Hooters Announces Closure of Underperforming Restaurants Amid Industry Woes

Hooters is closing underperforming restaurants amidst industry struggles, despite new openings. 

Hooters revealed on Monday that it will be shutting down "a select" number of underperforming restaurants, joining the ranks of other casual dining chains also experiencing closures due to industry-wide challenges. The company cited "current market conditions" as the primary factor behind this decision, while also emphasizing the ongoing opening of new restaurants both domestically and internationally. However, Hooters did not disclose the exact number of locations affected when approached for comment. Despite these closures, the company stated that its 41-year-old brand remains resilient and relevant.

Industry Challenges and Trends

According to National Restaurant News, approximately one-third of all brand-name restaurant chains concluded 2023 with fewer locations than they had at the start of the year, reflecting the turbulent state of the dining industry.

The restaurant landscape in the U.S. is navigating through various challenges. While fast-food chains like McDonald's, Burger King, and Popeye's parent company, Restaurant Brands International, have been grappling with declining fortunes, there is evidence suggesting a shift in consumer behavior. Darden Restaurants, the parent company of Olive Garden, noted on a recent earnings call that some fast-food diners are transitioning to casual dining establishments.

However, despite this indication, major casual dining giants such as Applebee's, Red Lobster, Cracker Barrel, Outback Steakhouse, and its sister chains Carrabba's Italian Grill and Bonefish Grill have announced a significant number of closures this year. The industry, as a whole, has experienced a decline in restaurant spending over several months, a trend not seen since the onset of the pandemic, as indicated by Census retail sales data.

Consumer Spending and Sentiment

The rising cost of eating out in the U.S. is putting pressure on consumer spending. The Bureau of Labor Statistics reported a surge of more than 25% in the cost of "food away from home" since the beginning of the Covid-19 pandemic, with an additional 4% increase in May compared to a 1% growth for groceries. A survey conducted by KPMG revealed that 41% of consumers intend to reduce their expenditure on restaurants this year, with only 21% planning to increase spending. On average, consumers anticipate cutting their monthly restaurant spending by 9%, surpassing reductions in other spending categories.

Duleep Rodridgo, KPMG's U.S. consumer and retail sector leader, underscored this trend, stating, "Consumers are tightening their belts another notch as they hunt for discounts, and even some essentials are being impacted. We have already seen a few retailers lower prices, as they look to maintain the balance between their margins and demand."

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