A mid-priced restaurant chain looks to US-wide links
Can a business be Friendly, conservative, and aggressive all at the same time? One restaurant chain believes so. It is named Friendly Ice Cream Corporation, and it is growing ''aggressively.''
Friendly is a Massachusetts-based chain of nearly 650 mid-priced, family-style restaurants in the Northeast and Midwest, with its sights fixed on a coast-to-coast network. But the idea, company executives say, is to make haste slowly - unlike other chains that have had to retrench in recent years as profits failed to keep pace with expansion.
''I would hope that we are coast to coast and border to border eventually,'' says James Staggs, vice-chairman and chief executive officer. ''But we don't want to spread ourselves thin.''
In the meantime, Friendly isn't content with a limited growth picture until the economy - or at least consumer eating-away-from-home habits - picks up substantially. When representatives of CREST (Consumer Reports on Eating Share Trends), a Chicago research and marketing firm whose services are widely used by chains as well as by the National Restaurant Association, projected a 1.8 to 2 percent average annual increase in real growth for the industry over the next five years, Friendly officials sat back assuredly. They expect to do four times that well.
''We feel we should leverage that success,'' Mr. Staggs says. ''We have the advantage of being in the best growth segment of the industry right now.''
Industry analysts agree that Friendly has demonstrated the capacity to grow intelligently, especially since its takeover by Hershey Foods Corporation in 1979. Last year Hershey spent an estimated $100 million on its lone restaurant subsidiary.
Friendly has averaged 22 openings as against nine closings for each of the past three years. In departures from past practices, it is experimenting with takeovers of restaurants that competitors had closed. It will open an outlet on the grounds of a suburban Philadelphia hospital - at the latter's invitation - later this year.
It even operates restaurants at both ends of a Cape Cod shopping center to keep out competition, although that means the two units cut into each other's sales. And, unswayed by sentimentality, the original Springfield, Mass., ice cream shop opened by its founders in 1935 was closed because sales had become unacceptably low.
By contrast, Sambo's closed 400 restaurants in 1981. Ralston Purina has shut down all Jack-in-the-Box outlets east of the Mississippi River. Hardee's pulled up stakes and left New England to its competition.
''Hershey is an extraordinarily well-run organization,'' proclaims Bentley Offutt, who tracks the company for Legg Mason Wood Walker Inc., a Baltimore brokerage firm. ''Everything they do has been test-marketed, and test-marketed, and test-marketed. That same philosophy has carried over to Friendly. It has been a very good fit.''
''Hershey has pumped a lot of money into them, and they've done well,'' echoes Jack Maxwell of Lehman Brothers Kuhn Loeb Inc., in New York.
According to Paul McDonald, vice-president for corporate development, Friendly's growth strategy is equally weighted between generating increased sales in existing units and building new restaurants. A reluctant entry in the advertising race being run so vigorously by other restaurant chains like Denny's , Wendy's, McDonald's, and Burger King, the company now promotes itself at ''competitive levels.''
Moreover, Friendly places heavy emphasis on the ''total dining experience'' - defined as the time between pulling into the parking lot and paying one's check on leaving. Employees must participate in a continuous self-evaluation program based on performance of even their minutest responsibilities. While this is not regarded as a direct sales-builder, it is assumed that if stopping at Friendly's is consistently satisfactory, customers will keep returning.
Those who do will find other innovations designed to stimulate sales. A children's menu is being introduced that not only offers smaller portions (like a two-ounce hamburger instead of the adult-size three ounces) but is also aimed at getting youngsters into the habit of ordering their own meals. Ice cream cakes and pies - for single servings or take-home containers - have also been developed in a variety of flavors.
Just so nothing is left to chance, however, the chain is overhauling every restaurant in its system - replacing, wherever possible, a traditional brick-with-mullioned-windows New England coffee shop look with a more contemporary decor. Design changes are worked out much as a child would play with a dollhouse - by erecting a full-scale unit inside a warehouse here and then repositioning counters, booths, kitchen facilities, cash registers, and the like according to the recommendations of those who will work with them.
That modification of units, now three-quarters complete, is likely to hold sales gains to the $40 million to $50 million range for the next couple of years , Mr. Offutt says.
Sales totals for 1982 will not be released until Feb. 15, but Hershey spokesman Jim Edris says that ''looking at the first nine months, (Friendly) had a pretty good year.'' Net sales for 1981 were $302.9 million - a $29 million increase from the year before. Earnings were up 15 percent to $29.3 million.