Friendly Ice Cream Corporation yesterday reported that net income for the second quarter of 2001 was $5.0 million, or $.68 per share, a 67% increase as compared to net income of $3.0 million, or $.40 per share, for the quarter ended July 2, 2000. The growth in second quarter net income was the result of a 1.4% increase in comparable restaurant sales revenue, an improvement of 1.4 percentage points in restaurant margins and $3.8 million in gains from re-franchising sales. Exclusive of restructuring charges, write-downs, gains on franchise sales and dispositions of other properties and equipment, income before income taxes increased by $1.1 million, or 35%, to $4.2 million for the second quarter of 2001 from $3.1 million in the same quarter of 2000.

Net income for the six months ended July 1, 2001 was $1.8 million, or $.25 per share. For the six months ended July 2, 2000, the net loss was $15.5 million, or $2.08 per share. On March 27, 2000, the company announced the strategic decision to immediately close 80 under-performing company owned restaurants and the future disposition of approximately 70 additional company owned restaurants over the next 24 months. The costs of this restructuring which were included in the six months ended July 2, 2000 were a pre-tax non-cash write-down of property and equipment of $17.0 million and pre-tax restructuring costs of $12.1 million related to the reorganization of the company's field and headquarters organization. Exclusive of the one-time items already mentioned, the loss before income taxes improved by $1.2 million, or 27%, to $3.2 million for the first six months of 2001 from a loss of $4.4 million in the first six months of 2000.

Friendly Ice Cream Corporation's Chairman and CEO Donald N. Smith commented, "We are pleased that results for the second quarter improved over the prior year and continue to evidence the positive results and outcome from the strategic restructuring of March 2000. Comparable restaurant revenues and margins were positive in the quarter and the first six months. Our continued and steady focus on guest satisfaction is also having a positive impact on our revenues and operating margins."

Total revenues for the second quarter ended July 1, 2001 were $152.2 million as compared to $159.2 million for the second quarter of 2000. During the quarter restaurant revenues were reduced due to the strategic decision to close under-performing and unprofitable restaurants as well as from the re-franchising initiatives. For the six months ended July 1, 2001 and July 2, 2000, total revenues were $278.3 million and $303.4 million respectively. Comparable restaurant revenues increased 1.2% for the first six months of the year.

During the 2001 second quarter, pre-tax income in the restaurant segment increased by $0.2 million to $11.4 million, or 9.6% of restaurant revenues, from $11.2 million, or 8.2% of restaurant revenues, for the second quarter 2000. The increase in pre-tax income and especially in margin percentages for the restaurant segment emphasizes the benefits seen from the closure of under-performing restaurants. In addition, there has been an impact from the strategic change in transfer pricing from the Company's foodservice segment to the restaurants resulting in a transfer of profit to the restaurant segment from the foodservice segment.

Pre-tax income for the Company's foodservice segment declined $2.2 million in the 2001 second quarter to $4.0 million, or 6.1% of foodservice revenues, from $6.2 million, or 9.9% of foodservice revenues, in the prior year. The decline was mainly due to dairy commodity cost pressures and the strategic changes in inter-company transfer pricing as discussed above.

Pre-tax income in the franchise segment increased by $1.4 million in the second quarter of 2001. The improvement was due to an increase in the number of franchise restaurants and in initial fees as 35 franchise restaurants, 33 as a result of re-franchising and two new restaurants, were added to the system during the quarter. Six restaurants were added in the prior year quarter.

Corporate expenses were favorable by $1.7 million due to lower interest expense resulting from reduced debt levels and overall reductions in staffing and related overhead expenses.

On April 16, 2001, the Company announced that it had completed the sale of 31 Friendly's restaurants on Long Island, New York to a new franchisee, J&B Restaurant Partners Holding Company of Long Island LLC, for a price of approximately $20.0 million. As a result of this transaction, a gain on franchise sales of restaurant operations and properties of $3.9 million and franchise development fees of $0.9 million were reported in the second quarter of fiscal 2001. The sale includes a development plan to open 29 new units over the next 12 years.

Friendly Ice Cream Corporation currently has operations in 17 states with a high concentration in the Northeast with 403 company restaurants, 158 franchised restaurants and 5 franchised cafes. Friendly's offers its customers a unique dining experience by serving a variety of high-quality, reasonably-priced breakfast, lunch and dinner items, as well as its signature frozen desserts, in a fun neighborhood setting. Additional information on Friendly Ice Cream Corporation can be found on the Company's website (www.friendlys.com).

