Controversial restaurant chain Hooters files for bankruptcy

June 2025 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

June 2025 Issue

In early April, Hooters of America announced it had filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Northern District of Texas, as a prelude to selling itself.

According to a statement released after the filing, Hooters explained that it had entered into a restructuring support agreement (RSA) with “near unanimous support from its key stakeholders”. Under the RSA, Hooters will sell some of its restaurants to a group of current franchisees, which includes the chain’s cofounders.

As part of the deal, Hooters of America, LLC and certain of its affiliates will be sold to an experienced group of current franchisees to acquire and operate certain company-owned Hooters locations. The buyer group is comprised of two existing Hooters franchisees, including Hooters Inc., the original Hooters founders, which collectively currently own and operate over 30 percent of the domestic franchised Hooters locations, including 14 of the 30 highest volume restaurants.

The company expects to move through the Chapter 11 process swiftly, with the goal of emerging from bankruptcy within approximately 90-120 days. In order to fund operations during the Chapter 11 process, the company is seeking approval of $40m in debtor-in-possession financing from existing lenders, including $35m in new capital.

Hooters expects its restaurants to remain open to serve customers, and restaurants will “continue to operate in a business-as-usual manner during its Chapter 11 cases”. Hooters also noted that its current franchise operations, including its locations outside the US, are not impacted by the Chapter 11 process and will continue to be operated by its franchise and licence partners.

“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,” said Sal Melilli, chief executive of Hooters of America. “I’ve seen firsthand the incredible value and opportunities our brand brings to life, and I look forward to continuing that momentum well into the future.”

“With over 30 years of hands-on experience across the Hooters ecosystem, we have a profound understanding of our customers and what it takes to not only meet, but consistently exceed their expectations,” said Neil Kiefer, chief executive of Hooters Inc., on behalf of the buyer group. “As we look toward the future, we are committed to restoring the Hooters brand back to its roots and simplifying HOA’s operations by adopting a pure franchise model that will maximize the potential for sustainable, long-term growth. The foundation we’ve laid ensures the continued success of our brand – one that is driven by a relentless focus on delivering an exceptional experience each and every visit for our customers.”

The reorganisation process will see Hooters transition from a hybrid franchise and company-owned model to solely a franchising model, which will, according to Hooters, “position the company to seize new growth opportunities, enhance its market leadership, simplify the role and responsibilities of the franchisor, and allow for reinvestment back into the brand and restaurants”.

Rumours of Hooters’ financial difficulties have swirled for some time, with reports emerging in early 2025 that the company was considering filing for bankruptcy. The second half of 2024 saw Hooters close dozens of underperforming restaurants. In March 2025, the company agreed to pay $900,000 to Hendrick Motorsports over a lawsuit concerning unpaid sponsorship money.

Hooters has also been tied up with legal challenges in recent years as its controversial business strategy has attracted attention. Specifically, it has been challenged over its hiring of only women to serve customers. Furthermore, in 2024, the company agreed to pay $250,000 and provide other relief to settle a race and colour discrimination lawsuit brought by the US Equal Employment Opportunity Commission against a Hooters outlet in Greensboro, North Carolina.

Richard Summerfield