Neil Kiefer has fond memories of the original Hooters restaurant he cofounded in 1983 in Clearwater, Florida. Despite naming his chain with a heavy dose of innuendo, he and his partners intended it as a beachside dining spot for young people and families.
“It started as a place five miles from the beach,” Kiefer, now the CEO of Hooters Inc., told Fortune. “You came in from the beach, could throw some coveralls on, shorts…and it was a hangout.”
In March, Hooters for America, the private equity-controlled entity that controlled the restaurant chain, filed for Chapter 11 bankruptcy, giving Kiefer, his co-founders, and franchises a way to buy back more than 100 locations. For about two years, Kiefer and his business partners at Hooters Inc. had galvanized his franchises’ discontent with the company’s direction under private equity ownership.
“It’s a beach-theme restaurant, not a sexualized one,” Kiefer said. “So I think they went too far down the road of making it more like a little boys club hangout, and they therefore alienated the women and the families we have.”
The CEO pledged to return the chain to its beachy roots, insisting Hooters is a family-friendly restaurant with beachy vibes. That means not just an updated menu with hand-breaded wings, sauces, and salads with housemade dressings, but also uniforms for servers that resemble Hooters’ 1980s jogging-style shorts.
“There’s volume shrink in the restaurant industry,” Saunders told Fortune. “At the moment, there’s very high costs and cost increases, and really, because people are dining out less often and they’re buying less, it’s really a big battle for market share.”
Saunders said private equity is to blame for these restaurant chains’ woes “very, very often.” It’s is an appealing option for business owners looking to sell and get a bang for their buck, as private equity firms are willing to give up lots of cash—most of which is leverage—and in return, try to flip the business, which can look like carving up its assets or selling its real estate to other investors, only to lease it back.
“Private equity tends to take quite a short-term view of the businesses it owns, and very much is about profit maximization in the short term, and it isn’t really about long term brand health,” Saunders said.
Kiefer’s gripe with Hooters’ private equity ownership was the choices they were making about the business, such as in 2021, when Hooters for America introduced skimpier shorts as part of its uniform. About 160 company-owned stores adopted the new look, while the couple of dozen franchise locations under Hooters Inc.’s ownership did not.
The CEO said he could see the difference in customer-base demographics in those stores, with franchise locations he owned seeing women and children make up between high-20s % to low-40% of its customers. In stores he is acquiring, customers were between 5% and 18% women and children.
“When you just appeal to just men or just women, you’re cutting the market in half totally,” he said.
According to Saunders, one major factor in Hooters’ future success will be its ability to overcome its reputation as a so-called “breastaurant.”
“One of the key questions is, Is that what consumers actually want? Is it still relevant today?” he said. “It’s a lot more of a love-it, hate-it-type proposition than it used to be. It’s polarizing.”
But with a bid to appeal to more women and families, Hooters risks failing to differentiate itself from the dozens of other casual dining chains also priding themselves on being family-friendly, according to Saunders. And that’s on top of restaurants competing with consumers’ desires to dine out less and cook more.
Kiefer is concerned with keeping the brand alive in the long term. He said he’s not interested in the private equity model of prioritizing profit, but rather supporting franchise locations, some of which have been in business for 40 years. And there are no plans for the company to change hands again anytime soon.
“Our plan is to never sell it,” Kiefer said. “Our plan is to have the next generation of Hooters operators take over.”
That doesn’t mean striking a chord with diners is any less important.
“It’s still a heavy climb,” Kiefer said. “We’re all consumers. When you go out to eat, you have a bad experience, you simply don’t go back. We’ve got a lot of work to do to straighten things out and then to win the customers back and get new customers, too.”
