US restaurant chain Hooters, which is owned by private equity firms Nord Bay Capital and TriArtisan Capital Advisors, has filed for bankruptcy protection ahead of a proposed founder-backed buyout of the business, according to a report by Reuters.
The restructuring, which will see all company-owned locations sold to a franchisee group, underscores the challenges private equity firms face in casual dining investments amid rising costs and shifting consumer behaviour.
Hooters, which has been under private equity ownership since 2019, is looking to shed its $376m debt burden through a Texas bankruptcy filing. The plan involves selling its 151 corporate-owned restaurants to a franchise group backed by the company’s original founders. The deal, pending bankruptcy court approval, would mark the end of Nord Bay and TriArtisan’s ownership of the brand.
The buyers – two existing Hooters franchisees – currently operate 30 high-performing locations in Florida and Illinois. The group has committed to taking Hooters “back to its roots,” suggesting a potential brand repositioning strategy post-bankruptcy.
Hooters’ bankruptcy follows a broader casual dining sector downturn, where private equity-backed chains have struggled under inflationary pressures and declining consumer spending. TGI Fridays, which also shares a private equity link with TriArtisan, recently filed for bankruptcy, highlighting the sector-wide impact on PE investments. Other struggling chains include Red Lobster, Bucca di Beppo, and Rubio’s Coastal Grill.
Industry-wide rising labour and food costs, coupled with a 30% increase in restaurant prices over the past five years, have made casual dining investments increasingly risky. The restructuring of Hooters reflects a growing trend of private equity firms seeking exits as operational challenges mount.
Hooters has secured $35m in debtor-in-possession (DIP) financing from its existing lender group to facilitate the transition. The company expects to emerge from bankruptcy within three to four months, at which point the new franchisee-led ownership structure will take full control.
