In 1983, in Clearwater, Florida, six businessmen who knew nothing about the restaurant industry decided to open one. Their goal? To create a place where they could enjoy good food, wall-to-wall sports, cold beer, and beautiful women and not get kicked out.
Today, over 40 years later, the somewhat controversial restaurant brand has 360 locations and is found in 36 states and 17 countries, according to Restaurant Dive. Recently, however, similar to brands such as TGI Fridays, Outback Steakhouse, and Applebee’s, they’ve announced the closure of 40 underperforming units.
Recently fired employees are posting tearful goodbyes on social media and sharing that they didn’t receive a warning of their restaurant’s impending closures. A former Hooter’s bartender, Kate Booker, told News Channel 6, “The Regional Manager read from a paper just monotone, ‘Wichita Falls Hooters is closing.’ You could hear a bit of silence and then a gasp. Not even our manager knew until yesterday.” The employees were then given 10 minutes to collect their belongings.
One post, with over 1.7 million views, shared, “Cannot stop crying. It was very unexpected a heads up would’ve been nice.”
The Cause Behind the Closures
Hooters noted high costs and current market conditions as some of the challenges leading up to their recent closures. They specifically noted rising labor and food costs.
In response to these increasing costs, menu prices have been on the rise. In the 12 months through May 2024, grocery prices increased by 1% while menu prices at full-service restaurants rose 3.5% and fast-casual and fast-food brands saw an increase of 4.5%.
It’s at the point, however, where consumers are demonstrating rising-price fatigue. A report from the marketing firm Vericast confirmed this. Almost 70% of those surveyed reported “trading down from restaurant meals to food from the grocery store.” The same report showed that many were choosing to eat at restaurants with lower costs and during more affordable times, such as lunch and breakfast.
Money quoted Dana Baggett, the executive director of Vericast’s restaurant division, “There’s a noticeable decrease in consumers dining out, especially with consumers that have a household income under $75,000. The steadily increasing cost of dining out is testing the limits of what consumers can and will spend.”
For other brands, such as Rubio’s Coastal Grill, it was the latest California minimum wage law, AB 1228, that was at the root of their Chapter 11 bankruptcy and the closure of 48 locations.
Slowed Growth
A recent report by Yelp revealed that the growth in higher-end restaurants has slowed year over year, while dessert and pop-up shops have increased. Pop-ups testing new concepts and limited menus have seen the most growth, with a phenomenal 155% increase. Higher-end restaurant concepts such as New American, Teppanyaki, and Modern European declined 46%, 40%, and 36% respectively.
The same report also revealed that operators are turning to restaurant technology upgrades to address rising costs and labor shortages, particularly self-service options. These options include iPad checkout, self-checkout, and ordering kiosks.
Tipflation fatigue was also noted on Yelp, with the following increase in mentions:
- Tip screen: 811%
- Gratuity: 111%
- Tip was included: 91%
- Tipping: 81%
- No tip: 71%
- Didn’t tip: 63%
Multiple Streams of Income
Like many brands impacted by inflation, supply chain issues, and consumer pushback, Hooters has been segueing into additional streams of income for some time. They’ve recently entered the restaurant grocery store craze, launching their new Hooter’s frozen food chicken wings and popcorn chicken in grocery stores across the country.
They’ve also created a digital food court for their virtual concepts, which include Hootie’s Burger Bar, Hootie’s Bait and Tackle, and Chase Elliott’s Chicken Tenders. Their also looking into second-generation real estate sites and non-traditional locations.
Underperforming Stores
According to the Sacramento Bee and 12News, while many of Hooters’ underperforming stores are located in Florida, Kentucky, Rhode Island, Texas, and Virginia, the closures have spread to 14 states. Texas ranks the highest, with 16 restaurants closing their doors for good. Additional states to see closures include Alabama, Georgia, Illinois, Indiana, Maryland, Missouri, North Carolina, Oklahoma, South Carolina, and Tennessee. Their seven California restaurants remain open to date.
KBTX reports the brand has experienced a 12% drop in locations since 2018.
