Hooters Faces Bankruptcy Shakeup After Mass Closures: Reports

Hooters of America, the casual dining chain known for its signature orange shorts and owl-themed branding (not to mention, um, the waitresses), is reportedly preparing to restructure its business through bankruptcy court, reports Bloomberg News. According to sources familiar with the situation, the company has been working with creditors and legal advisors to navigate mounting financial difficulties, though no final decisions have been made.

As Eat This, Not That! reported in June 2024, Hooters abruptly closed dozens of locations across at least five states, raising concerns about the brand's long-term viability. Markets affected by these closures include Louisville, Ky.; Bryan, Texas; and Lakeland, Fla., with estimates suggesting nearly 40 locations have shut their doors. While Hooters did not confirm the exact number of closures, the company cited 'current market conditions' as the reason for shuttering underperforming stores. Here's more about the latest bankruptcy blow.

A Struggle to Stay Afloat

Mississauga, On, Canada - August 11, 2019: Close up of Hooters restaurant sign on the building in Mississauga, On, Canada. Hooters, Inc. is the trade name of two American restaurant chains. — Shutterstock

Hooters, which has long been a staple in the casual dining industry, has been grappling with declining foot traffic, rising operational costs, and shifting consumer preferences. Reports indicate that the company is working with law firm Ropes & Gray to prepare a potential bankruptcy filing within the next two months. In addition, turnaround specialists from Accordion Partners have been brought in to explore restructuring options, while some of the company's creditors have enlisted advisory firm Houlihan Lokey Inc.

Despite efforts to keep its business steady, Hooters has closed multiple locations in recent years, signaling ongoing liquidity challenges. The company had previously raised approximately $300 million in asset-backed bonds in 2021, leveraging its franchise fees and other assets to secure funding. However, as the economic landscape has become increasingly volatile, the chain has struggled to maintain financial stability.

What's Next for Hooters?

Las Vegas, Nevada, USA on July 23, 2023 : Hooters restaurant. — Shutterstock

While the specifics of Hooters' restructuring plan remain uncertain, industry analysts suggest that a bankruptcy filing could allow the company to renegotiate leases, reduce debt, and focus on a leaner operational model. The extent of the impact on employees, franchise operators, and customers remains to be seen.

Hooters representatives have not publicly commented on the reported bankruptcy plans, and the final outcome of its restructuring efforts is still in flux. However, for a brand that has long been an American dining icon, the coming months could determine whether it finds a path to renewed success or follows other struggling chains into financial hardship.

Red Lobster Filed for Chapter 11

In recent months, several notable fast-food and chain restaurants have filed for bankruptcy, reflecting the ongoing challenges within the industry.

Red Lobster filed for Chapter 11 bankruptcy protection in May 2024, citing rising labor costs and expensive leases as significant financial burdens. The company secured over $100 million in financing commitments to support its restructuring efforts. As part of its reorganization, Red Lobster announced the closure of numerous underperforming locations, including its flagship Times Square restaurant in Manhattan. The chain continues to operate remaining locations while implementing strategic changes to regain financial stability.

TGI Fridays, Too

TGI Fridays also sought Chapter 11 bankruptcy protection in November 2024. The company attributed its financial difficulties to rising interest rates, increased competition, and a heavy debt load. In the months leading up to the filing, TGI Fridays closed over 100 locations, reducing its U.S. presence significantly. The restructuring plan includes selling corporate-owned restaurants to franchisees and focusing on a leaner operational model to ensure long-term viability.

BurgerFi Also Filed for Chapter 11

burgerfi BBQ Rodeo Burger — Courtesy of BurgerFi

BurgerFi International, a fast-casual burger chain, filed for Chapter 11 bankruptcy in September 2024. The filing affected 17 corporate-owned BurgerFi locations and 50 Anthony's Coal Fired Pizza & Wings restaurants, both under the company's umbrella. The decision was influenced by a significant decline in consumer spending post-pandemic, coupled with inflation and rising food and labor costs. Despite initiating a turnaround plan less than a year prior, the company faced ongoing financial strains, leading to the bankruptcy filing.