Hooters of America LLC won approval to reorganize in bankruptcy after settling a fight over royalty payments, allowing the restaurant chain to pivot to a “pure franchise” business model.
Hooters received approval Tuesday from the US Bankruptcy Court for the Northern District of Texas to exit Chapter 11 through a plan that will put the chain’s restaurants solely in the hands of franchisees.
A group that includes those who launched the restaurant in 1983 are purchasing a majority of the 151 company-owned locations with an eye toward making the chicken wing and beer brand more family friendly.
The company smoothed a path to plan approval in recent days by settling with creditor Lags Equipment LLC, which had fought since the beginning of the bankruptcy case to maintain a more than three-decade-old royalty interest agreement for a percentage of store revenue.
Lags, which earlier this month won the right to continue receiving 3% of revenue from more than a dozen Hooters locations in South Florida, will receive a $1.6 million payment to resolve pre-bankruptcy claims. The firm will also maintain rights to appeal the loss of continued royalty payments from stores in Texas, Ohio, and Indiana.
“It’s a great outcome all in all,” Hooters attorney Chris Dickerson of Ropes & Gray LLP said during a hearing Tuesday in front of Judge Scott W. Everett.
Known for its chicken wings and skimpy server outfits, Hooters filed for bankruptcy in March as part of a pre-arranged plan to sell the chain to a group of franchise owners and offload more than $300 million in debt.
The company, like other casual dining chains, has faced declining foot traffic and growing overhead.
The company is also represented by Foley & Lardner LLP. Lags is represented by Bradley Arant Boult Cummings LLP and Lawson & Moshenberg PLLC.
The case is In re Hooters of Am. LLC, Bankr. N.D. Tex., No. 25-80078, hearing 9/30/25.
