Hooters of America Files for Bankruptcy, Sells Company-Owned Restaurants to Franchise Group
Struggling with Debt and Competition
Hooters of America, a popular restaurant chain, has filed for bankruptcy in Texas, seeking to address its $376 million debt by selling all of its company-owned restaurants to a franchise group backed by the company’s founders. This move is part of the company’s efforts to restructure its operations and stay competitive in a challenging market.
Challenges Facing Casual Dining Restaurants
Casual dining restaurants like Hooters have been struggling in recent years due to a combination of factors, including inflation, high labor and food costs, and declining spending by cash-strapped American consumers. The company currently directly owns and operates 151 locations, with another 154 restaurants operated by franchisees, primarily in the United States.
Selling Corporate-Owned Locations
The privately-owned company, which shares a private equity owner with recently-bankrupt TGI Fridays, intends to sell all corporate-owned locations to a buyer group comprised of two existing Hooters franchisees, who operate 30 high-performing Hooters locations in the U.S., mainly in Florida and Illinois. The purchase price of the transaction is not disclosed, and must be approved by a U.S. bankruptcy judge before it becomes final.
Return to Roots
The buyer group is backed by some of Hooters’ original founders, and has pledged to take Hooters "back to its roots." Neil Kiefer, a member of the buyer group and the current CEO of the original Hooters’ location in Clearwater, Florida, expressed confidence in the group’s ability to lead the company’s revival, stating, "With over 30 years of hands-on experience across the Hooters ecosystem, we have a profound understanding of our customers and what it takes to not only meet, but consistently exceed their expectations."
Reorganizing for Success
Hooters expects to complete the deal and emerge from bankruptcy in three to four months. The company has lined up about $35 million in financing from its existing lender group to complete the bankruptcy transaction. This move is expected to help the company reorganize its operations and focus on its core strengths.
Industry Trends
Casual dining restaurants have been hammered by rising costs in 2024, with well-known chains like TGI Fridays, Red Lobster, Bucca di Beppo, and Rubio’s Coastal Grill all filing for bankruptcy last year. According to the Federal Reserve Bank of St. Louis, restaurant prices have risen about 30% in the last 5 years, outpacing consumer prices overall.
Conclusion
Hooters of America’s decision to file for bankruptcy and sell its company-owned restaurants to a franchise group is a significant move in the company’s efforts to restructure its operations and stay competitive in a challenging market. As the company looks to the future, it will be important for it to focus on its core strengths and build a strong foundation for long-term success.
Frequently Asked Questions
Q: Why did Hooters of America file for bankruptcy?
A: Hooters of America filed for bankruptcy to address its $376 million debt and restructure its operations.
Q: Who is buying the company-owned restaurants?
A: The buyer group is comprised of two existing Hooters franchisees, who operate 30 high-performing Hooters locations in the U.S., mainly in Florida and Illinois.
Q: What is the purchase price of the transaction?
A: The purchase price of the transaction is not disclosed, and must be approved by a U.S. bankruptcy judge before it becomes final.
Q: How will Hooters of America reorganize after the bankruptcy?
A: Hooters of America expects to complete the deal and emerge from bankruptcy in three to four months, with a focus on reorganizing its operations and building a strong foundation for long-term success.