According to Debtwire, Hooters has hired restructuring consultants. | Photo: Shutterstock
Two well-known casual dining brands could be the next restaurant chains to file for bankruptcy or undergo restructuring due to their inability to pay their debts.
That’s the view of John Bringardner, editor-in-chief of Debtwire, a publication that tracks corporate debt.
At least 16 restaurant chains, franchises or operator groups have filed for bankruptcy this year. Many took on debt to survive the pandemic and are struggling to pay it back as consumers spend less at restaurants due to inflation.
“It’s almost as if they just made it out of orbit but couldn’t quite get out because they had to take on a lot of debt just to survive the shutdowns during the pandemic,” Bringardner said.
Chains like Red Lobster, Buca di Beppo and Rubio’s were among the largest to file for Chapter 11 bankruptcy. BugerFi also appears to be on the verge of bankruptcy. And more are sure to follow. Debtwire has identified Hooters and Black Angus as two possible candidates.
Signs of problems at Hooters in Atlanta appeared as early as June, when Closure of a number of poorly performing sites throughout the country. Mass closures often precede bankruptcy as companies try to get unprofitable locations off their balance sheets.
Behind the scenes, Hooters has hired restructuring advisers to review options that could include restructuring, sale or bankruptcy, Bringardner said.
“Bankruptcy is probably the worst case scenario for them,” he said. “That is still open at the moment, but the fact is that restructuring consultants are working with the company.”
The 293-store chain, known for chicken wings and scantily clad waitresses, has struggled for years. Since 2018, systemwide sales in the U.S. have fallen nearly 15% and its domestic presence has shrunk 12%, according to Technomic data.
Last year, Hooters’ sales in the U.S. increased just 0.8% year over year, according to Technomic, and the company closed four restaurants.
Bringardner compared Hooters to other well-known companies facing bankruptcy, such as Avon, Tupperware and Red Lobster. “They used to be everywhere, but when was the last time you knew someone who went into a store?” he said.
At press time, Hooters had not responded to a request for comment.
The smaller Black Angus branch, which had 32 branches at the end of last year, is also at risk, said Bringardner, who said the company’s debt is now only a fraction of a dollar.
“This is extremely bad,” he said. “It is a sign that creditors really believe there is little prospect of recovery there.”
Debtwire reported in July that the Burbank, California-based company had hired investment bankers to explore a sale of the chain.
According to Technomic, Black Angus sales fell nearly 29% from 2018 to 2023 as more than a quarter of its restaurants closed. The company has struggled while steak competitors like Texas Roadhouse and LongHorn Steakhouse have rebounded. Sales fell 2.8% last year, according to Technomic.
One factor contributing to Black Angus’ problems is the fact that most restaurants are located in California, where wages and other operating costs tend to be higher.
“Is that their main problem? No,” Bringardner said. “They obviously have other problems with the business. But it’s another factor that affects their bottom line.”
Responding to an emailed question about a possible bankruptcy, Deborah Shapiro, vice president of growth at Black Angus, responded in a statement: “In today’s restaurant climate, that’s a fair question, but fortunately one that doesn’t arise for us.”
She added that while Black Angus’ competitors were posting “year-on-year losses,” the chain was “still delivering consecutive year-on-year gains,” including double-digit growth in sales and traffic.
Older casual dining chains have found it harder to recover from the pandemic as consumers become more discerning in their restaurant choices. This behavior has produced some clear winners, such as Texas Roadhouse and Chili’s, but has caused others to stumble. In the most extreme cases, it has led to bankruptcies or other drastic measures.
Members make our journalism possible. Become a Restaurant Business member today and receive exclusive benefits, including unlimited access to all of our content. Sign up here.
