Dive Brief:
- Nord Bay Capital and TriArtisan Capital Advisors acquired Hooters of America from HIG Capital, Chanticleer Holdings and other investors. The selling entities will retain a stake in the company, according to a press release.
- Financial terms were not disclosed.
- Hooters of America is the franchisor and operator of over 430 Hooters restaurants in 38 states and 27 countries.
Dive Insight:
After nearly a year on the market, the casual dining restaurant has finally been sold, capping off a particularly active first half of the year for acquisitions. Within the last few months, several casual dining chains have undergone transactions. Del Frisco’s was sold for $650 million while Perkins & Marie Callender's is on the market. P.F. Chang's also was sold to TriArtisan Capital and Paulson & Co.
Combined with declining foot traffic and a lack of innovation, casual dining restaurants have been targets for acquisitions, especially those on the public market. Red Robin and J. Alexander's are both under pressure by activist investors to sell following years of slow growth.
TriArtisan Capital is a bit on a spending spree as this transaction follows closely behind its acquisition of P.F. Chang's. Its appetite of casual dining is curious, especially since the segment has struggled with growth of late. Many private equity firms with a focus on consumer brands have turned away from traditional retail and toward restaurants since this segment is doing better than struggling retail. TriArtisan has owned TGI Friday's alongside Sentinel Capital since 2014, so it has some knowledge of the segment, but the new owners could have their work cut out for them.
Hooters of America was previously sold to HIG Capital, Chanticleer Holdings and other investors in 2011 following 30 years of ownership by the Brooks family. Technomic estimates Hooters' sales were nearly $800 million last year, which was down 1.7% from 2017. The company has been losing popularity among consumers, especially millennials, and dropped unit count 7% from 2012 to 2016, according to Business Insider.
It has since rolled out and grown its fast casual version, Hoots, that offers a similar menu minus the scantily clad waitresses. Hooters of America CEO Terry Marks said in the press release that the fast casual concept has been doing well and plans to open more stores this year. According to Technomic, Hooters' unit count stabilized in 2018 and 2017, which is good news for the restaurant's new owners, but overall sales growth will need to be addressed quickly to maintain the strength of the brand.
