Restaurant chain Hooters of America is in discussions with creditors to restructure its business through a bankruptcy filing, as reported by Bloomberg.

The company is collaborating with Ropes & Gray to prepare a potential filing, although plans are not yet finalised.

The court proceedings are expected to begin by April 2025.

The company, famous for its distinctive server uniforms and owl mascot, has been working with its legal team and turnaround advisers from Accordion Partners to address its debt burden.

Some of Hooters' debtholders have engaged Houlihan Lokey for advisory services.

Accordion Partners, Ropes & Gray and Houlihan have not provided comment.

Hooters has been grappling with liquidity challenges, leading to a decline in foot traffic and the closure of several locations.

In 2021, the chain issued $300m in asset-backed bonds structured as whole-business securitisations, in which a company uses the majority of its assets, including franchise fees, as collateral.

This financing method is common among restaurant chains and other franchised businesses.

The casual dining sector has been facing significant headwinds due to inflation, supply chain disruptions and rising interest rates, which have resulted in increased menu prices and reduced consumer interest in dining out.

More than a dozen large restaurants and franchisees filed for bankruptcy protection in 2024, according to BankruptcyData.

Restaurant prices rose 44% from 2015 to March 2024, as reported by Black Box Intelligence, outpacing the 26% increase in grocery prices over the same period.