Even in good times, the old-school dine-in restaurant business struggled to survive beneath the weight of high rents, thin margins and tough competition. So when Massachusetts-based Friendly’s this week sought bankruptcy protection for the second time in 10 years, it was not only unsurprising, but the chain was in good company.
With the addition of Friendly’s 130 stores, the list of COVID-era casualties in the casual-dining space has grown to more than 1,500 restaurants from at least a dozen different chains, including California Pizza Kitchen, Ruby Tuesday, Chuck E. Cheese and Sizzler.
For its part, the Friendly’s ownership group said it has identified a buyer willing to pay $2 million, or about $15,000 per store, to take over the company, which management said will remain open and emerge stronger on the other side.
“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,” Friendly’s CEO George Michel said.
“We believe the voluntary bankruptcy filing and planned sale to a new, deeply experienced restaurant group will enable Friendly’s to rebound from the pandemic as a stronger business, with the leadership and resources needed to continue to invest in the business and serve loyal patrons,” he added.
The company is hoping to get the U.S. bankruptcy court to approve its reorganization by mid-December.
Down But Not Out
Like the Friendly’s roadmap, a bankruptcy plan Ruby Tuesday unveiled a month ago included a similar transitional proposal.
“This announcement does not mean ‘Goodbye, Ruby Tuesday,'” CEO Shawn Lederman said in a statement at the time. He said the company’s Chapter 11 filing “will allow us an opportunity to reposition the company for long-term stability as we recover from the unprecedented impact of COVID-19.”
However, court documents show that under any plan, Ruby Tuesday will be a shadow of its former self when it emerges from bankruptcy, having agreed to permanently close 185 of some 450 locations.
Similarly, California Pizza Kitchen filed its own scaled-back bankruptcy plan in July. It calls for the chain to stay in business through the bankruptcy process, but permanently close about one-fourth of its 200 locations.
A Leaner Future
Even restaurants chains that are thriving have used the pandemic’s upheaval to streamline themselves, whether that means remodeling for new curbside pickup business, shuttering underperforming stores, or selling the business outright and going private.
In the case of Dunkin’ Brands, it’s a combination of all three. The Canton, Mass.-based chain had announced plans to close 800 stores when it agreed last week to sell itself to Inspire Brands for $11.3 billion.
Inspire already owns Arby’s, Buffalo Wild Wings, Sonic Drive-in and Jimmy John’s — a total of more than 11,000 locations. Buying Dunkin’ Brands will add more than 12,500 Dunkin’ locations and nearly 8,000 Baskin’ Robbins restaurants to its massive portfolio.
In a statement, Inspire said the deal furthered its goal of bringing together a family of complementary but highly differentiated brands. Inspire also noted the appeal of Dunkin’s international platform, robust packaged-goods licensing business and 15 million loyalty members.