Friendly’s

Summary

Chief Restructuring Officer

Wilbraham, MA

Friendly’s, an 80-year-old brand, operates a network of over 200 restaurants primarily in the northeastern United States. The company owns and operates about half of these locations while serving as the franchisor for the remaining 100 locations.

Friendly’s faced decades of declining sales, resulting in negative cash flow and EBITDA, requiring an assessment of its locations and overhead to focus on a core subset of profitable stores. Carl Marks Advisors (CMA) assisted in three phases: evaluating real estate obligations under a Master Lease Agreement, rationalizing company-owned locations and overhead costs, and developing a go-forward operating plan with a smaller, more profitable footprint. CMA also analyzed strategic alternatives, including potential sale options and restructuring models, to maximize value for stakeholders.

Key Challenges

Highly Competitive Market

Industry Wide Declining Sales

Deferred CapEx Requirements

Unprofitable Locations

Outsized Overhead Expenses

Lease Obligations

Master Lease Agreements

Engagement Highlights

Phase I – Assess the Real Estate Obligations

A solution needed to be negotiated regarding ~50 of the estimated 100 company-owned locations that fell under Master Lease Agreement (“MLA”).
CMA developed several strategic alternatives that helped Friendly’s adequately assess the costs and legal implications of its options and choose the options that maximized value to the business and all stakeholders (lenders and owners).

Phase II – Restructure the Business

Worked closely with Friendly’s to rationalize the company-owned locations, assessing the performance of each restaurant which included detailed location-specific meetings with management and on-site visits to assess expected store performance and CapEx needs.
Assisted management in evaluating the overhead cost structure, identified areas where savings could be achieved, and right-sized the costs for the new pro-forma business based on a rationalized store footprint.
Developed a go-forward operating plan, including costs to execute (lease terminations, severance, etc.) for the restructured business with a smaller footprint of better performing locations and a reduced overhead burden.

Phase III – Strategic Alternative Analysis

Provided an analysis of the strategic alternatives for the restructured business (out-of-court sale, in-court sale, franchisor model, etc.), and the potential value and cost considerations attributed to each.

Friendly’s

Summary

Chief Restructuring Officer

Key Challenges

Engagement Highlights

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