Friendly’s CEO Says the Company Has Achieved Needed Momentum
Moving Beyond the Heavy Lifting
As he talked with BusinessWest roughly four years ago, soon after assuming the title of president and CEO, John Maguire said his assignment, while complex in nature, came down to two simple words: fixing Friendly’s.
There were, of course, many things that needed to be fixed, and Maguire, then, as now, summed them all up by reciting comments attributed to a woman from New Jersey who was part of a focus group assigned the task of gaining valuable input concerning the restaurant chain, its food, and service. Yes, he knows the passage by heart, because he’s lost track of how many times he’s quoted it.
“She said very eloquently, ‘the problem with Friendly’s is … your people aren’t friendly, your food is mediocre, your restaurants are dirty, and you don’t fix things when they break,’” he noted. “And that was all you needed to know to sum up what had happened to the brand.”
To make a long, four-year story much shorter, the menu has been simplified, the food has been upgraded from mediocre, the restaurants have been cleaned and renovated, and perhaps, most importantly, the people are, indeed, friendly. (If they’re not, they don’t work there for long, if at all.)
Despite all this, Maguire isn’t remotely ready to retire the present tense as he talks about what is still his assignment. Indeed, he is most definitely still fixing Friendly’s. But sufficient progress has been made now for him to summon the phrase “we’re competitive now,” and he did so quite often. The implication was clear; for years, this chain that was started in Springfield in 1935 and has been a part of the landscape ever since, wasn’t competitive.
“You never say that work is done — that’s not how it is with brands; fixing and improving is a continuum,” he explained. “But we are competitive in the marketplace once again, and we’re taking market share from other restaurants.”
The work to achieve competitiveness was described as the “heavy lifting” by Maguire, who was quick to add, however, that there is still plenty of that to do.
And the company will use the capital gained from the sale several months ago of its large and quite successful manufacturing division to Dean Foods to continue to move the needle in the right direction.
Initiatives include everything from new restaurants to continued renovations of existing venues, to the installation of drive-thru facilities at some locations where infrastructure permits it.
For this issue, BusinessWest talked at length with Maguire about the progress that’s been recorded at Friendly’s and the considerable work still to do to return the chain to the prominence it once enjoyed.
Recipe for Success
Retracing the steps that led to the sale of the manufacturing division, what he called a “powerful transaction,” Maguire said that in some ways it was a difficult decision to make. After all, the unit had been enjoying steady growth, and was, in some respects, the top-performing business within the company.
But this strong track record is also what made it quite attractive to the many large companies that dominate that realm and have been searching for additional, and potential-laden, growth opportunities.
So, with a need for additional capital, Friendly’s leaders eventually saw the sale of that division as a means to an end.
“As I looked at the total business, we had this gem called the retail and manufacturing business,” he told BusinessWest. “The first year I was there, we grew the business maybe 45% and launched our novelty business as well. What became evident to us fairly quickly was that we could use the growth from that business to give us the capital, but also the time and the space, to do the things we needed to do on the restaurant side.
“So we put a full focus on that division, and as a result of those efforts, four years later, we ended up with a business that had grown more than 105% over that time,” he went on. “We were in more than 9,000 grocery stores, we were in 49 states, and had really a national footprint.”
The question then became what to do with this tremendous asset, he went on, adding that one option was to expand it, perhaps by opening one or more new plants in different parts of the country. The other was, as they say in business, to ‘sell high.’
It was decided to canvas the market to see if there was any interest in it. The response was overwhelming, to say the least.
“We were blown away by the response we got, both from private-equity companies and the ‘strategics,’ the people who were in the ice-cream business,” he explained. “We got back such a response that we believed that what made the best sense was exiting that retail and manufacturing business.”
The company will buy all its products from Dean, which acquired the division for $165 million, while continuing to own the recipes and setting the standards for quality, said Maguire, adding that Dean has made it clear it has no intention of moving the operation from Wilbraham or downsizing that workforce. In fact, it has plans to grow the division and expand those facilities.
Meanwhile, the transaction allowed the company to retire debt on the restaurant side and continue to gain momentum in the drive to make the restaurant side not only competitive, but a sector leader, and, in the process of doing all that, change the narrative from people like that woman from New Jersey.
