The Hooters Bankruptcy Plan Explained
The Hooters bankruptcy plan won approval from the US Bankruptcy Court for the Northern District of Texas. Under the Hooters bankruptcy plan, Hooters of America exits Chapter 11 and pivots to a pure franchise model after settling a fight over royalty payments.
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.
What the Hooters Bankruptcy Plan Means
The Hooters bankruptcy plan reshapes how the chain operates.
Under a pure franchise model, the parent company stops running restaurants itself. Franchise owners operate the locations, while the brand earns royalties and focuses on marketing, menu standards and growth.
For fans, the Hooters bankruptcy plan should mean fewer closures and more local ownership. Many franchise groups have run Hooters restaurants for decades and know their markets well.
For the industry, the Hooters bankruptcy plan is another sign of how casual dining chains are adapting to higher costs and changing tastes. Several large chains have moved toward franchising to reduce risk.
The court approval also ends months of uncertainty for employees and franchisees who waited to learn what the Hooters bankruptcy plan would include. With the plan confirmed, the company can focus on reopening conversations with diners and rebuilding trust in the brand.
What should diners watch for next? Expect franchise owners to refresh dining rooms, test new menu items and lean into sports viewing, which has always been a core part of the Hooters appeal. Watch for local reopening announcements and new promotions as franchisees take full control of their restaurants in the months ahead.
Franchisees who were already profitable are expected to keep their doors open, while weaker sites may be sold or converted. That mix of stability and change is typical when a brand emerges from Chapter 11 with a lighter, franchise-first structure and a cleaner balance sheet.
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