Bankruptcy might buy a company more breathing room financially, but it does not fix any underlying problems. That’s why it’s fairly common for companies to file for Chapter 11, reorganize their business, and then continue to struggle.
“Operating deterioration is ultimately what causes a capital structure to become inappropriate or unsustainable. Rightsizing a balance sheet is certainly a very high priority in bankruptcy, but is not itself a remedy,” Robert J. Duffy, former global segment leader of corporate financing and restructuring at FTI Consulting, shared with Financier Worldwide.
Fixing your debt buys breathing room, but it does not solve the underlying issues that led to bankruptcy. That’s at least partially why Hooters, a company that survived a March 2025 Chapter 11 bankruptcy, continues to close restaurants after it emerged from that bankruptcy.
Hooters pioneered what has been casually referred to as the “breasaurant” model. It uses busty waitresses in low-cut tops and short shorts to serve wings, burgers, and more.
The chain faced all of the issues that have challenged the restaurant industry.
“Hooters, like other casual dining restaurants, has struggled in recent years due to inflation, the high costs of labor and food, and declining spending by cash-strapped American consumers,” CNBC reported.
It also faced challenges from having a business model that may have become dated. The chain’s original owners, who bought the chain back as part of its Chapter 11 bankruptcy process, actually envisioned the chain as family-friendly.
Neil Kiefer, CEO of the founder-owned unit, HMC Hospitality Group, explained to Bloomberg how the chain lost its way.
“What hurt the brand, as the founders see it, were decisions by its private equity overlords that took it away from its roots as a beachy destination offering good food and good service that was also family-friendly. Helping crystallize that view: a 2021 decision by Hooters of America to introduce new waitress uniforms that looked more like underwear than the retro jogging shorts the original Hooters referenced, along with theme nights where servers wore only bikinis,” the news site shared.
To fix the brand, the former and now current owners planned a return to its PG-13 roots.
“You go to some parts of the country, and people say, ‘Oh, I could never go to Hooters, my wife would kill me,”’ Kiefer said. “That’s depressing to us. We want to change that.”
Filing for Chapter 11 (March 31, 2025): Hooters of America LLC, the corporate owner of the restaurant chain, filed a voluntary petition for Chapter 11 bankruptcy protection on March 31, 2025 in the U.S. Bankruptcy Court for the Northern District of Texas, according to PacerMonitor filings.
The filing was driven by mounting debt, about $376 million, and the need to restructure its capital and operations while continuing to operate. • Business‑as‑usual during restructuring, reported Reuters.
Despite the Chapter 11 filing, Hooters continued operating its restaurants during the bankruptcy process. The restructuring plan was designed to sell most or all of the company‑owned restaurants while keeping the overall brand alive rather than liquidating the business, according to Fox.
Sale to franchisee‑backed group: As part of the plan, Hooters arranged to transfer ownership of its company‑ownedrestaurants (reportedly around 151 locations) to a franchisee‑backed buyer group, which included existing franchise operators and individuals associated with the original founders, Fox added.
Store closures during restructuring: During the bankruptcy process, the company closed dozens of underperforming company‑owned locations. For example, more than 30 restaurants nationwide were shut mid‑2025 in several states as part of optimization efforts tied to the restructuring, according to The Today Show.