“We went to work on solving those issues she cited,” he said. “We made improvements with our people, for example; if you weren’t friendly, you couldn’t stay; if you didn’t want to take care of kids and families, you couldn’t stay; if you didn’t really want to be in the service business, you couldn’t stay; if you were a manager and you couldn’t be accountable for the results and deliver on the things we needed to deliver on, you couldn’t stay.”
But weeding out those who couldn’t provide the desired experience was just part of the equation, he went on, adding that a bigger piece was making the necessary investments in training so they could provide it.
If people were part 1 of the broad assignment to fix Friendly’s, then food, or improving it, to be more precise, was part 2.
“The food was mediocre,” said Maguire. “Over the years, Friendly’s had cut costs and stopped investing in food. We reduced portion sizes and cut back on the quality of the ingredients.”
So the company went back to fresh beef in its burgers, real ice cream in its shakes, haddock in the fish sandwiches, and extra large eggs and better bacon at breakfast. Just as importantly, it removed from the menu items that didn’t sell or that Friendly’s had no “credibility in serving,” as he put it — the ‘chicken-and-shrimp stir frys’ of this world.
Such improvements were both needed and quite timely, said Maguire, a food-industry veteran who has a turn-around effort at Panera Bread at the top of his résumé’s list of accomplishments, adding that the burger and ice-cream business is flourishing, despite what amounts to rumors to the contrary.
“I know everyone talks about eating healthy, but there’s not much real evidence of that,” he said, adding that this assessment is buffeted by the strong performance recently of chains such as Five Guys, Steak ’n Shake, Dairy Queen and its ‘Grill & Chill’ concept, and relative newcomers such as Shake Shack. “The truth of the matter is, if you have a compelling product in the burger and ice-cream segment, you can be pretty darn successful.”
In most ways, Friendly’s is qualified to use that word ‘compelling,’ he went on, adding, again, that food is just part of the equation, and this brings him to what would be considered the third leg of the stool regarding the company’s return to competitiveness — the restaurants themselves.
Looking back only a few years, he said that woman from New Jersey was right on the money with her assessment.
“Our restaurants were, quite frankly, in deplorable shape; they hadn’t been remodeled in 12 to 15 years on average, and when things broke, we didn’t fix them,” he explained, adding that the company has made needed improvements and has remodeled 95% of the 130 company-owned locations, with the rest slated for work over the next 12 months. There are 130 more restaurants that are franchised; 60% of those have been remodeled, and the company has received commitments for the rest to be done by the end of 2017.
Add all that up, and the result is that measure of competiveness Maguire mentioned. And now that Friendly’s is competitive, it can do the things it needs to do to grow the brand, he told BusinessWest.
“Now that we’re competitive, the real work begins,” he explained. “Now, it’s about showing not only that Friendly’s can be viable — which I would say it can be — but that it can be a growth vehicle. And there’s a big difference between the two.”
Growth will come from improving the average unit volume of each location, or simply bringing more people to those sites, he said, adding that, while all the initiatives taken above are part of that equation, additional steps are being taken.
These include the addition of drive-thru windows, he said, adding that this additional convenience has proven its worth for countless other brands. And while Friendly’s doesn’t exactly fit the description of fast food, Maguire noted that it gets food to the drive-thru customer within four or five minutes on average.
“We’ve begun to retrofit some of our locations for drive-thrus,” he said, noting that the location in Westfield was the first to be done over, and six have been completed to date. “And those drive-thrus are seeing a 25% lift in sales volume.”
The company plans to be aggressive in this realm and add another 25 to 50 such retrofits in the coming years, with the goal of having one-third of the locations equipped with them.
Meanwhile, the company continues to expand with new locations, including one at Logan Airport, another in Merrimack, N.H., and two more in Southern New Jersey, with more planned for next year.
Shaking Things Up
If you visit a Friendly’s location, you won’t see a picture of that focus-group participant from New Jersey on the wall.
Still, Maguire gives her ample credit for the company’s turnaround efforts and return to competitiveness. In fact, he even called her “wise” as he relayed her sentiments, or previous sentiments, to be more accurate.
Making those observations dated constituted the ‘heavy lifting,’ as Maguire called it, in his efforts to change the company’s fortunes, and now the real work has commenced to become into an instrument of growth.
As happened in individual locations, Friendly’s has fixed what became broken — its brand. Actually, it’s still fixing it, because, as Maguire noted, such work is a continuum, and it’s never really done.
George O’Brien can be reached at [email protected]