Hooters files for bankruptcy, plans sale of all company-owned restaurants

LOS ANGELES - Amid rising costs and declining customer traffic, the iconic restaurant chain Hooters of America has filed for Chapter 11 bankruptcy. 

The move comes as the chain seeks to address $376 million in debt by selling all its company-owned restaurants to a buyer group backed by its original founders.

Despite the filing, Hooters promises that its restaurants will remain open and continue operating in a "business-as-usual" manner.

Hooters files for bankruptcy to address mounting debt

The backstory:

Hooters of America, known for its chicken wings and distinctive uniforms, filed for Chapter 11 bankruptcy in Texas on Monday. The company cited $376 million in debt as the primary reason for the filing. 

In a press release, Hooters explained that the bankruptcy is part of a restructuring support agreement approved by key stakeholders. The plan calls for selling all 151 corporate-owned restaurants to a buyer group comprised of two current franchisees—who already operate 30 high-performing locations in states like Florida and Illinois—and backed by some of the chain’s original founders.

How will the sale affect Hooters operations?

What's next:

Despite the bankruptcy filing, Hooters assures customers that its restaurants will remain open and continue to operate normally throughout the restructuring process. The deal must be approved by a U.S. bankruptcy judge and is expected to close in three to four months. 

The company has secured about $35 million in financing from its existing lender group to help complete the transaction, ensuring the brand’s continuity during this transition.

Why is Hooters taking this step now?

Big picture view:

Like many casual dining chains, Hooters has faced significant challenges in recent years. Inflation, rising labor and food costs, and a decline in consumer spending have all taken their toll on the industry. 

The bankruptcy comes on the heels of similar struggles at other chains like TGI Fridays, Red Lobster, and Bucca di Beppo. Hooters’ decision to restructure through bankruptcy and sell its corporate-owned locations is seen as an effort to reinforce its financial foundation and focus on its strongest assets for the future.