Friendly Ice Cream Corp. (Wilbraham, MA), reports first-quarter total revenues of $145.7 compared to $151.7 million for the first quarter ended Mar. 29,1998. Comparable restaurant revenues decreased 3.8% for the 1999 quarter following an increase of 6.9% in the first quarter of 1998.
The company sold four Friendly's restaurants to franchisees since the end of the first quarter of 1998, reducing revenues 0.8% from the same period in 1998. The company also closed 21 under-performing restaurants subsequent to the end of the first quarter ended March 29, 1998, further reducing revenues by $2 million. "Unfavorable weather patterns" further contributed to the fiscal chill, says the company.
The loss before the cumulative effect of a change in accounting principle for the first quarter of 1999 was $6.2 million, or $0.83 per share, as compared to $4.0 million, or $0.53 per share, for the first quarter of 1998. In the first quarter of 1999, Friendly changed its method of accounting for restaurant pre-opening costs, which resulted in a charge of $0.3 million or $0.04 per share. The net loss for the quarter ended Mar. 28, 1999 after the effect of the accounting change was $6.5 million, or $0.87 per share.
Also according to the company, cost of sales, as a percentage of total revenues, decreased to 30.3% for the first quarter of 1999 from 30.5% for the same quarter in 1998. The cost of dairy raw materials, specifically fresh cream, was higher during the first quarter of 1999 as compared to the first quarter of 1998. The decrease in food cost as a percentage of total revenues was primarily due to the increase in franchise revenues which do not have any associated food costs. Labor and benefits, as a percentage of total revenues, increased to 34.6% for the first quarter of 1999 from 33.1% for the same period in 1998 due to the company's emphasis on improving guest service by increasing staffing levels and training at the restaurants.
Operating expenses, as a percentage of total revenues, were 22.9% and 22.2% for the first quarters ended Mar. 28, 1999 and Mar. 29, 1998, respectively. The increase in the 1999 period was primarily due to a maintenance initiative to improve restaurant standards and increased snow removal and other weather related costs.
Franchising continues to play an increasingly important role in the company' s growth strategy. Five multi-unit contracts for a total of 48 franchised restaurants were signed during the quarter; one new unit was opened by a franchisee and two Friendly's restaurants were sold to new franchisees in the first quarter. The largest development agreement is with Statewide Management Group of Long Island City, NY, to franchise 20 Friendly's units in Manhattan over the next six years with two units scheduled to open in 1999.
Friendly has operations in 15 states with a high concentration in the Northeast with 641 company operated and 45 franchised restaurants as of Mar. 28, 1999. In the first quarter of 1999, 34 re-imaging projects have been completed, two company-owned restaurants have been opened, five under-performing restaurants have been closed and, as previously discussed, one restaurant has been opened by a company franchisee and two restaurants have been sold to company franchisees.