Investor to pay $55.1m for 22-unit Hooters Inc. group

Nation's Restaurant News,  March 24, 2008  

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CHARLOTTE, N.C. -- A firm that holds an IOU-based option on 2 percent of the stock of brand owner Hooters of America Inc. has agreed to pay $55.1 million to buy out the nine owners of a 22-unit franchisee, Hooters Inc., which launched the chain in 1983.

Chanticleer Holdings Inc., based here, said its deal should close before July 31 and that several of the individuals selling their Hooters Inc. stock would remain involved with the Clearwater, Fla.-based group.

The deal requires that Hooters Inc. be converted from a business development company into an operating company, according to Chanticleer, which would pay for the acquisition by raising equity and taking on debt, with the transaction contingent on that financing.

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Hooters Inc. sold the trademark in 2001 to Atlanta-based franchisor-operator Hooters of America, whose 28-nation system now comprises 433 of the casual-dining restaurants.

As a franchisee, Hooters Inc. holds what Chanticleer described as "a perpetual irrevocable license agreement with greatly reduced royalties." Chanticleer chief executive Mike Pruitt said the acquired group has "the highest average-unit gross sales within the Hooters system," including branches in and around Tampa, Fla., Chicago and Manhattan, and the original Hooters in Clearwater.

In addition to its 2-percent stock option by dint of being lead investor in a $5 million, 6-percent, three-year promissory note to the late Robert Brooks, who was Hooters of America's chairman until his death in 2006, Chanticleer holds an option to develop franchised Hooters in the Republic of South Africa.

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