Friendly's Ice Cream
The History of Friendly's Ice Cream
It all began in 1935, Elvis was born, Bob Hope made his first network radio appearance, Babe Ruth was released by the Yankees and hits his 714th and final home run, Boulder Dam is completed, FDR orders a Federal gold vault to be built at Fort Knox, KY, Ella Fitzgerald makes her first recording, Parker Brothers introduces Monopoly, FDR signs the Social Security Act into law, AND Prestley & Curtis Blake open the 1st “Friendly” restaurant.
It was the summer of 1935, at the height of The Great Depression, and the Blake brothers Prestley “Pres” (20) and Curtis (18), decided to go into business for themselves by opening an ice cream shop. With $547 that they borrowed from their parents (Herbert P. and Ethel Blake) they opened their first Ice Cream shop in Springfield, MA.
Having funded the venture Herbert and Ethel wanted everything to be as equal as possible, so with the flip of a coin it was determined that Curtis would be the company’s president and that Pres would serve as treasurer overseeing real estate and the company’s finances.
They named the shop ‘Friendly Ice Cream’ because they considered themselves to be friendly guys by nature, and as a pledge to provide friendly service to their customers.
The Blake brothers made their own ice cream in a 2-1/2 gallon freezer they had purchased with the borrowed money. They began serving their homemade ice cream in cups, but after just 4-days they decided to offer double-dip cones for a nickel, and the business took off. As the summer came to an end, the Blakes realized they would need to offer more than just ice cream to keep customers coming in through the winter months. They polled their customers and added
hamburgers to the menu. By the following summer the business was booming and they hired their first employee.
Over the next 40-years the brothers grew the chain. The company quickly became known for its Fribble milkshake and as a family friendly restaurant serving good food at affordable prices.
- In 1940 the brothers opened a second location in West Springfield, MA. The United States then entered World War II and in early 1943 the Blakes closed their shops, putting signs in the windows of their restaurants announcing that they would be closed “until we win the war!”
- 1945 at the conclusion of the war the Blakes reopened their shops, and expanded into Longmeadow, MA and Thompsonville, CT
- In 1951 with ten (10) Friendly Ice Cream Restaurants operating in Western Massachusetts and Connecticut, they introduced take-home half-gallons of ice cream and further expanded their menu to include a variety of ice cream products and a variety of sandwiches.
- In 1960 the growing company moved to its current headquarters in Wilbraham, MA.
- In the late 60’s the Blake brothers took Friendly Ice Cream public with a stock offering.
- In 1974 they opened a new food processing and distribution plant in Troy, OH to serve the chain which had grown to 500 restaurants, mostly concentrated in the Northeast with a few as far south as Florida and west as Ohio.
The thriftiness of Pres served the company well in the early years. Their first company truck was an old Ford which he bought for $40. In 1940 when they bought property for offices in Wilbraham, he discovered it extended a few feet into Springfield, and took advantage of the quirk to buy electricity at that town’s lower rate. Pres had an aversion to debt and paid cash for almost everything including real estate as the company rapidly expanded. However, by the late 70’s the brothers began to disagree over how to best build and grow the company. Curtis accused Pres’ frugal ‘depression-era thinking’ and spending habits of holding the company back from being able to expand and compete with rival chains.
In 1979, in part as an effort to resolve their disputes, the Blakes agreed to sell Friendly Ice Cream to candy giant Hershey Foods Corporation for $164 million. Under Hershey’s ownership older stores were modified, new menu items were introduced, and Friendly’s popular ice cream products were co-branded by adding Reese’s Pieces, Oreos and Heath Bar Crunch toppings. The chain quickly grew to more than 800 locations. By the late 80’s the chain was not performing as well as Hershey’s had hoped so they then put the company up for sale.
In September of 1988 Chicago based Tennessee Restaurant Company (TRC) acquired Friendly Ice Cream Corp from Hershey for $375 million. TRC had been formed in 1985 by former fast food whiz and seasoned restaurant entrepreneur, Donald N. Smith and a group of investors to purchase and manage restaurant chains. Smith was considered a superstar in the restaurant world. His career began at McDonalds Corp where by age 29 he was the youngest field vice president and credited with the introduction of a successful breakfast menu. He served as president of Burger King from 1977 to 1980 and doubled company profits. In 1980 he moved to PepsiCo’s food division, which at the time included Pizza Hut & Taco Bell, he boosted profits 600 percent in two years. Smith was given credit for the success of Pizza Huts Personal Pan Pizza. As its first major acquisition TRC purchased Perkins Restaurant & Bakery from Holiday Inn in 1985. With the acquisition of Friendly Ice Cream Corporation TRC was the second largest operator of family restaurants in the country. Smith took the title of Friendly CEO and board chairman, in addition to his roles as chairman and CEO of TRC.
