(Bloomberg) — Hooters of America is collaborating with creditors to formulate a plan for restructuring the company via bankruptcy court in the imminent months, as per sources familiar with the situation.
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The casual dining chain is enlisting the help of law firm Ropes & Gray to prepare a filing, according to sources, who noted that the plans are still in development and requested anonymity to discuss confidential matters. The court proceedings are expected to commence within the next two months, the sources indicated.
Known for its revealing server outfits and cheeky owl mascot, the company has been strategizing with its legal team and turnaround consultants from the boutique firm Accordion Partners to tackle its debt burden, as Bloomberg had previously reported. Some of Hooters’ creditors have also sought advice from Houlihan Lokey Inc.
Hooters, Accordion Partners, and Ropes & Gray did not reply to requests for comments. A representative from Houlihan declined to provide a statement.
The restaurant chain has been dealing with cash flow challenges as customer traffic has decreased, leading to the closure of multiple locations. In 2021, the chain raised approximately $300 million by selling asset-backed bonds, according to data from Bloomberg.
These asset-backed bonds are structured as whole-business securitizations, where the company uses a majority of its assets, including franchise fees, as collateral—a financial product favored by restaurant chains, fitness centers, and other franchise-based businesses.
Casual dining establishments have faced mounting challenges due to inflation, disruptions in supply chains, and increased interest costs that have driven up menu prices, leading consumers to dine out less frequently. According to BankruptcyData, over a dozen major restaurant groups or franchisees filed for bankruptcy protection last year.
From 2015 to March 2024, restaurant prices surged by about 44%, as reported by data analytics firm Black Box Intelligence, compared to a 26% increase in grocery prices during the same timeframe.
–With contributions from Dorothy Ma and Jonathan Randles.
(Updates have been made to provide more context on the casual dining sector in the eighth and ninth paragraphs.)
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