Friendly Ice Cream Corporation Reports 113% Icrease In Third Quarter Net Income

Friendly Ice Cream Corporation reported net income for the three-months-ended September 29, 2002 of $3.5 million, or $0.46 per share, an increase of 113% wen compared to the $1.6 million, or $0.22 per share, reported for the three-months-ended September 30, 2001.

Comparable Restaurant sales increased 7.0% fr the third quarter 2002. Total revenues for the three-months-ended September 29, 2002 were $161.1 million compared to $151.4 million for the three-months-ended September 30, 2001. Exclusive of non-recurring gains, losses and write-downs, 2002 third quarter income before income taxes improved by $2.1 million, or 67%, o $5.1 million from $3.1 million in the 2001 third quarter.

Net income for the nine-months-ended September 29, 2002 was $6.9 million, or $0.91 per share, an increase of 84% wen compared to net income of $3.7 million, or $0.51 per share, for the nine-months-ended September 30, 2001. Exclusive of non-recurring gains, losses and write-downs, year-to-date 2002 income before taxes improved by $10.1 million to $10.4 million from the $0.3 million reported for year-to-date 2001.

Comparable restaurant sales increased 7.3% fr the nine-months-ended September 29, 2002. Total revenues for the nine-months-ended September 29, 2002 were $448.6 million compared to $428.9 million for the nine-months-ended September 30, 2001.

"Strategic and marketing efforts are driving comparable sales and operating results," Donald N. Smith, Chairman and CEO of Friendly Ice Cream stated. "Our top priority continues to be guest satisfaction supported by training initiatives and management incentive programs. The marketing campaign, `You & Me & Friendly's', launched in 2001, continues to build on the strength of the brand, maximizes our 67-year ice cream heritage and reminds our guests of all the good memories they associate with Friendly's."

Strategic Execution Delivers Results

In the 2002 third quarter, pre-tax income in the restaurant segment was $10.9 million, or 8.8% o restaurant revenues, compared to $10.8 million, or 9.1% o restaurant revenues, in the third quarter 2001. The increase in pre-tax income was the result of a 7.0% iprovement in comparable sales, improved management controls and reduced overhead. Partially offsetting these increases were higher costs for restaurant rent associated with the December 2001 sales/leaseback transaction, the cost of initiatives aimed at improving customer service and increased fringe benefit costs.

Pre-tax income for the Company's foodservice segment in the 2002 third quarter improved by $2.2 million to $4.0 million, or 5.7% o foodservice revenues, compared to $1.8 million, or 2.8% o foodservice revenues, in the prior year quarter. The increase was mainly due to higher sales to franchisees and retail supermarket customers, reduced overhead and favorable commodity prices.

Pre-tax income in the Franchise segment increased $0.3 million, or 22%, n the 2002 third quarter to $1.7 million from $1.4 million in the prior year. The improvement is primarily due to increases in royalty revenue from strong comparable franchised restaurant sales.

Corporate expenses in the third quarter of 2002 grew by $0.6 million, or 5%, s compared to the third quarter of 2001 mainly due to higher bonus expense and a reduction in the benefit realized from the Company's over-funded pension plan when compared to the prior year. Theses increases were partially offset by lower interest expense resulting from reduced debt levels and by overall reductions in staffing and related overhead expenses.

As a result of the Sarbanes-Oxley Act of 2002, Friendly Ice Cream Corporation undertook an extensive review of its accounting policies and determined that its policy for recording restaurant advertising expense, included in operating expenses, although proper for annual reporting, needed to be revised for the Company's quarterly reporting. Accordingly, the Company has amended its quarterly SEC filings for 2001 and for the first two quarters of 2002 along with the 2001 10-K. The annual financial results reported for fiscal 2001 did not change. The only change in the 2001 10-K occurred to "Footnote 21 - Quarterly Financial Data (Unaudited)". The Company believes that this change in its methodology moves it to a more conservative position in regard to recording restaurant advertising expense.

An investor conference call to review third quarter 2002 results will be held on Thursday, October 31, 2002 at 10:00 AM Eastern Time. The conference call will be broadcast live over the internet and will be hosted by John Cutter, President and Chief Operating Officer. To listen to the call, go to the Investor Relations section of the Company's website located at www.friendlys.com, or go to www.streetevents.com. An online replay will be available approximately one hour after the conclusion of the call.

Friendly Ice Cream Corporation is a vertically integrated restaurant company serving signature sandwiches, entrees and ice cream desserts in a friendly, family environment in more than 550 company and franchised restaurants throughout the Northeast. The company also manufactures ice cream, which is distributed through more than 3,500 supermarkets and other retail locations. With a 67-year operating history, Friendly's enjoys strong brand recognition and is currently revitalizing its restaurants and introducing new products to grow its customer base.