TRC immediately began assessing the company’s strengths and weaknesses. More than 60 corporate employees were laid off and within 18 months more than 100 underperforming stores had been closed, mostly in Virginia, Florida, and Ohio. The company’s New England stronghold remained mostly intact.
In 1989, Friendly Ice Cream changed its name to Friendly’s making the restaurants truly "Friendly’s” as it had become known by its patrons. Plans for re-modeling the remaining stores over the next 5 years were put into place. All of the company’s manufacturing and distribution operations were folded into a newly created Food Service Division. As an added distribution channel and cross marketing opportunity Friendly’s began to distribute a variety of ice cream products through supermarkets, starting in Albany,
NY and expanding throughout New England.
Despite all the fanfare and optimism which Smith and his previous successes brought to Friendly’s the ‘turn around’ was moving slowly. A 1992 Consumer Reports ranked the Friendly’s chain last among 14 family food chains, citing surveyed customer dissatisfaction with the food quality, service and atmosphere. Smith in an interview with the Patriot – News Harrisburg acknowledged the chains problem by saying “The Blake brothers came up with a concept that evolved into something a notch above fast food. When we bought the chain, that image had become blurred.” He declared his intention to continue to upgrade the company’s reputation.
In 1994 Friendly’s began to add healthier items like roasted chicken and baked cod to the menu. Typical entrees ranged in price from $5.70 to $6.40 including sides. Unit sales began to go up, and corporate revenues were moving up slightly each year. The company began to explore opportunities in the UK and Far East.
By mid 1997 the company had renovated nearly 90 percent of its restaurants. With the cost of remodeling, heavy debt load, and stiff competition the company balance sheet which had remained in the red since it was acquired by TRC, seemed to finally be on the track of profitability. In July the company announced plans to franchise, selling off 34 restaurants in Deleware, Maryland, Virginia and D.C. to DavCo Restaurants who had agreed to open a total of 100 additional locations within 10 years.
In November of 1997 Friendly Ice Cream Corporation completed an IPO of 5,000,000 shares of its Common Stock, which was traded on the Nasdaq National Market under the symbol “FRND” in an effort to reduce the debt load. The stock opened at just under $18 and quickly climbed to more than $26 within 6 months.
In early 1998 the price of fresh cream tripled, forcing Friendly’s to raise its prices on ice cream while absorbing much of the added expense. Simultaneously the retail ice cream market got tight with growing competition and much of the previous increased sales began to drop off. By the fall of 1998 the stock had dropped to less than $5 per share. The company closed the Troy, Ohio manufacturing and distribution center to save shipping costs since Friendly’s no longer had restaurants in Ohio. The company also pulled out of its UK and China ventures.
In 1999 John L. Cutter, became President and CEO of Friendly’s. Prior to this Cutter had served as COO of Boston Chicken. In the spring and in response to the success of the McDonald’s McFlurry, Friendly’s launched its largest new product introduction ever, introducing the “Cyclone” a soft-serve ice cream cone which could be purchased with a variety of mixed-in additions of candy, cookies, and pieces of fruit. The company also announced that it would be stepping up its franchise openings, with 25 scheduled for 1999 and 50 to 70 per year thereafter. The stock began to inch back-up as analysts were applauding the changes.
In March of 2000, the company announced that it was shutting 80 restaurants, shaking confidence in the stock and it once again dropped to below $5 per share. As the stock began to trade well below the $5 NASDAQ minimum, NASDAQ threatened to pull their listing. In June Friendly’s switched over to the American Stock Exchange trading on the AMEX under the symbol FRN.
In early 2001, Friendly’s closed more stores and laid-off nearly 100 employees. Co-founder Pres Blake at the age of 86 decided it was time to save what he called “his baby”. He began dealing himself back into the company that he’d founded in 1935 and sold to Hershey in 1978. With a $2 million investment Press bought 892,000 shares or approximately 10% of the companies stock, explaining that he couldn’t sit by and watch as the company was – in his opinion – being mismanaged by chairman Donald Smith.
