, not least because the coronavirus is here to stay. On Oct. 20, a Forbes piece addressed the fact that when California Pizza Kitchen declared bankruptcy in July, no one wanted to buy it like others did for Friendly's or La Pain Quotidien. This is due in part because no one knows when such businesses will be lucrative again. Since no one can tell, no one knows what the actual value of the franchise is. It ends on a note of optimism though, believing that when we reach the end of the pandemic, pent up demand for dining will burst into a new flourishing industry.