Hooters of America: Founder-Led Buyout Returns Iconic Chain to Its Roots

When Hooters of America filed for chapter 11 bankruptcy protection on March 31, 2025, it marked the end of private equity ownership and the return to the original founders who launched the brand in 1983. The filing came after years of systemwide sales decline, mounting debt service obligations, and an inability to invest in the restaurants that defined the brand.

The restructuring resulted in the chain's original founding group, through franchisees Hooters Inc. and Hoot Owl Restaurants, acquiring more than 100 company-owned locations rather than a liquidation or sale to a strategic acquirer. This transaction eliminated approximately $376 million in funded debt and transitioned the brand to a pure franchise model. The case proceeded through contested confirmation hearings and an adversary proceeding over a legacy royalty obligation, and emerged in seven months with the founders controlling over 65% of domestic locations.

The Hooters bankruptcy involved a franchisee-led acquisition of company-owned restaurants alongside a transition to a pure franchise model amid industry pressures and legacy liabilities that complicated plan confirmation.

The Hooters Brand: From Clearwater Beach to Chapter 11

Origins and Cultural Impact.

Hooters launched in Clearwater, Florida in 1983, founded by six businessmen who created a casual dining concept that combined a beach-themed atmosphere, sports entertainment, and Hooters Girl servers. The brand grew through the 1990s and 2000s, reaching a peak of over 400 locations worldwide. The company established its corporate headquarters in Atlanta, Georgia, where Hooters of America, LLC managed company-owned restaurants while licensing the brand to franchisees domestically and internationally.

The Hooters concept operated across decades of shifting consumer preferences, but the company faced operational and financial challenges that led to the chapter 11 filing.

Private Equity Ownership and Leverage.

The chain's trajectory changed when private equity investors acquired the company. Nord Bay Capital and TriArtisan Capital Advisors became the owners of Hooters of America through a leveraged transaction that saddled the company with approximately $376 million in funded debt. This capital structure required annual debt service of roughly $30.9 million in 2024 and approximately $19 million projected for 2025.

The leverage limited cash available for operational investment. An interest payment of $3.9 million came due in May 2025, just weeks after the bankruptcy filing.

Systemwide Sales Decline.

Systemwide sales declined approximately 15% since 2018, while the overall footprint shrank by 12% according to Technomic data. Vendor payment delays ran four times the industry average, and more than 20% of vendor invoices were 90 or more days past due when the company filed for bankruptcy.

Critics characterized the business model as "antiquated." The combination of declining traffic, heavy debt service, and vendor payment delays prompted the company to engage restructuring advisors and begin negotiations with creditors.

Causes of Financial Distress

Industry-Wide Pressures.

Hooters faced inflationary pressures that challenged the casual dining sector in the 2023-2025 period. Rising labor costs squeezed margins as minimum wage increases and labor market tightness pushed wage expenses higher. Commodity cost increases, particularly for chicken wings—a core menu item—drove food costs upward.

The casual dining segment experienced broad-based challenges during this period, with multiple legacy chains restructuring or closing. Consumers migrated toward more cost-efficient dining alternatives, including fast-casual concepts.

Capital Structure Burden.

The company's pre-petition capital structure consisted of multiple debt tranches that required cash flow for debt service:

Beyond funded debt, the company carried approximately $26.3 million in accounts payable at the petition date, reflecting the vendor payment delays. The combination of mandatory debt service and stretched payables limited financial flexibility for operational investment.

A perpetual 3% gross sales royalty payable to Lags Equipment, LLC represented a legacy burden. This royalty, which originated from historical transactions involving the original founders, consumed approximately $4.2 million annually. The obligation was central to contested proceedings during the bankruptcy case. Significant real estate lease costs added to the fixed cost burden. Many locations had become unprofitable but remained bound by lease terms that exceeded the stores' economic value. The combination of PE-era leverage, legacy royalties, and unfavorable leases constrained the business.

Liquidity constraints limited investment in restaurant maintenance, renovations, employee training, and menu updates. By the time the company filed for bankruptcy, deferred maintenance and underinvestment remained.

Store Closures

Before filing for bankruptcy protection, Hooters closed 48 company-owned stores in 2024. Texas was particularly impacted, losing 16 locations in a state that had been a core market for the brand. These closures targeted unprofitable locations and preceded the formal engagement of restructuring advisors. The closures did not resolve the company's financial issues, and negotiations with prepetition debtholders began.

The bankruptcy filing did not end store closures. In June 2025, Hooters abruptly closed approximately 30 additional locations, with franchise industry observers noting the ongoing contraction. Consumer reaction and local coverage documented the sudden nature of these closures, with some stores shuttering without advance notice. These mid-case closures reduced the scope of locations included in the franchise conversion strategy.

