Not So Friendly's: Bankrupt Restaurant Chain Lays Off 1,260 Overnight
Though workers have been mostly mute, one Dedham, Mass., waitress who had been with Friendly's for 27 years spoke to AOL Patch about her restaurant's closing. "This is my heart," Helen Smolak said of her job. "Nobody knows more about Friendly's than I do."
Federal law does prohibit companies from laying off workers en masse, through something called the WARN (Worker Adjustment and Retraining Notification) Act, but only if those workers -- a minimum of 50 -- are located on one specific site. The rationale: Communities aren't devastated when a franchise closes in same way that they are when a large factory does, like the recently bankrupt Solyndra plant in Silicon Valley.
Yet more states are looking to close this loophole to cover outfits like Friendly's that employee large numbers of people spread across multiple workplaces.
Friendly's filed for bankruptcy on Wednesday and shuttered 63 restaurants, effective immediately. The layoffs represented more than more than 12% of the company's 10,300 person workforce, a Friendly's spokesman told DailyFinance.
Everyone from restaurant managers to dishwashers at the affected locations were told Tuesday evening that the following day would be their last. Employees spent Wednesday cleaning out stores, according staff contacted that afternoon.
Still, workers at the closing locations answered phones cheerfully on Wednesday as they explained to a reporter that they were in fact closed -- permanently. None would give their names or details about the layoffs over the phone. Friendly's spokesman Rich Tauberman told DailyFinance that no employees received severance packages, though certain "accommodations" were being made for managers.
In a motion filed in U.S. Bankruptcy Court in Delaware on Wednesday, Friendly's stated that total employee wages were costing it about $2.95 million every week. This means that its layoff of about 12% of workers will save it close to $18.4 million per year in wages.
A Friendly Restructuring?
"Were not trying to put people out of jobs," Tauberman said. "We're trying to ensure the future of the company." He adds that many of the closed locations were unprofitable.
The drop in expenses from closing these locations should help the company and its parent, Sun Capital, get a handle on the $296 million in outstanding debt that it now hopes to restructure. Eventually, Friendly's hopes to regain profitability and reinvest in more successful parts of its company -- like franchising to independent owners and selling its ice cream in grocery stores.
Friendly's will "try to find opportunities" (but cannot guarantee employment) for those laid off, says Tauberman.
Layoffs without WARNing
State legislators are increasingly looking to protect workers from unannounced layoffs at businesses like Friendly's that have lots of workers spread out over many locations. After Charlie Brown's Steakhouse fired 1,900 New Jersey employees when it closed 47 restaurants last November, State Senate Majority Leader Joseph Cryan responded with a bill to amend his state's version of the WARN Act to include multiple franchise locations. The bill expired in committee during the last voting session, and was only recently reintroduced in early September. So much for the Friendly's workers in Trenton, N.J. -- at least for now.
New York's 2009 WARN Act, passed in response to the surge of mass layoffs during the economic crisis, prohibits companies from downsizing more than 25 full-time employees from a single site without at least 90 days notice. Friendly's laid off roughly 120 employees at six locations in New York.
With roughly 20 employees per location -- the number fluctuates seasonally -- it's unclear if any of the closed Friendly's in New York might be on the edge of a WARN Act violation. Thus far, no former employees have taken legal action.
Tauberman said that his company had "enough legal council" to make its decision to close stores. He could not immediately be reached Thursday for comment on whether any New York Friendly's locations employed enough people to be covered by WARN.
Mourning the Fribble
In Friendly's home state of Massachusetts, where 30 of the 63 closings occurred, workers will have trouble meeting the WARN Act's 50-employee threshold. Still, the layoffs will have community repercussions, both economic and emotional. About 600 residents will lose their jobs in places like the already-depressed former industrial hub of Springfield, which has an unemployment rate of 12.5%.
On Wednesday, Massachusetts Friendly's fans mourned the closings, sharing stories of snacks after baseball practice and the beloved ice cream Fribble on message boards and social media sites.
Smolak, the waitress in Dedham, explained how she heard about her layoff. "The phone rang, and [my manager] said, 'Helen, we're closed.' I said, 'Yeah, it is 10 o'clock.' She's like, 'No Helen, we're closed."
"I feel like I was betrayed," Smolak says.