(Bloomberg) — Hooters of America has filed bankruptcy as the casual-dining brand known for its chicken wings and skimpy server uniforms struggles to lure customers.
The Atlanta-based company filed for Chapter 11 bankruptcy in the Northern District of Texas on Monday, court documents show. It listed assets of $50 million to $100 million and liabilities in the same range in its petition.
High labor costs, competition from cheaper fast-food chains and declining restaurant traffic overall have taken a toll on casual-dining restaurants. Seafood restaurant chain Red Lobster went bankrupt last year after a money-losing “endless shrimp” promotion, while TGI Friday’s Inc. filed for Chapter 11 after struggling to turn around its business.
The company is seeking approval of $40 million of debtor-in-possession financing from certain of its existing lenders, including $35 million of new capital, it said in a press release on Monday. That would provide the company with ample liquidity to support operations during the chapter 11 process, which is expected to last up until August, according to the statement.
Hooters’ founders plan to make the chain more family-friendly as a way to turn things around, Neil Kiefer, chief executive officer of the founder-owned unit, HMC Hospitality Group, told Bloomberg News in a recent interview.
A turnaround plan would likely see HMC and other operators of Hooters franchises take over most of the US locations currently owned and run by Hooters of America, though some may close.
Hooters’ complex debt financing could be one of the wrinkles in a restructuring. Its bonds are packaged as whole-business securitizations, through which it pledges most of its assets, including franchise fees, as collateral.
The bankruptcy case is Hooters of America LLC, 25-80078, US Bankruptcy Court for the Northern District of Texas.
–With assistance from Jonathan Randles.
(Updates with details of debtor-in-possession financing in fourth paragraph and case number in last paragraph.)
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