On Sunday night the COVID-19 pandemic continued wreaking havoc on the service industry (in addition to wreaking havoc on lots of other things, obviously) by being the alleged force driving yet another dining chain into bankruptcy.
The latest business to pin its inability to pay back creditors on the coronavirus is Friendly's, a chain of East Coast eateries that has become best known for its sandwiches and "Fribble" milkshakes. CNN reports that this is the second time the 85-year-old restaurant has filed for bankruptcy in the past decade.
On Sunday evening the company filed for Chapter 11 protection in Delaware. It was announced that it would be selling "substantially all of its assets" to a private hedge fund company which also owns fast-food restaurants that include Red Mango frozen yogurt shops and Souper Salad. Bloomberg reports that Friendly's plans to sell itself for just under $2 million, and that it estimated its assets at somewhere between $1 million to $10 million, with liabilities somewhere between $50 million to $100 million.
As a result of this action, Friendly's claims that "nearly all" of its 130 corporately-owned locations will stay open. It's reported that they have 34 full-time staff members at a corporate headquarters in Massachusetts, and 1,664 restaurant workers scattered around the East Coast.
"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," said the company's CEO George Michel.
Michel went on to say that this bankruptcy declaration will lead to Friendly's becoming a "stronger business, with the leadership and resources needed to continue to invest in the business and serve loyal patrons."
Bloomberg, citing FIC's Chief Restructuring Officer Marc Pfefferle, reports that Friendly's had been having issues prior to the pandemic.
“The business had been losing money for some time, and the debtors had been routinely borrowing under their credit facilities as that was the only way to sustain operations,” said Pfefferle.
Attempted remedies for these issues included shutting down unprofitable locations, changing the menu, and switching up marketing strategies.
A court hearing has been scheduled for December for the purpose of approving the bankruptcy transaction. In the meantime, Friendly's says they have enough cash to continue running operations and paying employees.
Friendly's previously filed for bankruptcy back in 2011. At that time it had more than 400 restaurants.