A pair of well-known casual-dining brands could be the next restaurant chains to file for bankruptcy or restructure as they struggle to pay their debt.
That’s according to John Bringardner, executive editor of Debtwire, a publication that tracks companies’ debt.
At least 16 restaurant chains, franchisees or operating groups have filed for bankruptcy this year. Many took on debt to survive the pandemic and are struggling to pay it back as consumers slow their restaurant spending due to inflation.
“It’s almost like they just made it out of orbit but couldn’t quite exit because they had to take on a great deal of debt just to survive closures during the pandemic,” Bringardner said.
Chains including Red Lobster, Buca di Beppo and Rubio’s have been among the biggest to file for Chapter 11 protection. BugerFi also appears to be on the brink of bankruptcy. And there are sure to be more. Debtwire has identified Hooters and Black Angus as two likely candidates.
Signs of trouble at Atlanta-based Hooters arose in June, when it closed a number of underperforming locations across the country. Mass closures often precede a bankruptcy as companies look to get unprofitable locations off of their balance sheets.
Behind the scenes, Hooters has hired restructuring advisors to consider its options, which could include a restructuring, sale or bankruptcy, Bringardner said.
“Bankruptcy is probably the worst-case scenario for them,” he said. “It’s open at the moment, but the fact is there are restructuring advisors working with the company.”
The 293-unit chain known for chicken wings and scantily clad waitresses has been struggling for years. Since 2018, U.S. systemwide sales are down nearly 15%, and its domestic footprint has shrunk by 12%, according to Technomic data.
Last year, Hooters U.S. sales rose just 0.8% year over year and it closed four restaurants, per Technomic.
Bringardner compared Hooters to other well-known companies facing bankruptcy, such as Avon, Tupperware and Red Lobster. “They were ubiquitous at one time, but when’s the last time you know somebody who’s gone to one?” he said.
Hooters had not responded to a request for comment as of publication time.
The smaller Black Angus, which had 32 locations at the end of last year, is also at risk, per Bringardner, who said the company’s debt is trading at pennies on the dollar.
“It is extremely bad,” he said. “It’s a sign that the debt holders really think that there’s little likelihood of recovery there.”
Debtwire reported in July that the Burbank, California-based company had hired investment bankers to explore a sale of the chain.
Sales at Black Angus decreased by nearly 29% from 2018 to 2023 as it closed more than a quarter of its restaurants, according to Technomic. It has struggled while steak competitors such as Texas Roadhouse and LongHorn Steakhouse have soared. Sales fell 1.5% last year, per Technomic.
A contributing factor in Black Angus’ problems is that most of its restaurants are in California, where wages and other operating costs tend to be higher.
“Is that their main issue? No,” Bringardner said. “They’re clearly having other troubles with the business. But it’s another factor that’s hitting their bottom line.”
In response to an emailed question about a potential bankruptcy, Black Angus VP of Growth Deborah Shapiro said in a statement: "In today’s restaurant climate it is a fair question, but thankfully one that does not pertain to us."
She added that while Black Angus' competitors are "showing year over year losses," the chain is "still showing consecutive yearly gains," including double-digit growth in sales and traffic.
Older casual-dining chains have found it harder to rebound from the pandemic as consumers become more discerning in their restaurant choices. That behavior has produced some clear winners, such as Texas Roadhouse and Chili’s, and left others floundering. In the most extreme cases, it has led to bankruptcies or other drastic measures.
CORRECTION: A previous version of this story said Black Angus' sales fell 2.8% last year. They declined 1.5% in 2023 and 2.8% in 2022.
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