Casual dining restaurant chain Hooters is reportedly considering filing for bankruptcy and is behind on paying its suppliers.
The Atlanta, Georgia, U.S.A.-based operator of 293 restaurants has hired a law firm to prepare a bankruptcy filing in the coming months, but the plans are not final, according to Bloomberg.
The operator, which features numerous seafood dishes on its menu, has often been up to 90 or more days late in paying its bills, taking about four times longer than other restaurant chains to pay, according to Creditsafe data.
Between August and November 2024, around 20 percent of its outstanding bills were 91 days past due and then reached a high of nearly 50 percent in November, Creditsafe Head of Brand and Spokesperson Ragini Bhalla said in a statement provided to SeafoodSource.
Hooters’ U.S. sales declined nearly 15 percent from 2018 to 2023, and its domestic footprint shrunk by 12 percent, according to Technomic, per Restaurant Business.
In previous years, the chain closed several underperforming restaurants and may close more with the bankruptcy filing, per Creditsafe. Bhalla praised the “proactive” decision to close underperforming restaurants and diversify its income, noting that Hooters launched a frozen food line in grocery stores and expanded into the international market.
“Rather than limiting itself to revenue solely from its restaurant locations, it’s creating new revenue streams so it can safeguard and increase its cash flow. As these ventures solidify, we’ll be looking to see if it helps them reduce their Days Beyond Terms and pay their suppliers faster,” Bhalla said.
However, the initiatives do not seem to have pulled it out of its financial hole, and Hooters' financial challenges are just the latest evidence of financial issues in the restaurant industry.
On 21 February, Bloomin’ Brands announced it is laying off around 100 corporate employees, and Starbucks announced 24 February that it will lay off around 1,100 corporate employees. Additionally, the food and beverage operator said it will not fill several hundred other open positions.
A KPMG report found that 41 percent of consumers plan to spend less at restaurants this year, Creditsafe said, as food costs remain a challenge for restaurant operators and consumers. Food costs inclined 2.5 percent year over year in January, according to the U.S. Consumer Price Index, driven by a 3.4 percent hike in food-away-from-home prices.
Higher menu prices are leading fewer consumers to dine out, Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek. Additionally, rising rents on many restaurant locations are impacting restaurants’ bottom line.
“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,” Beene said.
