Hooters Files for Bankruptcy, Plans Sale to Founders Amid Financial Restructuring

April 1, 2025 ATLANTA — Hooters of America, the iconic restaurant chain known for its chicken wings and scantily clad waitstaff, has filed for Chapter 11 bankruptcy protection in a Texas court, marking a pivotal moment in its 42-year history. The filing, announced on Monday, March 31, 2025, comes as the company grapples with a staggering $376 million debt and seeks to restructure by selling its 151 company-owned restaurants to a buyer group that includes its original founders. Despite the financial turmoil, Hooters officials insist the brand is "here to stay," with plans to maintain operations during the bankruptcy process and emerge revitalized under new ownership within months.

The filing was made in the United States Bankruptcy Court for the Northern District of Texas, a move that allows Hooters to continue operating while reorganizing its finances. According to a press release from Hooters of America, the company has entered into a Restructuring Support Agreement (RSA) with key stakeholders to facilitate the sale, which must be approved by a U.S. bankruptcy judge. The buyer group comprises two existing franchisees, including HMC Hospitality Group—owned by the six men who founded Hooters in 1983—and another unnamed franchisee. Together, they currently operate over 30% of domestic Hooters locations, including 14 of the chain’s 30 highest-volume restaurants (Hooters Files for Bankruptcy with Plan to Bring Back Original Founders, Newsweek, March 31, 2025).

Hooters’ financial struggles are not unique in the casual dining sector, which has faced significant challenges in recent years due to rising food and labor costs, inflation, and shifting consumer habits. The chain, which generated $867 million in U.S. sales in 2023—up less than 1% from the previous year—has been burdened by declining foot traffic and mounting debt (Hooters Files for Bankruptcy with Plan to Bring Back Original Founders, Newsweek, March 31, 2025). Last June, Hooters shuttered approximately 40 underperforming locations across states like Florida, Texas, and Virginia, citing “pressure from current market conditions” (Hooters Is Getting A Family-Friendly Makeover, wibc.com, March 31, 2025). The closures reduced its footprint, leaving roughly 300 locations nationwide, including both company-owned and franchised outlets.

The bankruptcy filing follows months of speculation about the chain’s future. In February, reports surfaced that Hooters had hired a law firm to prepare for a potential bankruptcy, prompted by a downgrade of its credit rating by KBRA and struggles to pay vendors on time (Hooters founders reportedly plan to take control of the struggling chain, restaurantbusinessonline.com, March 31, 2025). The company also ceased payments on a high-profile NASCAR sponsorship with driver Chase Elliott last year, settling a related lawsuit for $900,000 just last week (Hooters founders reportedly plan to take control of the struggling chain, restaurantbusinessonline.com, March 31, 2025). These financial missteps underscored the urgency of Hooters’ need for a lifeline.

Under the proposed restructuring, Hooters aims to shift to a franchise-only model, a strategy its leadership believes will restore stability. The buyer group, led by HMC Hospitality Group CEO Neil Kiefer—one of the original founders—has pledged to return the chain “back to its roots” as a family-friendly destination (Hooters: Restaurant chain files for bankruptcy, bbc.com, March 31, 2025). Kiefer, speaking to Bloomberg last week, emphasized the group’s “profound understanding of our customers” and their intent to exceed expectations by refocusing on quality food and service (Hooters files for bankruptcy in Texas to allow founder-led buyout, The Independent, March 31, 2025). This vision includes phasing out controversial traditions like “bikini nights,” a move announced earlier this month as part of a broader rebranding effort (Hooters axes one of its most famous traditions in drastic attempt to avoid bankruptcy, dailymail.co.uk, March 31, 2025).

“For many years now, the Hooters brand has been owned by private equity firms and other groups with no history or experience with the Hooters brand,” Kiefer said in a press release on Monday (Hooters files for bankruptcy, but brand is here to stay, wishtv.com, March 31, 2025). Since 2019, Hooters of America has been controlled by investment firms Nord Bay Capital and TriArtisan Capital Advisors, a period marked by accumulating debt and a perceived drift from the chain’s original identity. The founders’ return is seen as a bid to reclaim that legacy, leveraging their success with 22 Original Hooters locations in Florida and the Chicago area, which reported record sales last year (Hooters founders reportedly plan to take control of the struggling chain, restaurantbusinessonline.com, March 31, 2025).

The bankruptcy plan includes $40 million in debtor-in-possession financing from existing lenders, with $35 million in new capital to support the transition (Hooters Files for Bankruptcy with Plan to Bring Back Original Founders, Newsweek, March 31, 2025). Hooters expects to complete the sale and exit Chapter 11 within 90 to 120 days, ensuring continuity for its customers. “Our renowned Hooters restaurants are here to stay,” said Sal Melilli, CEO of Hooters of America, in a statement (Hooters: Restaurant chain files for bankruptcy, bbc.com, March 31, 2025). The company has assured patrons that its menu, rewards program, gift cards, and merchandise offerings will remain unchanged during the process.

Hooters’ challenges mirror those of other casual dining chains like Red Lobster, TGI Friday’s, and On the Border, which have also filed for bankruptcy in recent months amid similar economic pressures (Hooters files for bankruptcy, will shift to franchise model, 10tv.com, March 31, 2025). Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek that rising food costs, higher meal prices, and increasing rents have created a “perfect storm” for such restaurants, pushing some toward restructuring (Hooters Files for Bankruptcy with Plan to Bring Back Original Founders, Newsweek, March 31, 2025).

Beyond finances, Hooters has faced reputational hurdles. The chain settled a $250,000 racial discrimination lawsuit with the U.S. Equal Employment Opportunity Commission last year over preferential treatment of White employees at a North Carolina location (Hooters files for bankruptcy, but some restaurants to remain operating, washingtonpost.com, March 31, 2025). A 2021 uniform change, which saw servers donning outfits likened to underwear, drew complaints from staff and further solidified its risqué image—something the founders now aim to move away from (Hooters axes one of its most famous traditions in drastic attempt to avoid bankruptcy, dailymail.co.uk, March 31, 2025).

As Hooters navigates this transition, its global franchise operations remain unaffected, with the company stressing that business will proceed as usual (Hooters files for bankruptcy as restaurants continue operating business as usual, foxbusiness.com, March 31, 2025). For a brand launched on April Fool’s Day 1983 in Clearwater, Florida, today’s filing—coincidentally on April 1, 2025—marks not an end, but a calculated pivot. Whether the founders can steer Hooters back to its heyday remains to be seen, but for now, the owl logo and orange shorts endure, at least in spirit, as the chain fights to reclaim its place in America’s dining landscape.

17GEN4.com