Hooters of America has filed for Chapter 11 bankruptcy and entered into a Restructuring Support Agreement to sell restaurants to a group that includes the chain’s original co-founders.

The company announced on Monday that they will remain fully operational during the bankruptcy process, with the buyer group comprising two franchisees that collectively own almost one-third of all domestic franchised Hooters locations, including 14 of the 30 highest-volume restaurants.

Newsweek reached out to Hooters via email on Monday for comment.

Why It Matters

This bankruptcy filing represents a significant shift in Hooters’ business model, transitioning from a hybrid franchise and company-owned operation to solely a franchising model.

The restructuring comes after years of declining store count, dropping from 340 U.S. locations in 2019 to approximately 290 in 2023, and financial struggles with roughly $300 million in debt that was downgraded by Kroll Bond Rating Agency last year.

The move follows the closure of dozens of underperforming restaurants in recent months.

Hooters Decline and Closed Locations

Hooters—famous for putting female employees, who are known as “Hooters Girls,” in revealing uniforms—was working with the law firm Ropes & Gray to prepare for the bankruptcy earlier this year.

Previously, the Atlanta-based fast casual chain was working on dealing with its debt load with lawyers and advisers at Accordion Partners.

The restaurant chain saw customer foot traffic decline in recent years and had to close many locations across the country. In 2021, Hooters sold roughly $300 million in asset-backed bonds.

What To Know

Hooters says it plans to continue normal operations throughout the bankruptcy process, with no planned changes to its menu, rewards program, gift cards, or merchandise offerings. The company is seeking approval of $40 million in debtor-in-possession financing from existing lenders, including $35 million in new capital.

The chain generated $867 million in U.S. sales in 2023, edging up less than 1 percent from the previous year, according to data from Hooters. Just days before the bankruptcy filing, Hooters agreed to pay $900,000 to Hendrick Motorsports over a lawsuit concerning unpaid sponsorship money.

What People Are Saying

Sal Melilli, CEO of Hooters of America: “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.”

Neil Kiefer, CEO of Hooters Inc., representing the buyer group: “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.”

Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, previously told Newsweek: “Hooters and similar restaurants are getting hit by three factors concurrently. The higher prices on food supplies equate to higher meal costs. Consequently, more expensive dishes means fewer consumers are dining out. The third factor many don’t consider are rising rents on many restaurant locations, which also add to pricing pressures. It’s the perfect storm of negative news to make some restaurant chains consider filing for bankruptcy and using the financial opportunity to restructure into a leaner and more cost-effective company.”

What Happens Next

Hooters aims for a swift reorganization process with the goal of emerging from bankruptcy within the next several months. Global franchise operations are not impacted by the financial restructuring process and will continue to operate as usual.