Restructuring Strategy: Transition to Pure Franchise Model

Strategic Rationale.

The restructuring strategy centered on transitioning from a hybrid model to 100% pure franchise structure. Under the pre-petition model, Hooters of America operated 151 company-owned restaurants while franchising 154 additional locations. The company bore the operational risk, real estate costs, labor expenses, and capital requirements for its owned stores while collecting royalties from franchisees.

The plan called for eliminating these burdens. By selling company-owned restaurants to franchisees, the reorganized entity was to:

• Reduce corporate overhead by eliminating store-level operations
• Maximize franchise royalty revenues from an expanded franchisee base
• Eliminate company-owned store losses that had dragged performance
• Transfer operational risk to franchisees responsible for local markets

Prior to filing, the debtors negotiated a restructuring support agreement with key stakeholders that established the framework for the chapter 11 case. The RSA contemplated a prearranged sale to the franchisee buyer group, with Nord Bay Capital and TriArtisan Capital agreeing to exit their investment through the bankruptcy process. The transaction faced challenges during plan confirmation that extended the case timeline.

DIP Financing

Initial $40 Million Facility.

The debtors secured debtor-in-possession financing to fund operations during the chapter 11 case. The initial DIP facility totaled $40 million, consisting of $35 million in new money loans and $5 million in roll-up loans that converted a prepetition bridge loan into DIP financing.

Celtic Master Fund LP served as the initial DIP lender, with U.S. Bank Trust Company acting as agent. The facility bore interest at Prime plus 3.00%, with an additional 2.00% default premium applicable if default occurred. The Interim DIP Order entered on April 3, 2025, just three days after the petition date, allowing the debtors to begin drawing on the facility immediately.

Facility Expansion.

As the case progressed through contested confirmation proceedings, the DIP facility was amended and expanded multiple times. The final facility size reached up to $80 million, double the initial commitment. Maturity dates were extended through multiple amendments, ultimately extending to November 7, 2025, to accommodate the longer-than-expected path to plan confirmation.

The DIP facility provided adequate protection to prepetition secured creditors through cash reimbursement, replacement liens, and Section 507(b) superpriority claims. A carve-out of $500,000 protected professional fees in the event of a trigger event.

Sale to Franchisees: Founder-Led Acquisition

Buyer Group Composition.

The acquisition of company-owned restaurants was led by two franchisee groups:

Hooters Inc. represented the original founding group, the same businessmen who launched the brand in Clearwater, Florida in 1983. Through this entity, the founders acquired 75 company-owned locations, bringing the brand back under their operational control for the first time since the PE buyout.

Hoot Owl Restaurants, LLC was one of the chain's leading franchisee operators. This group acquired 65 company-owned locations, demonstrating the franchisee commitment to the brand's future.

Combined, the buyer group acquired approximately 140 of the 198 domestic locations that would operate post-emergence, representing control of over 65% of the domestic footprint.

Transaction Structure.

The transaction closed on October 31, 2025, one day after plan confirmation. Under the transaction:

• More than 100 company-owned restaurants were sold or converted to franchise operations
• The reorganized entity adopted a pure franchise model with no corporate-owned stores
• Brand licensing and the franchise system continued under reorganized ownership
• Remaining locations that could not be sold were closed
• Approximately $380 million in debt was restructured or eliminated

The approximately 60 international franchised locations continued operations unaffected by the domestic restructuring, maintaining the brand's global presence while the U.S. operations underwent transformation.

New Ownership Strategy.

The new ownership group articulated a strategic direction. CEO Neil Kiefer revealed that many locations had served the wrong wing sauce for 20 years.

The strategy encompassed several elements:

• Food quality improvements: Standardizing wing sauce recipes, menu consistency, and overall food preparation across locations
• Modest uniform changes: Addressing brand perception through what new ownership characterized as efforts to somewhat "de-sexualize" the brand while maintaining its distinctive identity
• Return to roots: Positioning Hooters as a "local beach-themed hangout" rather than the more provocative brand image that had drawn criticism
• Family-friendlier positioning: Broadening appeal while retaining core customer base
• Systemwide sales target: Approximately $700 million in systemwide sales

The post-emergence strategy emphasized preserving core brand elements while modernizing aspects that had become barriers to growth.

Contested Plan Confirmation

Plan Evolution Through Multiple Amendments.

The path to plan confirmation required multiple amendments. The Original Plan of reorganization was filed on May 6, 2025, accompanied by a Disclosure Statement. Objections and negotiations required multiple amendments:

Each amendment addressed creditor concerns and refined transaction terms.

Multi-Day Confirmation Hearing.

