A “re-Hooterization” is planned for the casual sports bar chain if two franchisee groups are able to buy dozens of corporate restaurants as the company navigates Chapter 11 bankruptcy. Hooters, in debt more than $370 million, said inflation and resulting consumer spending shifts led to a “tight liquidity crunch” and the need to restructure.
The Hooters filing comes just days after fellow casual dining franchise Bar Louie filed its own Chapter 11 petition.
A pair of franchisees want to buy more than 100 corporate-owned Hooters restaurants as the franchisor works through the bankruptcy process. Hooters of America declared Chapter 11 bankruptcy March 31 in a U.S. Bankruptcy Court in Texas.
Hooters Inc., the multi-unit group run by the original Hooters founders, and fellow franchisee Hoot Owl Restaurants, reached an agreement in principle with HOA they say will put units “in the hands of the best possible operators.” They plan to run the brand as a fully franchised system.
A proposed purchase price was not disclosed, and any deal must be approved by a U.S. bankruptcy judge before it becomes final.
Hooters Inc. and Hoot Owl Restaurants operate more than 30 percent of the company’s domestic locations, including 14 of the 30 highest-volume restaurants. The buyer group would assume most of the franchise support obligations of Hooters, including oversight of the national ad fund, the central purchasing organization, franchise development and support and other key franchise functions.
“For many years now, the Hooters brand has been owned by private equity firms and other groups with no history or experience with the Hooters brand,” said Neil Kiefer, CEO of Hooters Inc., in a statement. “As a result of these transactions, the Hooters brand will once again be in the hands of highly experienced Hooters franchisees and we will be well-positioned to return this iconic brand to its historic success.”
Kiefer noted in a separate statement that the buyer group is “committed to restoring the Hooters brand back to its roots and simplifying HOA’s operations by adopting a pure franchise model that will maximize the potential for sustainable, long-term growth.”
Private equity firms Nord Bay Capital and TriArtisan Capital Advisors bought Hooters in 2019.
TriArtisan also owns TGI Fridays, another bankrupt restaurant chain that is selling company units to franchisees. Major multi-unit operator Yadav Enterprises is buying 16 Fridays stores for $3 million in debt plus additional costs and liabilities, according to bankruptcy documents. Sugarloaf Hospitality, owned by former TGI Fridays CEO Ray Blanchette, is acquiring three locations for $100,000 plus the cash in the restaurants and some other obligations, excluding debt and other liabilities.
Kiefer is planning a revamp he called a “re-Hooterization.” The casual sports bar franchise known for its female waitstaff clad in low-cut tank tops and tight orange shorts popularized the so-called “breastaurant” concept. But Kiefer told Bloomberg he wants to undertake an image overhaul.
“You go to some parts of the country and people say, ‘Oh, I could never go to Hooters, my wife would kill me,’” Kiefer said in an interview with Bloomberg. “That’s depressing to us. We want to change that.”
Among the plans are to end the chain’s “Bikini Nights,” during which servers ditch their already-revealing uniforms for two-piece swimsuits. Kiefer told Bloomberg he also wants to pursue an operational overhaul to improve consistency among locations and upgrade the menu with better ingredients.
Securitization saddles Hooters with debt
Hooters, founded in Clearwater, Florida, in 1983, has 151 corporate restaurants in 22 states and 154 franchise units across 19 states and 17 countries. In a press release the company said it expects to move through the bankruptcy process in 90 to 120 days.
It’s seeking court approval for $40 million in new lending via a debtor-in-possession term loan facility and rollup of $5 million in obligations under a manager advance credit agreement to work through the bankruptcy. Existing debt would be converted into new notes and equity that, along with the sale of those corporate stores, “will right-size the company’s balance sheet and provide the way for a profitable go-forward business,” court filings said.
Keith Maib, a senior managing director with Accordion Partners, began working with Hooters as chief restructuring officer in June 2024. He noted in court documents that “inflationary pressures and industry headwinds … significantly impacted the company’s performance.”
“As inflationary pressures have made consumers increasingly cost-conscious, preferences for casual out-of-home dining experiences began to shift to more cost-efficient alternatives,” Maib said in the filing. “As a result, the company began facing an increasingly tight liquidity crunch at the same time that it most needed cash reserves to adapt to industry-wide changes.”
Corporate restaurants generated approximately $359 million in sales last year, “the vast majority” of the company’s revenue. That hasn’t been enough to cover the company’s overhead expenses, court documents said, “and the need to reconfigure the loss-generating company-owned stores is a key factor driving” the bankruptcy.
Unit-level sales at company-owned Hooters restaurants are markedly worse than franchise locations. Hooters franchise locations reported average sales of $3.7 million in 2023, while the 195 corporate units averaged just $2.3 million, as noted in the brand’s 2024 franchise disclosure document. The poorest performing company store had sales of $960,019; the low end for franchises was $1.17 million.
Hooters closed 48 underperforming company restaurants since the beginning of 2024, according to court filings.
The company is in debt to the tune of about $376 million, with the majority of it from a 2021 whole business securitization financing. In 2024, approximately $30 million in debt service payments and $3 million in royalty obligations came due.
Hooters restaurants remain open, and the company’s CEO, Sal Melilli, said in statement the sale announcement and bankruptcy filing mark “an important milestone in our efforts to reinforce Hooters’ financial foundation and continue delivering the guest-obsessed hospitality experience and delicious food our customers and communities have come to expect.”
Hooters was in its heyday in the 1980s and 1990s, and a number of competitors, including Tilted Kilt and the newly public Twin Peaks, eventually emerged in the space. By the late ‘90s and into the 2000s, Hooters began to struggle and faced lawsuits, including ones for weight discrimination and from men who said they were denied jobs.
Expansion continued, and by 2018 Hooters had 432 global locations doing just over $1 billion in systemwide sales, according to Franchise Times Top 400 data. Overall sales and unit counts have been in decline, and by 2022 the chain reported $956 million in total sales from 363 units.
Seeking to entice new customers and franchisees, Hooters in 2020 announced a fast-casual spinoff, Hoots Wings. The concept hasn’t taken off, with just three units open.