In February 2003 Friendly’s promotes John L. Cutter to CEO replacing Donald N. Smith, who remained as chairman. Later in the year, Pres filed a lawsuit against Friendly Ice Cream Corp. and its chairman Donald Smith in a so-called derivative action to force the return of money to the company which Blake claims was improperly paid for use of a private jet. The jet’s costs were split between The Restaurant Co., a company controlled by Friendly’s Chairman Donald N. Smith and Friendly Ice Cream Corp. Blake accused Smith of using the jet for his personal use and using the airplane lease to funnel $3 million annually from the company into another restaurant chain he controlled.
The law suit filed by Pres, divided the brothers; Curtis believes that Prestley’s actions hurt the chain. He was quoted as saying “My brother forgot we sold the company. He used to call Hershey’s regularly and with Smith he does the same thing. My brother never wanted to let go.” Meanwhile, Pres Blake continued to buy more Friendly stock and once again became the company’s largest individual shareholder with 13.1% of the shares.
At the 2004 & 2005 annual shareholder meetings Pres offered the company a low interest $50 million loan out of his own pocket, IF Friendly’s would force Smith to repay the alleged $3.5 million in misused funds, and use the loan to pay down debt. On both occasions Friendly management refused to accept the loan.
While continuing to deal with the claims of Pres and the negative publicity brought on by those claims the company continued to work on revamping its operations and strategy to improve sales and profits. Friendly’s re-franchised 27 restaurants in Florida, Ohio and New Jersey. The company signed deals with Jax Family Restaurants and Central Florida Restaurants to grow the brand in Florida. The company updated its menu selections to include Carb Fabulous and Lighter Choices for the diet conscious. The company also launched a line of decorator ice cream cakes which are available in supermarkets and its restaurants.
After having fought Friendly’s alone for years, Pres found an unlikely ally in the summer of 2006, in Sadar Biglari, a 29 year old immigrant from Iran. Biglari, the son of rug dealers began to invest at the age of 19 after reading the book “The Warren Buffet Way”. As chairman of Biglari Capital Corp the general partner to The Lion Fund L.P. and Western Sizzlin Corp, Biglari saw potential in Friendly’s and quickly acquired 15% of the company’s stock, making Pres the second largest stockholder. As the company’s largest stock holder Biglari began to push for 2 of the 6 seats on its board, however the terms of the deal could not be worked out.
September 2006, Cutter resigns as President and CEO to pursue other interests. Chairman Donald N. Smith, assumed oversight responsibilities on a temporary until a replacement can be found.
In December 2006, Biglari announced that he would launch a proxy fight for seats on the board at the company’s annual meeting. Realizing that they would need to prevent Prestley, Friendly’s second largest stock holder from joining Biglari, the company turned to his brother and Friendly’s co-founder 89-year old Curtis Blake. Two Friendly’s executives flew to Florida and met with Curtis at his home. The morning following the meeting Curtis faxed a handwritten, five-page letter to his older brother, in which he wrote: “Our company is now in a very precarious position. You alone are now in the position to control the entire future.” The two brothers, who live just 12 miles apart, had not spoken to each other in over a year due to the law suits filed by Prestley. Curtis broke the silence to protect Friendly’s from what he called “a corporate raider.”
Pres said “ I’m sorry my brother isn’t with me on this, but I’m going to keep going because I know I’m right. I’m going to keep going until I can’t go any further.” To which Curtis replied: “I’m very disappointed. He was my best friend for 85 years. It would have been a nice story if we ended up best friends for our entire life.”
Jan 8, 2007 Friendly’s appoints George M. Condos (51) as President, CEO and Director. Condos began his career in franchise operations with Dairy Queen. In 1987 he joined Dunkin Brands, which owns Dunkin Donuts, Baskin Robbins and TOGOS sandwich shops, where he served in various roles until being named Brand Officer in 2003 and serving in that capacity until 2006.
On March 7, 2007 new CEO George Condos announced that they were considering putting the company up for sale.
On June 17, 2007 it is announced that a deal is in place. The headline read Pending Friendly sale means Company founder can relax. Prestly Blake’s lawyer James Donnelly, said it would take a few weeks for accountants to figure out how much his client spent to accumulate the $16 million worth of stock and to fight his legal battle.
But Blake – who has no other immediate plans other than overseeing repairs and gardening at his home – said he was in no rush to count or spend his money. “I just want the future of Friendly’s to be secure,” he said. "I'll be watching out for the company for the rest of my life. Seventy-three years ago next month, we started this business. And I'm still concerned about it."
Oh and if you’re curious, remember that double-dip cone which sold for a Nickel back in 1935, well today it goes for $3.35.