Plan confirmation required a contested hearing that extended across multiple days. The proceedings began August 26-27, 2025, continued September 4, and resumed September 19 and September 30 before ultimate confirmation on October 30. Key issues included:

• Best interest of creditors test: Creditors challenged whether the plan provided value at least equal to what they would receive in a chapter 7 liquidation
• Feasibility concerns: Objecting parties questioned whether the reorganized entity could perform under the plan terms
• Lags royalty treatment: The legacy perpetual royalty to Lags Equipment, LLC became a central contested issue

Testimony at the confirmation hearing addressed franchise territory issues, particularly involving 15 franchise-owned stores in South Florida operated by Wings of South Florida, LLC. The South Florida territory and its relationship to the Lags royalty dispute featured prominently in confirmation proceedings. The court entered the Confirmation Order on October 30, 2025, confirming the Fourth Amended Plan. The Fourth Amended Plan Supplement followed on October 31, 2025, the same day the transaction closed. Drivetrain, LLC was appointed as wind-down officer, responsible for administering post-confirmation matters including processing administrative expense claims, resolving disputed claims, and managing the orderly conclusion of the bankruptcy estates.

Lags Equipment Royalty Dispute

One aspect of the Hooters bankruptcy was a perpetual 3% gross sales royalty payable to Lags Equipment, LLC. This royalty, which consumed approximately $4.2 million annually, originated from historical transactions involving original ownership interests. The obligation represented a continuing claim on gross revenues that affected the economics of both the debtors' operations and any potential acquisition.

The royalty dispute spawned an adversary proceeding: Case No. 25-08010, commenced July 18, 2025. Wings of South Florida, LLC, a franchisee operating 15 stores in the South Florida territory, filed as plaintiff against Lags Equipment, LLC. The proceeding challenged aspects of the royalty obligation and its application. The adversary proceeding ran parallel to the main bankruptcy case, with both matters intersecting at the confirmation hearing. Testimony addressed the relationship between franchise rights, territory claims, and the Lags royalty, with the debtors working toward settlement as confirmation approached.

The Confirmation Order addressed the Lags royalty treatment, resolving how the obligation would be handled in connection with the franchisee acquisition. The plan assumed existing franchise agreements while addressing the disputed royalty claims through the confirmation process rather than full adversary proceeding adjudication.

Case Timeline

The case ran seven months from filing to emergence.

Casual Dining Industry Context

The Hooters bankruptcy occurred within a casual dining sector experiencing pressure. Inflation squeezed consumer spending on discretionary dining while increasing operators' cost structures. Labor costs rose across the restaurant industry as minimum wage increases and labor market dynamics pushed wages higher. Fast-casual competition continued to erode traditional casual dining market share. Consumer preference shifts toward convenience challenged full-service restaurants that had historically relied on the experience component of dining out. Quick-service and delivery-focused models captured an increasing share of restaurant spending.

Hooters joined a pattern of legacy casual dining chains entering restructuring during 2024-2025. TGI Friday's filed for bankruptcy, as did Red Lobster, Buca di Beppo, and other established brands. Reporting on these cases cited heavy debt loads from leveraged buyouts, aging restaurant concepts requiring capital investment, consumer traffic declines, real estate costs misaligned with store-level economics, and brand relevance challenges with younger demographics. These restructurings included footprint rationalization through store closures, debt reduction through bankruptcy, and in many cases, a transition toward franchise-focused or asset-light models.

The industry shift toward asset-light franchise models reflected operational trade-offs. Franchising transfers restaurant-level operational responsibility to franchisees. Corporate entities focus on royalty collection, brand management, and franchise support rather than direct store operations. Capital requirements decrease under franchise models, as franchisees fund new restaurant development and renovation. The Hooters transition to pure franchise aligned with this broader industry movement.

Professional Roster

Debtors' Advisors.

Keith Maib served as Chief Restructuring Officer, providing operational leadership during the case. SOLIC Capital Advisors provided financial advisory services while Accordion Partners handled investment banking and transaction support.

Official Committee of Unsecured Creditors.

The Official Committee of Unsecured Creditors represented the interests of general unsecured creditors throughout the case, with Pachulski Stang providing legal representation and Province providing financial advisory services.

Post-Confirmation Administration.

Drivetrain, LLC was appointed wind-down officer to manage post-confirmation administrative matters, including processing of administrative expense claims, disputed claim resolution, and orderly wind-down of the bankruptcy estates.

Post-Emergence: Operational Changes

Operational Focus.

The new ownership's comeback strategy included the acknowledgment that many locations had served the wrong wing sauce for two decades.

