FDD Talk 2016: The Hooters Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

In this FDD Talk 2016 post, you’ll learn the following:

• Section I – Background information on the Hooters franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Hooters franchise, based on Item 7 of the company’s 2016 FDD

• Section III – Presentation and analysis of Hooters’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:

• 2015 average, median, high, and low gross sales for the 187 company-owned (141 legacy company-owned, 43 remodel company-owned, and 3 new company-owned) and 139 franchised Hooters Restaurants that operated in the United States for the full fiscal year 2015 (which ended December 27, 2015)

• 2015 aggregate food sales, beverage sales, merchandise sales, total revenue, food costs, beverage costs, merchandise costs, total cost of sales, gross profit, staff payroll, management payroll, indirect payroll and benefits, total controllable payroll, direct controllable costs, fixed controllable costs, non-operating expense, and restaurant EBITDA for the 187 company-owned, 141 legacy company-owned, 43 remodel company-owned, and 3 new company-owned Hooters Restaurants that operated in the United States for the full fiscal year 2015 (which ended December 27, 2015)

Section I – Background Information

Hooters is a casual restaurant that got its start back in 1983 in Clearwater, Florida. Three years later in 1986 it started franchising. The restaurants have a beach-type theme, plenty of flat-screen televisions for sports, music, and waitresses that serve up a fairly standard menu of American food. The girls, however, are anything but standard (more on that below).

The number of locations has been hovering just above the 400 mark for at least the last five years, and currently stands at 417, of which 193 are company-owned and 80 are located outside the U.S.

Headquartered in Atlanta, here’s how privately-held Hooters keeps serving up its own special brand of dining out in the casual restaurant segment:

The Menu

The menu at Hooters features five salads, 13 different “Hooterstizers” (appetizers), five different kinds of wings, six different seafood dishes, five burgers, nine other sandwiches and tacos, and an array of sides and desserts. None of it looks particularly interesting or different from what you’d find at any other sports bar or restaurant. And that’s because people (guys) don’t really go to Hooters just for the food.

The Girls

Hooters clearly caters to a high-testosterone male crowd. Here’s how the company’s website presents its main draw:  “…the Hooters Girl has become a phenomenon of her own. Hooters Girls are the very essence of Hooters. Trained to excel in customer service, they provide the energy, charisma and engaging conversation that keep guests coming back. Much more than just a pretty face, Hooters girls have game. They’re intelligent and attentive – using their energy, experience and personalities to serve guests everywhere to live in the moment and take a break from the outside world.”

All you have to do is see a picture of a Hooters girl to figure out what’s really going on here:  The waitresses are well endowed and wear skimpy outfits to emphasize their figures.

Legal Challenges

As might be expected with an establishment that will only hire a very particular kind of female server, there have been various lawsuits filed against the company, none of which have kept it from continuing to do what its brand does best:  Keep men well fed and entertained.

And the company is not apologetic for its approach, as the website states: “Yes, we have a pretty face. And sex appeal is part of our thing, but it’s not the only thing. Hooters has no plans to alter the concept and feels doing so would be a tremendous disservice to its franchisees, employees, and you.”

Philanthropy

Perhaps in an effort to make sure there is as much positive publicity as possible and to promote a good public image, Hooters is deeply involved in the communities where the company has restaurants. Its Hooters Community Endowment Fund raises and contributes funds to local and national charities such as the Jimmy V Foundation for Cancer Research, Make-A-Wish Foundation, the USO, Special Olympics, American Diabetes Association, Juvenile Diabetes Foundation, and Muscular Dystrophy Association.

Section II – Estimated Costs

• Please click here for detailed estimates of Hooters franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis