Many restaurants in the casual dining segment have been struggling in recent years due to inflation, high labor and food costs, and declining spending by financially strained American consumers. Restaurant chain Hooters of America filed for bankruptcy protection in Texas on Monday, 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.
Hooters, like other casual dining establishments, has faced difficulties in recent years due to inflation, high labor and food costs, and reduced 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. The privately-owned company, which shares a private equity owner with the recently bankrupt TGI Fridays chain, intends to sell all corporate locations to a buyer group consisting of two existing Hooters franchisees who operate 30 high-performing Hooters locations in the U.S., mainly in Florida and Illinois.
Hooters did not disclose the purchase price of the transaction, which must be approved by a U.S. bankruptcy judge before it becomes final.
Founded in 1983, the chain became famous for its chicken wings and its waitresses’ uniform consisting of orange shorts and low-cut tank tops.
The buyer group is backed by some of the original founders of the Hooters chain and has committed to taking Hooters “back to its roots.” “With more than 30 years of hands-on experience in the Hooters ecosystem, we have a deep understanding of our customers and what it takes not only to meet, but to consistently exceed their expectations,” said Neil Kiefer, a member of the buyer group and current CEO of the original Hooters location in Clearwater, Florida.
Hooters expects to complete the transaction and emerge from bankruptcy within three to four months. The company has secured approximately $35 million in financing from its existing lender group to complete the bankruptcy transaction.
Casual dining restaurants have been hit hard by rising costs in 2024, with well-known chains such as TGI Fridays, Red Lobster, Bucca di Beppo, and Rubio’s Coastal Grill all filing for bankruptcy protection last year.
Restaurant prices have increased by approximately 30% over the past 5 years, outpacing overall consumer price growth, according to data from the Federal Reserve Bank of St. Louis.
