Friendly's vies for a renaissance

February 21, 2013: 11:03 AM ET

77-year-old burger and ice cream chain Friendly's wants to bring customers back to its booths by returning to its roots.

By Beth Kowitt, writer

FORTUNE -- Friendly's wants you to remember the good old days. The 77-year-old burger and ice cream chain is betting that it can drive customers back to its booths by moving its menu and restaurants closer to what they looked like during the brand's prime.
"One of the things I tell people is, if there's any advantage I have over prior administrations at Friendly's, it's simply this: I remember as a guest or a customer what Friendly's once was," says CEO John Maguire, who's been on the job for about nine months.
Maguire, a native of Massachusetts, where Friendly's is based, grew up with the restaurant and was drawn to the idea of having a shot at reviving it. He joined the company after working for Panera (PNRA) for 19 years, his last as COO.
"They're trying to bounce back by refreshing their image and getting some of these customers who have left to come back and re-engage the brand," says Darren Tristano of food services research firm Technomic. He adds that it's "absolutely a necessary strategy" for Friendly's, which emerged from bankruptcy in January 2012.

Friendly's, which is owned by private equity firm Sun Capital Partners, joins a growing number of brands like McDonald's (MCD) and Wendy's that are updating their restaurants at a faster rate to keep up with customers' expectations, says Tristano.
The chain's decline started 10 to 15 years ago, as Friendly's and other brands in the family-style dining category saw their share decline to casual dining restaurants (think T.G.I. Fridays, Olive Garden, Applebees), says Tristano. As it struggled to compete, Friendly's lost focus on its core customer and tried to be like everyone else. "In trying to be all things to all people, they ended up being nothing to anyone," Maguire says.
Officially called Friendly's Ice Cream, the company has 361 restaurants in 16 states predominantly focused in the Northeast. But the chain also sells its ice cream in 7,500-plus grocery stores across the U.S. and does more than $500 million in sales annually between the restaurants and ice cream business. The company plans to expand its grocery-store business, which was up 20% last year.
As Maguire worked to redefine the brand, he focused on the three elements that he says matter most in the business: the people, the food, and the physical restaurant.
The menu had ballooned over the years, with items like meals under 550 calories, steak tips, and a roast turkey dinner. And they weren't selling. The company looked at 185,000 point of sale transactions to narrow in on the most popular items, which, not surprisingly, turned out to be burgers, melts, fried seafood, French fries, and ice cream.
The data showed that reducing the menu by 65% would only impact sales by 2.5%. So Maguire cut the menu by 40%, increased portion sizes, and added a number of items like a fried chicken dinner, a turkey wrap, fish tacos, and a new product called the Slinky Dog, which is a nine-inch, 100% beef hot dog.
Maguire's team has also moved to improve the quality of the food. The Fribble, the restaurant's signature milkshake, went back to being made with real ice cream rather than soft serve. At breakfast, customers get thicker toast and an extra-large egg, not a medium-sized one. Hamburgers are fresh, never frozen. And the Fishamajig went back to being made with haddock rather than deep-skinned Pollock. "If we're an indulgent brand that has the potential for calories," Maguire says, "the quality of that food really has to be worth the caloric intake."
Maguire thinks that Friendly's biggest advantage is its ice cream, which represents 20% of sales, compared to 5% or 6% for most restaurants in its segment. It's what sets Friendly's apart, with three out of every four customers ordering a dish that has an ice cream component.
To get its people on board, the company recertified and retrained every employee and decided to go through the process of rehiring the staff. "There are people who couldn't make that trip," says Maguire, "that couldn't embrace change, couldn't really understand what we were trying to do." In the end, about 95% of its restaurant employees were rehired.

As for the physical restaurant, the company has remodeled 10 locations in the Springfield, Mass., area and Maine. Maguire describes the new look as timeless. "We wanted to make them as relevant in the 1940s and 1950s, which was our heyday, but still make them relevant in the 21^st century at the same time," he explains. In the last few decades, the restaurant's customer base has predominantly been seniors and families with young kids. Maguire's hopeful the updated look will attract customers in the 25-to-49 age group.
The last step for Friendly's is getting customers to give it a second chance. "The marketing campaign is going to get people back through the doors, but execution at unit level will determine if they keep coming back," says Technomic's Tristano.
Friendly's will remodel its entire system over the next 12 to 18 months, but even locations still waiting on a facelift have a reduced menu with the higher quality food. Sales are up more than 20% at restaurants where the company has put all of the pieces together, Maguire says.
Another development that marks a return to the company's past -- opening a new location, which is on the horizon for 2013. "There's no reason we can't continue to grow again at some point," Maguire says. But, he adds, first things first.