Hooters, famous for its hot wings and, well, “scenic views,” is reportedly gearing up to file for bankruptcy. It’s yet another American restaurant chain finding itself in hot financial water in recent months. Bloomberg News reported this morning that the U.S. division of Hooters is planning to undergo a Chapter 11 restructuring in the coming months, according to sources close to the situation.
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The somewhat infamous “breastaurant,” known for its waitresses’ revealing uniforms, has hired the law firm Ropes & Gray to help with a potential filing expected in the next two months. However, the timeline is not set in stone, and the plans are not yet finalized, according to sources.
The restaurant chain has faced challenges with decreasing foot traffic and financial difficulties, resulting in several restaurant closures. Last fall, it was revealed that executives were in urgent discussions with lenders and advisers to tackle the chain’s $300 million debt.
In early 2024, Hooters closed around 40 underperforming restaurants to reduce costs. The closures included locations in Florida, Kentucky, Rhode Island, Texas, and Virginia.
Hooters cites rising rent and food costs, along with fewer customers dining out, as reasons for its potential bankruptcy filing.
Why Hooters Potential Bankruptcy Filing Makes Economic Sense
Hooters, under private equity ownership since 2019, faces $300 million in bond repayments, according to Bloomberg data. These bonds are backed by the company’s assets, such as its property, brand rights, and franchise fees, similar to how mortgages work. This means that if the company doesn’t repay its debts, lenders can pressure it to sell these assets.
Chapter 11 bankruptcy provides companies with an opportunity to restructure by renegotiating lease agreements with landlords and loan terms with banks.
Hooters now operates approximately 300 restaurants worldwide following this year’s closures, a decline from 333 locations in 2018.
Denny’s Joins Hooters in Facing Hard Times
Meanwhile, another American institution is facing economic difficulties.
Denny’s is continuing its string of closures after last year’s decision to shut down 150 locations. According to the company’s latest earnings report, 88 restaurants have closed over the past year. They plan to shutter an additional 70 to 90 locations by 2025. These closures will bring the total to approximately 180, marking a significant reduction in the chain’s footprint.
Denny’s hasn’t shared a full list of locations. However, it said closures are due to expiring leases, high remodeling costs after 30+ years, and unprofitable areas.