Arai-san and Fennec end up in the Hell area while chasing the hat thief. Fennec in terrified (and later regresses into a childish state), but Arai-san has been there before and knows what to do. She needs to find the ruler of this place ("the foolish king"), and a local Lucky Beast guides them there.
On the way, Arai-san tells Fennec the story of how this place came to be - it was a regular Park area, but some people tried to tamper with Sandstar FOR SCIENCE and everything blew up. The silver circle seen at some point is the remains of the "Sandstar particle accelerator" device, which is now frozen in time along with those people.
The foolish king itself (the giant Serval head) is an empty vessel of an "outer god" (I guess something Lovecraftian) that tried to manifest into reality. Arai-san asks it to bring them back, giving it her "old form" (the raccoon) in exchange; in doing that, she forgets what kind of Friend she was.
Arai-san wakes up, and Fennec asks if she had a bad dream. Fennec herself recounts seeing a dream where Arai-san carried her on her back and gave her a lap pillow. They get back to chasing the hat thief; in fact, final lines are the same as their first scene in the anime.