Hooters founders' haul: $55.1-million
The chicken wing empire's founders agree to sell their remaining 22 restaurants.
By MARK ALBRIGHT, Times Staff Writer
Published March 12, 2008
CLEARWATER - The founders of Hooters Inc., the chicken wing chain better known for its wait staff in skin-tight shorts, have agreed to sell their 22 restaurants for $55.1-million.
While most of the money will help the Clearwater founders cash out, the new ownership arrangement is designed as a vehicle for those who stick with the company to play a bigger role in the growth of a brand that did more than $1-billion in sales in 2007.
"This will help us get this company to the next level," said Ed Droste, 57, one of the six drinking buddies who got Hooters off the ground as a Clearwater neighborhood bar 25 years ago.
In 1997, the founders sold the last of the franchise rights for $60-million to Atlanta-based Hooters of America Inc., which controls the 433-store franchise network spread over 28 countries. The founders, however, kept their stores in the Tampa Bay area, Chicago and Manhattan, and other rights to exploit the Hooters brand they created.
The buyer - Chanticleer Holdings Inc., a small Charlotte, N.C., closed-end investment fund - agreed to raise the $55.1-million with bank debt and by selling a secondary offering by this summer to acquire Hooters Inc., which will remain based in Clearwater.
"We believe in this management team," said Mike Pruitt, the 47-year-old president of Chanticleer, which will become an operating company, with Hooters Inc. as a wholly owned subsidiary.
Neil Kiefer, Hooters' chief executive, will be named president of Chanticleer and Hooters. Management will remain intact.
Indeed, the founders' restaurants generated average sales of $3.6-million in 2007, almost double the average of the chain Hooters. So Chanticleer hopes to be an enticing development partner for other Hooters franchisees. Chanticleer also is developing Hooters stores in South Africa.
In Atlanta, Hooters of America has been mired in lawsuits among the heirs of Robert Brooks, a Myrtle Beach, S.C., entrepreneur who owned and built the franchise network company, but died in 2006 at 69.
Chanticleer's biggest deal: raising $5-million for Hooters of America, a company in which his fund has a 2 percent stake.
It was Brooks who introduced the founders group to Chanticleer and Pruitt at a Hooters charity event two days before he died.
"This was exactly the type of deal we were talking about with Bob then," Kiefer said.
Only four of the six Hooters founders still have a stake in the company. The proceeds of the sale, however, will be split nine ways, thanks to stakes for wives and ex-wives. The nine, some of whom still work at the headquarters, have yet to decide how much they will pocket in cash and how much of a stake they will keep in the new organization. Droste, whose ad agency handles the Hooters account, said he will remain "a player." Bill Ranieri, 86, is expected to mostly cash out.
The founders still own a separate Hooters food business that sells about $15-million in licensed products to grocers and generates $5-million publishing Hooters Girls calendars. They also own the 696-room Hooters Casino and Resort in Las Vegas with some Japanese partners, but have a deal to sell it for $95-million to a Santa Monica, Calif., group. The buyer, NTH Advisors, recently agreed to keep paying $500,000 a month to keep the purchase alive for another six months.
Mark Albright can be reached at firstname.lastname@example.org or (727) 893-8252.