Hooters Franchise: Exceptional Enviroment but Worth the Cost? (2024)
Hooters Franchise is a restaurant chain that was founded in 1983 by six businessmen in Clearwater, Florida. The concept of the restaurant was to create a casual, beach-themed atmosphere. Where customers could enjoy a meal while watching sporting events on television.
The first Hooters restaurant was opened on October 4, 1983, in Clearwater, Florida. The chain’s original menu consisted mostly of sandwiches and fried seafood items, with a focus on the Hooters “Original” buffalo-style chicken wings. In the years following the opening of the first Hooters, the chain expanded rapidly. With new locations opening throughout the United States. Today, Hooters has over 400 locations in 42 states and 28 countries.
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Hooters Origins
The founders of Hooters were six businessmen: Lynn D. Stewart, Gil DiGiannantonio, Ed Droste, Ken Wimmer, Bill Leith, and Dennis Johnson. They were inspired to create Hooters after visiting a bar in Florida that was decorated with pictures of beautiful women in cut-off t-shirts. They saw the potential in the concept of a casual, sports-themed restaurant that would appeal to both men and women, and decided to open their own restaurant with a similar concept.
Despite some criticism and controversy over the years, Hooters has remained a popular dining destination for its casual atmosphere, extensive menu, and friendly service. The restaurant has also become known for its charitable efforts, including its annual Hooters International Swimsuit Pageant and its support of various charitable organizations such as the Make-A-Wish Foundation.
How is Hooters Franchise Positioned in the Food and Beverage Industry?
According to data from the National Restaurant Association, the restaurant industry in the United States is a significant part of the economy, generating over $899 billion in sales in 2020. The casual dining segment of the industry, which includes chains like Hooters, accounted for around $225 billion in sales in 2020. This segment is expected to continue growing, with an estimated increase of 1.5% in sales for 2021
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In terms of employment, the restaurant industry is a major employer in the United States, with over 15.3 million people employed in the industry in 2020. Casual dining restaurants like Hooters account for a significant portion of this employment, with an estimated 3.4 million people employed in the segment in 2020.
Hooters is also a well-known brand in the casual dining industry and has a strong presence in the industry. The chain’s sales per unit are around $2.5M and Hooters has been consistently in the top 300 of the Top 500 Chain Restaurant Report by Restaurants & Institutions.
How Much is a Hooters Franchise?
The initial Hooters Franchise Fee is $75,000. You have to pay this upfront fee when opening a Hooters franchise.
Hooters Franchise Cost
The estimated total investment necessary to begin the operation of a Hooters Franchise ranges from $2,256,500 to $4,275,000. The following costs are part of the upfront costs included in the initial investment for Hooters. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a Hooters franchise.
| Type of expediture | Amount | To Whom Payment Is to Be Made | |
|---|---|---|---|
| Low | High | ||
| Initial Franchise Fee | $75,000 | $75,000 | Us |
| Real Estate Lease Payments | $7,000 | $50,000 | Lessor |
| Liquor License | $5,000 | $225,000 | Governmental Authority |
| Improvements/Signage | $1,400,000 | $2,500,000 | Suppliers, Tradesmen |
| Equipment, Furniture, Supplies and Smallwares | $550,000 | $750,000 | Suppliers |
| Initial Inventory | $25,000 | $100,000 | Suppliers, Our Affiliates |
| Labor and Training | $65,000 | $140,000 | Your employees, us, suppliers of transportation, food, lodging |
| Initial advertising | $10,000 | $50,000 | Suppliers |
| Insurance | $45,000 | $100,000 | Third-Party Insures |
| Professional Fees | $20,000 | $100,000 | Your attorneys, accountants, third-party site evaluation |
| Deposits, Licenses and Other Prepaid Expenses | $4,500 | $35,000 | Suppliers, Utilities, Landlord |
| Additional Funds – 3 Months | $50,000 | $150,000 | Suppliers, Employees, Tradesmen |
| Estimated Total | $2,256,500 | $4,275,000 | |
Hooters Franchise Requirements
You need a minimum net worth of $2.5M and liquidity of $1.5M. These requirements are minimums and may be higher in certain markets.
Trade Area Demographics
- Minimum of 100,000 population in the immediate trade area surrounding the site
- Daytime population of at least 15,000 in the immediate trade area
- Median income of $50,000 and higher in the trade area
Site Requirements
- Lot size of 1.5 acres or larger unless parking can be shared with adjoining lots
- Minimum building size of 5,000 square feet
- Minimum of 80 parking stalls
- Superior visibility of the building and signage elements
- Easy access into location, with a preference of two curb cuts at a signalized corner
- Traffic count of at least 30,000 VPD
- Superior strategic positioning of the site for the trade area
- Strong retail synergy within ½ mile of the location
- Late night activity drivers within one mile of the site
- Ability to achieve Hooters brand signage and exterior elements
Owning a Hooters Franchise Requires Ongoing Fees
Continuing Royalty Fee: 5% of Gross Sales
National Advertising Fee: Currently, 2.5% of Gross Sales
Local Advertising and Promotion: Currently, 1.0% of Gross Sales
How much do Hooters franchise owners make?
According to data from Restaurant Business Online, 303 Hooters locations made $835 million combined for an average unit volume of $2,755,775.
2022 Hooters Median Franchise Sales: $2,755,775
| Initial investment (midpoint) | %Profit margin of median franchise sales | Estimated Profits | Time to recoup investments |
|---|---|---|---|
| $3,265,750 | 10% | $275,577 | 13.5 years |
| 15% | $413,366 | 9.5 years | |
| 20% | $551,155 | 7.5 years |
Based on the median sales provided by Hooters’s franchise locations, at an average of a 15% profit margin it will take around 9.5 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other Food and Beverage stores; the extent of market penetration and brand awareness that Hooters stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Hooters Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Hooters franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
Under $5 Million Net Sales
- Estimated Selling Price = Net Sales * 0.55
When you go to sell a Hooters franchise based on the median multiple of .55 and net sales of $2,755,775, it would sell for $1,515,676.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Conclusion
Hooters has differentiated itself in the market by providing an ambiance that you will not find at most restaurants. If you have the right locations, a Hooters franchise can be a great investment opportunity.
While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Food and Beverage Industry.
