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AStrongest tier66/100FDD 2023

Hooters: Litigation & Risk

Full-Service Restaurants · FDD Items 3, 4 & 5

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Elevated Risk

2 cases disclosed in FDD Items 3 and 4. Bankruptcy disclosed in Item 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
2
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
Disclosed
Franchisor or officer bankruptcy
Verdict score
66 / 100
FranchiseVerdict composite · higher is better
Rating
A
A / B / C / D / F verdict grade

7(a) FOIA data · FY2020–present

SBA Loan Performance

Aggregated from public SBA 7(a) loan disclosures. Charge-off rate is the share of loans that were charged off or settled for less than the full balance.

Total 7(a) loans
6
Government-backed loans issued
Charge-off rate
N/A
vs 16% franchise average
5-yr charge-off rate
N/A
Defaults
N/A
Loans charged off or defaulted
Total loan volume
$2.4M
Avg loan size
$394K
Participating lenders
4

FDD Items 5, 6 & 17: What You Give Up

Contract Risk Indicators

Mandatory arbitration
Not required
You retain the right to sue in court
Jury trial waiver
Not waived
Non-compete
2 yrs
Post-termination restriction on similar businesses
Franchisor can compete
Yes
Franchisor can open competing locations in or near your territory
Right of first refusal
Yes
Franchisor can match any purchase offer when you try to sell
Governing law
Florida
State whose law governs disputes. Relevant if you're not based there

Extracted from FDD Item 3

Litigation Detail

Franchisor itself has no pending or concluded litigation. Predecessor/affiliate litigation: (1) HOA Franchising, LLC v. MS Foods, LLC and Mahmood Saifie (N.D. Ga., filed 2023) for breach of contract/trademark infringement after a terminated franchisee continued operating; case administratively closed due to Predecessor's 2025 bankruptcy. (2) Owl's Eyes entities v. Hooters of America, LLC (Cobb County, GA Superior Court, filed 2011) alleging wrongful termination; settled in 2018 for $190,000 with no admission of liability.

What drove the 66/100 verdict

Risk Score Breakdown

  1. 01MINORDeclining unit count (-3.8% YoY) indicates system contraction and market challenges
  2. 02HIGHMultiple litigation cases involving breach of contract, abandonment, and financial obligation failures suggest operational and legal instability
  3. 03MINORNo Item 19 (Net Income) disclosure prevents accurate ROI assessment despite $1.26M-$4.1M investment requirement
  4. 04HIGHGoing Concern status is FALSE, indicating potential financial viability concerns at corporate level
  5. 05MINORHigh investment range ($1.26M-$4.1M) combined with declining units suggests poor unit economics or market saturation
  6. 06HIGHLitigation pattern includes franchise failures (unauthorized abandonment) indicating franchisee distress
  7. 07MED5% royalty on average $3.57M revenue ($178.75K annually) is sustainable only if net margins are healthy—which are undisclosed

Severity inferred from FDD text. Not a regulatory or legal classification

Litigation data from FDD Items 3, 4, and 5. SBA data from public 7(a) FOIA records (FY2020–present). Not legal advice. Consult a franchise attorney before signing any franchise agreement.