ATLANTA (Covering Katy News) — Atlanta-based Hooters of America LLC, which has nine Houston-area locations including one in Katy, has filed for Chapter 11 bankruptcy protection in North Texas amid ongoing challenges in the casual dining restaurant industry.
However, Hooters says it has a plan to sell restaurants to longtime franchisees that will keep them open.
Hooters announced March 31 that it has entered into a restructuring support agreement with near unanimous support from its key capital stakeholders to effectuate a sale, marking a significant development for the well-established restaurant brand.
The company said it reached an agreement with two existing groups of franchisees that now own and operate over 30% of the domestic franchised Hooters locations, including 14 of the 30 highest-volume restaurants. One of these groups is Florida-based Hooters Inc., operated by the original Hooters founders, bringing experience and brand knowledge to the restructuring process.
"Today's announcement marks an important milestone in our efforts to reinforce Hooters' financial foundation and continue delivering the guest-obsessed hospitality experience and delicious food our customers and communities have come to expect," Sal Melilli, CEO of Hooters of America, said in a prepared statement.
Hooters of America is the franchisor and operator of hundreds of restaurants across the globe. According to its website, the company's Houston-area restaurants are in Humble, Katy, Pasadena, Pearland, Spring, Stafford, Webster, West Houston's West Oak Mall area and the Willowbrook Mall area. All are located along interstates or other major highways, making them convenient dining destinations for travelers and locals alike.
Tampa, Florida-based Nord Bay Capital and New York-based TriArtisan Capital Advisors acquired Hooters of America in 2019.
Upon completion of the Chapter 11 process, which is expected in approximately 90-120 days, all Hooters restaurants will be franchisee-owned, potentially creating a more sustainable business model for the iconic restaurant chain.
Hooters of America's bankruptcy discussions first surfaced in February, following industry trends that have impacted many restaurant businesses.
The bankruptcy comes as Hooters closed dozens of locations last year, according to media reports. Bloomberg reported in September 2024 that the company had about $300 million in asset-backed bonds to repay, highlighting the financial pressures facing the restaurant chain.
Hooters of America isn't the only major dining company to face financial troubles lately. Other notable chains, such as Red Lobster and T.G.I. Fridays, have filed for bankruptcy, demonstrating the widespread challenges in the casual dining sector.
The restaurant industry, already operating on thin margins, has seen increasing challenges in recent years. Businesses lost sales during COVID-19 lockdowns, and in the wake of the pandemic, high inflation caused food costs to rise and consumers to spend less eating out, creating a difficult operating environment for many established restaurant brands.
Legacy casual dining brands have seen their traffic dip about 27% over the past five years, according to January data from Black Box Intelligence, highlighting the need for strategic restructuring in this competitive market segment.
3.7 Sonnet