Friendly Ice Cream Corporation's Offer of Two Board Seats is Rejected by Sardar Biglari

The Company's offer contained only one condition - that they agree not to solicit any proxies for additional board seats or other matters not recommended by the Board. The Board's offer was intended to respond favorably to a significant shareholder's request for a voice on the Board, while avoiding the unnecessary expense and distraction of a proxy contest.

In rejecting the Company's offer, Mr. Biglari increased his demands to include the submission of a proposal to Friendly's shareholders to remove the Company's three classes of directors. Donald N. Smith, Chairman of the Board, said '[W]e gave Mr. Biglari what he asked for. Now he wants more. What does he really want? His demands, together with his actions at the publicly traded Western Sizzlin Corporation ('WSC'), raise concerns regarding his true intentions. It appears that he isn't interested in just a voice on the Board - he wants to control the Board.'

In a letter to shareholders dated January 2, 2007, Smith stated, '[t]he results of WSC suggest that it would not be in the best interests of our shareholders to allow Mr. Biglari to control the Friendly's Board. After Mr. Biglari took control of WSC, rather than reinvesting in the restaurant business of WSC, Mr. Biglari used WSC's surplus cash, its bank credit facilities and a brokerage margin account to purchase Friendly's stock. It appears that Mr. Biglari is leveraging the credit of WSC and his hedge fund to purchase our stock.'

Smith added, 'Under Mr. Biglari's leadership, WSC's operating cash has dwindled, year to year earnings from operations have declined, franchised restaurants continue to be closed, and its stock price has declined significantly. While he continues to offer criticisms of our company, he hasn't offered any plan, vision or strategy for increasing Friendly's shareholder value. If Mr. Biglari gains control of your Board, he could change the Company's financial agreements to allow him to invest Friendly's cash in other companies, like he has done at WSC. We believe that Mr. Biglari wants to gain control of the Board in order to redirect corporate assets for purposes other than the continued growth of Friendly's. The Friendly's Board will take all actions necessary to prevent this from happening. Friendly's is a restaurant company not a hedge fund or investment company.'

As previously announced, the Company decided to increase the size of its Board and expects to appoint individuals who will bring independence, experience, success and value to enhance the business of the Company. The Company is considering a number of candidates who will bring these values and expects to make an announcement shortly.



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