Hooters files for Chapter 11 bankruptcy protection to restructure debt while continuing to serve wings and maintain its iconic brand as franchisees step in to save the struggling restaurant chain.
Quick Takes
- Hooters will continue operating during bankruptcy restructuring with restaurants staying open.
- The company is transitioning from a hybrid model to a solely franchise operation.
- A group of current franchisees, including cofounders, will purchase parts of the business.
- Hooters is seeking $40 million in financing to fund operations during the Chapter 11 process.
- International franchises will not be affected by the bankruptcy filing.
Restructuring Without Closing Doors
Hooters of America has filed for Chapter 11 bankruptcy protection, but customers need not worry about their favorite wings destination disappearing. The company will continue operating during the restructuring process, with no immediate plans to alter its menu, rewards program, or other offerings. The move comes after the closure of several underperforming locations and amid reports of mounting debt and liquidity challenges. CEO Sal Melilli has reassured patrons that despite the financial reorganization, Hooters restaurants across the country will remain open for business.
The filing follows a recent $900,000 settlement with Hendrick Motorsports over unpaid sponsorship money, highlighting the financial pressures the company has faced. To fund operations during the Chapter 11 process, Hooters is seeking $40 million in debtor-in-possession financing, including $35 million in new capital. This financial cushion will allow the restaurant chain to maintain normal business operations while it works to restructure its debt and streamline its business model for future sustainability.
5. Hooters files for bankruptcy as brand eyes turnaround plan #hooterscto
Hooters has filed bankruptcy as the casual-dining brand known for its chicken wings and skimpy server uniforms struggles to lure customers. pic.twitter.com/7epX3AV3cw
— Stock Jabber (@Stock_Jabber) April 1, 2025
From Company-Owned to Franchise Model
A key component of Hooters’ restructuring plan involves transitioning from its current hybrid franchise and company-owned model to operating solely as a franchisor. This strategic shift aims to enhance growth opportunities while simplifying operations. The company has entered a Restructuring Support Agreement to sell some restaurants to a group of current franchisees, which includes the chain’s cofounders. This Buyer Group consists of experienced operators who already own nearly one-third of all domestic franchised Hooters locations, including 14 of the top 30 highest-volume restaurants.
The franchise model allows Hooters to leverage the expertise and capital of experienced restaurant operators while reducing the corporate overhead and operational risks associated with directly managing individual locations. This approach has proven successful for many restaurant chains looking to expand their footprint while managing costs. For Hooters, which has faced increasing competition in the casual dining segment, this restructuring represents an opportunity to refocus on what made the brand successful in the first place.
International Operations Unaffected
While the domestic operation undergoes significant changes, Hooters’ global franchise operations will continue without disruption. The international franchises operate under separate agreements and financial structures, allowing them to maintain business as usual despite the parent company’s bankruptcy filing. This international stability provides an important revenue stream for the company while it works through its domestic restructuring, demonstrating the enduring global appeal of the Hooters concept despite challenges in the U.S. market.
The company aims to complete the reorganization process swiftly, with plans to emerge from bankruptcy in the coming months. Throughout this transition, Hooters is evaluating its operational footprint to focus on its strongest assets, ensuring that the brand can thrive once it emerges from Chapter 11. With experienced franchisees taking a more prominent role in the business and a streamlined corporate structure, Hooters is positioning itself to adapt to changing consumer preferences while maintaining the distinctive experience that has defined the brand since its founding in 1983.
Sources:
Hooters files for Chapter 11 as franchisees step in to buy locations
Hooters files for Chapter 11 bankruptcy
Hooters files for bankruptcy as restaurants continue operating business as usual: ‘Here to stay’
