Friendly’s Ice Cream is a private, family-owned, Massachusetts-based retail and

Question

Friendly’s Ice Cream is a private, family-owned, Massachusetts-based retail and manufacturing ice cream business founded in 1935. 27M gallons of its brand name ice cream are sold in 8,000 retail locations across the United States every year. It also owns a chain of 230 family-friendly restaurants on the east coast. One of the key factors to Friendly’s success has been the company’s vertical integration. This means that Friendly’s has sole control over how its ice cream is made, distributed, sold, and even served.

In 2007, Friendly’s sold their restaurant chain for $337M to Sun Capital Partners, a global private equity firm. Sun Capital Partners operates these under its subsidiary, FIC Restaurants. Recently, Friendly’s sold its retail and manufacturing business for $155M to Dean Foods, a publicly-traded food and beverage company based in Texas. Dean Foods acquired Friendly’s trademark and all intellectual property associated with its ice cream.

Where do you think complications will arise as Friendly’s Ice Cream moves from vertically integrated to two separate businesses, neither of which are owned by the founding company? What limitations will this place on manufacturing, retail, and restaurant operations?

Explanation / Answer

Q1) The complications will arise with the intellectual property of the firm in first place which includes trademark, logo, tradedress, ingredients used to manufacture the ice cream, manufacturing process etc. which is owned by Dean Food who paid lesser amount of 155 million $ for the deal whereas the restaurant chain owner Sun Capital Partners who paid 337 million $ will not get the brand identification rather it just gets the physical property sold by Frendly's. As Sun Capital Partners is at greater loss considering it gets only the physical assets while Friendly's business is more regarded for its brand image and brand value rather than the might of the business. This makes it complicated as Sun Capital might claim rights to the IP and challenge Dean Foods.

Q2) The limitations that this will place on manufacturing, retail and restaurant operations will be that there will not be any vertical integration as restaurant business is sold to Sun Capital Partners while retail and manufacturing business is sold to Dean Foods. This might result in loss of brand value for the firm as it becomes difficult for the firm to get the required support for its operations resulting in increasing lead times, costs etc. The brand overall loses control on how it is made, distributed and served.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.