The post-emergence operational agenda includes:

• Recipe standardization across all locations
• Employee training to ensure consistent food preparation
• Restaurant maintenance and refresh previously deferred
• Menu improvements building on the core wing offering
• Technology investments to improve ordering and service

Hooters retains its distinctive identity—the beach theme, sports entertainment focus, and Hooters Girl concept—while making adjustments the new ownership believes will broaden appeal. The "family friendlier" positioning and modest uniform changes aim to reduce barriers to trial by customers who might have avoided the brand based on perception.

Under the pure franchise model, Hooters' corporate entity collects royalties and fees from approximately 260 franchised locations (198 domestic plus approximately 60 international) without the operational burden and capital requirements of company-owned restaurants. The buyer group's control of over 65% of domestic locations provides operational alignment between the franchisor and its largest franchisees.

Frequently Asked Questions

Who is the claims agent for Hooters of America?

Kroll Restructuring Administration LLC serves as the claims and noticing agent for the Hooters bankruptcy cases (Case No. 25-80078 in the Northern District of Texas). The plan was confirmed October 30, 2025, with the transaction closing October 31, 2025. Post-emergence, Hooters operates under a pure franchise model with the original founders in control.

Why did Hooters file for bankruptcy?

Hooters filed chapter 11 due to approximately $376 million in funded debt from private equity ownership, declining systemwide sales of roughly 15% since 2018, casual dining sector headwinds including inflation and labor cost increases, inability to invest in operations due to liquidity constraints, and legacy obligations including a perpetual royalty and unfavorable lease commitments. Annual debt service of approximately $30.9 million in 2024 consumed cash flow needed for operations.

Who bought Hooters in the bankruptcy?

Two franchisee groups acquired the company-owned restaurants: Hooters Inc., representing the original founding group from 1983, acquired 75 locations; and Hoot Owl Restaurants, LLC, a leading franchisee operator, acquired 65 locations. Combined, these buyers control approximately 140 of the 198 domestic locations post-emergence, representing over 65% of the domestic footprint.

Are Hooters restaurants closing?

Hooters closed 48 company-owned locations in 2024 before the bankruptcy filing and approximately 30 additional locations during the bankruptcy case in 2025. Post-emergence, approximately 198 domestic locations continue operating under franchisees, with roughly 60 international franchised locations unaffected by the restructuring. Closures targeted unprofitable locations that could not be converted to franchise operations.

What is the new Hooters business model?

Post-emergence, Hooters operates under a 100% pure franchise model with no corporate-owned stores. The company collects franchise royalties and licensing fees while franchisees assume operational responsibility for individual restaurants. This asset-light structure reduces corporate overhead and eliminates the losses from company-owned stores that contributed to the bankruptcy.

What changes are coming to Hooters?

New ownership announced food quality improvements, including fixing wing sauce recipes that CEO Neil Kiefer revealed had been wrong at many locations for 20 years. Modest uniform changes aim to adjust brand perception. The strategy includes returning to "family friendlier roots" and positioning restaurants as "local beach-themed hangouts" while maintaining the core Hooters concept.

How long was the Hooters bankruptcy?

The case lasted seven months from filing to emergence. Hooters filed chapter 11 on March 31, 2025, the plan was confirmed on October 30, 2025, and the transaction closed on October 31, 2025. The contested confirmation proceedings extended the timeline beyond what prearranged cases typically require.

What was the DIP financing structure?

Celtic Master Fund LP provided debtor-in-possession financing that started at $40 million and was expanded through amendments to up to $80 million. The facility included $35 million in new money loans and $5 million in roll-up of prepetition bridge financing. Interest was set at Prime plus 3.00%, with extended maturity dates to accommodate the contested confirmation proceedings.

What is the Lags Equipment royalty dispute?

Lags Equipment, LLC held a perpetual 3% gross sales royalty consuming approximately $4.2 million annually, a legacy obligation from historical transactions. An adversary proceeding was filed during the bankruptcy, and the royalty treatment became a central issue in the contested confirmation hearings. The dispute was addressed through the confirmation order.

What happened to private equity owners?

Nord Bay Capital and TriArtisan Capital Advisors exited their investment through the bankruptcy process. The private equity ownership period ended with the sale to the founder-backed franchisee group, representing a return of the brand to its original founders after years under leveraged buyout ownership.

Is the Hooters bankruptcy part of a broader trend?

Yes, multiple casual dining chains filed for bankruptcy during 2024-2025, including TGI Friday's, Red Lobster, and Buca di Beppo. The pattern reflects sector-wide challenges including inflation, labor costs, consumer preference shifts toward fast-casual and convenience, heavy debt loads from leveraged buyouts, and the need for capital investment in aging restaurant concepts. Many chains are transitioning toward franchise-focused models similar to Hooters' restructuring.

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For more coverage of restaurant sector restructurings and casual dining chapter 11 cases, explore additional analysis on the ElevenFlo bankruptcy blog.