WILBRAHAM, Mass. (TheStreet) -- Friendly's Ice Cream chain filed for bankruptcy on Wednesday, but will keep most of its restaurants open while closing a number of its weaker performing locations.

Following in the footsteps of other casual dining chains like Sbarro, Real Mex Restaurants , Perkins & Marie Callenders, Fuddruckers and Charlie Brown's Steakhouse, Friendly's suffered sluggish traffic and sales as a still-tight economy kept consumers opting to dine in instead of out, or trading down to lower-priced establishments.

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The company attributed its woes to rising commodity costs, particularly for cream, as well as high rents. Friendly's will keep 424 of its restaurants open, while closing 63 under-performing locations. Friendly's has around 10,000 employees across 15 states, and is well-known for its ice cream and burgers.

Opened in Springfield, Mass. in 1935, the original founders sold the restaurant chain to


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in 1979; it was later sold in 1988 to Donald N. Smith. Friendly's began trading publicly in 1997 at $18 per share, and was then purchased by private equity firm

Sun Capital Partners

in 2007 for $395 million, or $15.50 a share.

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In its Chapter 11 bankruptcy filing, Friendly's said it plans to seek a sale of itself in an auction with an affiliate of Sun Capital as the lead bidder. The auction is expected to take place in early December, and all bids will have to be submitted by Nov. 24. A minimum of $122.6 million in cash will be necessary to qualify as a bidder.

Friendly's CEO Harsha Agadi said filing for bankruptcy would "quickly improve our financial position and ensure we have the resources to build a better and stronger Friendly's."

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Sun Capital, which also invested in Real Mex Restaurants -- a Mexican chain that filed for bankruptcy on Tuesday -- will likely use Friendly's Chapter 11 filing as a chance to maintain the company's franchise business but also streamline operations through restaurant closings.

Friendly's should be able to continue operating and meet its commitments during the restructuring having received a $70 million financing commitment, the company said. Its bankruptcy filing listed liabilities and assets of $100 million to $500 million. Its debt sits around $297 million.

-- Written by Miriam Marcus Reimer in New York


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