Hooters has filed for bankruptcy. Here’s why

The 42-year-old business is in for a major shake-up

Bartender Bernie De Guzman serves drinks at a Hooters in Las Vegas (Getty Images)

Hooters of America, the restaurant chain known for its owl logo and waitresses in orange shorts and tight tops, has filed for bankruptcy protection in Texas.

The move comes as the company grapples with a $376 million debt burden amid a challenging landscape for casual dining restaurants.

The filing, made on Monday, outlines a plan to restructure the 42-year-old business by selling all of its company-owned restaurants.

The intended buyer is a franchise group backed by Hooters' founders, offering a potential path to stability for the embattled chain.

Like many of its competitors, Hooters has been struggling against a confluence of economic headwinds. Inflation, escalating labor and food costs, and a decline in consumer spending have all contributed to the company's financial woes.

These pressures have been particularly acute in the casual dining sector, where consumers are increasingly opting for less expensive alternatives.

Hooters servers in their trademark orange shorts (Getty Images)

Currently, Hooters directly owns and operates 151 locations, primarily in the United States. An additional 154 restaurants operate under franchise agreements.

The proposed sale would see all corporate-owned locations transferred to the franchise group, which currently operates 30 high-performing Hooters restaurants, mainly in Florida and Illinois. The purchase price of the transaction has not been disclosed.

The sale is contingent on approval from a U.S. bankruptcy judge. If approved, it would mark a significant shift in Hooters' business model, transitioning from a mix of company-owned and franchised locations to a predominantly franchise-based structure.

“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,” said Neil Kiefer, a member of the buyer group and the current CEO of the original Hooters’ location in Clearwater, Florida.

Hooters said it 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.

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 in 2024.

Restaurant prices have risen about 30 per cent in the last five years, outpacing consumer prices overall, according to the Federal Reserve Bank of St. Louis.