Certain statements in this press release may be forward looking in nature, or "forward looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. All forward looking statements are subject to risks and uncertainties which could cause results to differ materially from those anticipated. These factors include the Company's highly competitive business environment, uncertainty with respect to the Company's ongoing compliance with covenants and its existing debt facilities and its ability to re-finance its existing debt facilities, exposure to commodity prices, risks associated with the food service industry, the ability to retain and attract new employees, government regulations, the Company's high geographic concentration in the Northeast and its attendant weather patterns, conditions needed to meet re-imaging and new opening and franchising targets and costs associated with improved service and other initiatives.

                    Friendly Ice Cream Corporation
                 Consolidated Statements of Operations
         (In thousands, except per share and unit count data)
                              (unaudited)

                                 Quarter Ended     Six Months Ended
                               July 1,   July 2,   July 1,   July 2,
                                 2001      2000      2001      2000

Restaurant Revenues          $ 118,953 $ 136,800 $ 226,098 $ 262,223
Foodservice Revenues            30,148    20,674    47,520    37,155
Franchise Revenues               3,101     1,766     4,662     4,042

REVENUES                       152,202   159,240   278,280   303,420

COSTS AND EXPENSES:
  Cost of sales                 52,857    50,243    94,917    95,065
  Labor and benefits            41,334    49,399    81,010    97,575
  Operating expenses            30,307    30,968    57,760    61,919
  General and
   administrative expenses       9,345    10,191    18,677    21,567
  Restructuring costs             --          (1)     --      12,056
  Write-downs of property
   and equipment                    68       688        68    18,360
  Depreciation and amortization  7,097     7,319    14,649    15,740
(Gain) loss on franchise
  sales of restaurant
  operations and properties     (3,823)       89    (3,823)   (1,998)
Gain on dispositions of other
 property and equipment           (261)     (509)   (2,242)      (45)

OPERATING INCOME (LOSS)         15,278    10,853    17,264   (16,819)

Interest expense, net            6,918     7,963    14,503    15,901

INCOME (LOSS) BEFORE
 (PROVISION FOR) BENEFIT
  FROM INCOME TAXES              8,360     2,890     2,761   (32,720)

(Provision for) benefit from
 income taxes                   (3,328)      115      (932)   17,215

NET INCOME (LOSS) AND
 COMPREHENSIVE               $   5,032 $   3,005 $   1,829 $ (15,505)
 INCOME (LOSS)

NET INCOME (LOSS) PER SHARE:
  Basic                      $    0.68 $    0.40 $    0.25 $   (2.08)
  Diluted                    $    0.68 $    0.40 $    0.25 $   (2.08)
WEIGHTED AVERAGE SHARES:
  Basic                          7,364     7,438     7,370     7,454
  Diluted                        7,370     7,498     7,377     7,454

NUMBER OF COMPANY UNITS:
Beginning of period                438       502       449       618
Openings                          --           1      --           2
Re-franchised                      (33)       (2)      (33)      (37)
Closings                            (2)      (15)      (13)      (97)
End of period                      403       486       403       486

NUMBER OF FRANCHISED UNITS:
Beginning of period                128       109       127        69
Re-franchised                       33         2        33        37
Openings                             2         4         3        10
Closings                          --          (1)     --          (2)
End of period                      163       114       163       114


                    Friendly Ice Cream Corporation
                 Consolidated Statements of Operations
                     Percentage of Total Revenues
                              (unaudited)

                                 Quarter Ended     Six Months Ended
                               July 1,   July 2,   July 1,   July 2,
                                2001      2000      2001      2000

Restaurant Revenues             78.2 %    85.9 %    81.2 %    86.4 %
Foodservice Revenues            19.8 %    13.0 %    17.1 %    12.3 %
Franchise Revenues               2.0 %     1.1 %     1.7 %     1.3 %

REVENUES                       100.0 %   100.0 %   100.0 %   100.0 %

COSTS AND EXPENSES:
  Cost of sales                 34.8 %    31.6 %    34.1 %    31.3 %
  Labor and benefits            27.2 %    31.0 %    29.1 %    32.2 %
  Operating expenses            19.9 %    19.4 %    20.8 %    20.4 %
  General and
   administrative expenses       6.1 %     6.4 %     6.7 %     7.1 %
  Restructuring costs              --        --        --      4.0 %
  Write-downs of property
   and equipment                   --      0.4 %       --      6.0 %
  Depreciation and
   amortization                  4.7 %     4.6 %     5.3 %     5.2 %
(Gain) loss on franchise
 sales of restaurant
 operations and properties      (2.5)%     0.1 %    (1.4)%    (0.7)%
Gain on dispositions of
 other property and equipment   (0.2)%    (0.3)%    (0.8)%      --

OPERATING INCOME (LOSS)         10.0 %     6.8 %     6.2 %    (5.5)%

Interest expense, net            4.5 %     5.0 %     5.2 %     5.3 %

INCOME (LOSS) BEFORE
 (PROVISION FOR)
  BENEFIT FROM INCOME TAXES      5.5 %     1.8 %     1.0 %   (10.8)%

(Provision for) benefit from
 income taxes                   (2.2)%     0.1 %    (0.3)%     5.7 %

