Hooters, which declared bankruptcy this past Monday, said it closed 48 underperforming corporate restaurants since the start of 2024, according to court documents.
The majority of closures occurred last summer. The brand confirmed back in June 2024 that it shuttered dozens of underperforming stores because of market conditions. And it wasn’t one geographic region either; locations shuttered in places like Florida, Texas, Indiana, Maryland, Kentucky, Virginia, and Rhode Island.
Around that same time, Hooters brought in Keith Maib as chief restructuring officer and financial advisory firm Accordion Partners to spearhead restructuring efforts. Ropes & Gray LLP was retained as legal counsel, and SOLIC Capital was brought on as investment banker. An independent board member, Adam Paul, was appointed to lead a special committee focused on evaluating restructuring alternatives.
The company listed approximately $376 million in funded debt and cited inflationary pressures, rising labor and food costs, and a burdensome capital structure as major factors driving the decision to seek court protection.
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The bankruptcy covers 151 company-owned restaurants in the U.S., which will all be sold to two high-performing franchisees, Hooters Inc. (owned by the original founders) and Hoot Owl Restaurants, which will make the brand a 100 percent franchised model. Existing U.S. and international franchises aren’t impacted by the bankruptcy.
Through a broad marketing process that reached over 95 potential investors, the company determined that selling to Hooters Inc. and Hoot Owl Restaurants was the best path to preserving value and minimizing disruption.
In total, there are 305 Hooters locations worldwide. That’s down from 430-plus in 2019, when the brand was bought by Nord Bay Capital and TriArtisan Capital Advisors.
The two buying operators collectively own more than 30 percent of U.S. Hooters locations, including 14 of the 30 highest volume restaurants, and have been in the Hooters system for more than 30 years. Additionally, in 2024, these franchisees realized average restaurant revenue that was over double those of company-owned restaurants.
Last year, the company generated $358.9 million in revenue from company-owned stores, with another $22.6 million from franchise and licensing agreements. But profitability has been elusive. According to court documents, corporate locations failed to cover overhead costs and contributed to the brand’s liquidity crisis. Adding to the pressure were $30.9 million in debt service obligations due in 2024 and $3 million in disputed royalty payments stemming from legacy licensing agreements.
Before bankruptcy, Hooters took several steps to stabilize operations. It not only closed 48 restaurants, but it also launched a “guest-obsessed” staff training program and entered into a licensing agreement for Hooters-branded frozen meals, now sold in 1,250 U.S. grocery stores.
It expects to emerge from court proceedings in 90 to 120 days. Hooters is asking for $40 million in debtor-in-possession financing—including $35 million in new capital—from its lenders to fund continued business operations.
Hooters struggled with paying its bills on time throughout 2024, as indicated by its consistently high Days Beyond Terms (DBT), a measure of how many days late a company pays its invoices on average. According to data from Creditsafe, Hooters’ DBT started at 20 days in February 2024 and steadily increased over the year. A significant spike occurred from August to November 2024, with DBT rising from 27 in August to 38 in September, then jumping to 48 in October, and peaking at 54 in November. This is a stark contrast to the restaurant industry average, which remained between 10 and 13 days. Essentially, Hooters was taking about four times longer than other restaurant chains to pay its suppliers.
A concerning number of Hooters’ bills were over 91 days past due. In August 2024, 20.32 percent of its outstanding bills were in this severely overdue category. This percentage climbed sharply in the following months—30.28 percent in September, a drastic jump to 49.72 percent in October, and an even higher 52.25 percent in November. This pattern aligns closely with Hooters’ rising DBT over the same period, suggesting that the company was experiencing significant financial difficulties or cash flow disruptions that made it harder to meet its payment obligations.
