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Hooters of America has filed for Chapter 11 bankruptcy protection in Texas as it struggles with rising costs and declining consumer spending.

The company has revealed plans to transfer ownership of all its corporate-operated locations to a franchise group supported by its original founders.

The restaurant chain, famous for its chicken wings and distinctive branding, is grappling with a debt of $376 million.

Like other casual dining establishments, Hooters has been hit hard by inflation, labor expenses, and changing dining habits. Currently, the company owns and operates 151 locations, with an additional 154 restaurants under franchise agreements, NBC News said.

The proposed sale would transfer ownership of corporate locations to a buyer group made up of two Hooters franchisees.

These franchisees already manage 30 successful Hooters locations in Florida and Illinois. The purchase price has not been disclosed, and the transaction will require approval from a US bankruptcy judge before moving forward.

"With over 30 years of hands-on experience across the Hooters ecosystem, we have a profound understanding of our customers and what it takes to not only meet but consistently exceed their expectations," said Neil Kiefer, a member of the buyer group and CEO of the original Hooters location in Clearwater, Florida.

Hooters Files for Bankruptcy, Plans Major Financial Restructuring

Hooters projects that it will successfully emerge from bankruptcy within the next three to four months.

To facilitate this transition, the company has secured $35 million in financing from its existing lenders. The bankruptcy filing follows a challenging period for the casual dining sector.

Several well-known restaurant chains, including TGI Fridays, Red Lobster, Buca di Beppo, and Rubio's Coastal Grill, have filed for bankruptcy as they face increasing operational costs and evolving consumer dining habits.

According to the Federal Reserve Bank of St. Louis, restaurant prices have increased by about 30% over the past five years, outpacing overall consumer price inflation.

Hooters has faced additional challenges beyond financial struggles. The brand has been criticized for its outdated image and has faced legal issues, including allegations of workplace discrimination.

The company previously closed several underperforming locations, citing high food and labor costs.

Despite the bankruptcy, Hooters reassured customers that it will continue operations as usual while evaluating its company-owned locations. Some closures may still occur as part of its financial restructuring.

According to CNN, Hooters' new ownership group, including some of the chain's original founders, aims to revitalize the brand and return it to its roots. "For many years now, the Hooters brand has been owned by private equity firms and other groups with no history or experience with the Hooters brand," Kiefer said.

The turnaround plan may include efforts to make Hooters more family-friendly while preserving its well-known identity.

CEO Sal Melilli emphasized the company's commitment to its loyal customers. "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."

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