NET INCOME (LOSS) AND
 COMPREHENSIVE
 INCOME (LOSS)                   3.3 %     1.9 %     0.7 %    (5.1)%



                    Friendly Ice Cream Corporation
                 Condensed Consolidated Balance Sheets
                            (In thousands)

                                           July 1     December 31,
                                            2001         2000
                                         (unaudited)

                          Assets

Current Assets:
  Cash and cash equivalents             $  10,346    $  14,584
  Other current assets                     40,152       32,658
Total Current Assets                       50,498       47,242

Property and Equipment, net               201,010      226,865

Intangibles and Other Assets, net          29,177       23,579

                                        $ 280,685    $ 297,686

             Liabilities and Stockholders' Deficit

Current Liabilities:
  Current maturities of debt, capital
    lease and finance obligations       $   5,743    $  15,172
  Other current liabilities                71,120       67,499
Total Current Liabilities                  76,863       82,671

Deferred Income Taxes                      14,208       13,276

Capital Lease and Finance Obligations       7,190        8,223

Long-Term Debt                            264,243      275,435

Other Long-Term Liabilities                16,167       18,064

Stockholders' Deficit                     (97,986)     (99,983)

                                        $ 280,685    $ 297,686



                    Friendly Ice Cream Corporation
                Selected Segment Reporting Information:
                            (In thousands)
                              (unaudited)

                                For the                For the
                          Three Months Ended       Six Months Ended
                           July 1,    July 2,     July 1,    July 2,
                             2001     2000(1)       2001     2000(1)
Revenues:
  Restaurant             $ 118,953  $ 136,800   $ 226,098  $ 262,223
  Foodservice               64,627     62,947     112,807    117,940
  Franchise                  3,101      1,765       4,662      4,042
    Total                $ 186,681  $ 201,512   $ 343,567  $ 384,205

Intersegment revenues:
  Foodservice            $ (34,479) $ (42,272)  $ (65,287) $ (80,785)

External revenues:
  Restaurant             $ 118,953  $ 136,800   $ 226,098  $ 262,223
  Foodservice               30,148     20,675      47,520     37,155
  Franchise                  3,101      1,765       4,662      4,042
    Total                $ 152,202  $ 159,240   $ 278,280  $ 303,420

EBITDA (2):
  Restaurant (3)         $  16,024  $  16,090   $  24,792  $  23,558
  Foodservice (3)            4,809      7,065       7,888     12,584
  Franchise (3)              1,927        580       2,421      1,518
  Corporate (3)             (4,422)    (5,240)     (9,016)   (10,169)
  Subtotal                  18,338     18,495      26,085     27,491
  Gains on property
   and equipment, net        4,180        509       6,064      2,132
  Restructuring costs         --            1        --      (12,056)
    Total                $  22,518  $  19,005   $  32,149  $  17,567

Interest expense, net    $   6,918  $   7,963   $  14,503  $  15,901

Depreciation and
 amortization:
  Restaurant             $   4,613  $   4,895   $   9,659  $  10,930
  Foodservice                  841        856       1,695      1,715
  Franchise                     61        100         121        183
  Corporate                  1,582      1,468       3,174      2,912
    Total                $   7,097  $   7,319   $  14,649  $  15,740

Other non cash expenses:
  Corporate              $      75  $     145   $     168  $     286
  Write-downs of property
   and equipment                68        688          68     18,360
    Total                $     143  $     833   $     236  $  18,646

Income (loss) before
 income taxes:
  Restaurant (3)         $  11,411  $  11,195   $  15,133  $  12,628
  Foodservice (3)            3,968      6,209       6,193     10,869
  Franchise (3)              1,866        480       2,300      1,335
  Corporate (3)            (12,997)   (14,816)    (26,861)   (29,268)
    Subtotal                 4,248      3,068      (3,235)    (4,436)
  Gains on property and
   equipment, net            4,112       (179)      5,996    (16,228)
  Restructuring costs         --            1        --      (12,056)
    Total                $   8,360  $   2,890   $   2,761  $ (32,720)


(1) Certain amounts have been reclassified to conform with the current
    period presentation.

(2) EBITDA represents net income (loss) before (i) cumulative effect
    of change in accounting principle, net of income taxes, (ii)
    (provision for) benefit from income taxes, (iii) interest expense,
    net, (iv) depreciation and amortization and (v) write-downs and
    all other non-cash items plus cash distributions from
    unconsolidated subsidiaries.

(3) Amounts are prior to gains (losses) on property and equipment and
    restructuring costs.