For Hooters, the pandemic has proven to be quite the renaissance, says CEO Sal Melilli.
Same-store sales increased 7 percent last year against 2019 and grew 29 percent year-over-year, which is roughly 400 basis points better than the industry, according to data from Black Box Intelligence. At corporate stores, four-wall adjusted margin is expected to be up 300 basis points from 2019 and adjusted EBITDA is projected to increase 36 percent versus 2019 and 95 percent compared to 2020.
The company is also as diverse and flexible as it’s ever been. Within the casual-dining segment, Hooters is seeking smaller footprints and second-generation locations to lower overhead costs and leveraging interest among international markets. The chicken chain is also bolstering its presence in quick-service with the continued expansion of fast-casual spinoff Hoots Wings, which has about a dozen units across five states. After making a strong franchise push in 2021, the brand has more than 100 committed units and is in advance discussions to sign deals for another 100 or more.
Alongside those growth pillars are three virtual brands—Hootie’s Burger Bar, Hootie’s Chicken Tenders, and Hootie’s Bait & Tackle—to fill extra capacity and attract new customers on third-party platforms. The company partnered with delivery facilitators REEF Kitchens and C3 to extend Hooters’ brand even further.
Combined, parent company HOA Brands oversees roughly 380 locations that earn about $1 billion in systemwide sales.
“The brand is back,” Melilli says. “The brand is alive and well. We’re seeing double-digit growth sales that we’ve carried out of last year into this year. We’re very excited that we’ve got a real focus, especially on the core brand and now the emerging brand. It really puts us in a good spot with a good foundation.”
Though Hooters is transforming, it still understands experiential dining rooms are its core, and that’s why the brand is heavily investing in the rising world of sports betting. More than 30 states have legalized sports gambling. The global market is projected to reach $140.26 billion by 2028 and grow at a CAGR of 10.1 percent from 2021 to 2028, according to a report by Grand View Research.
Thus far, Hooters has launched live betting in Indiana, Virginia, and Tennessee, formed partnerships with DraftKings and PointsBet, and placed in-store gaming machines in select Georgia restaurants. More than 80 stores are in legal sports betting markets. In 2020, the sports bar began using KonekTV’s sports betting platform to display game statistics, analytics, and odds to inform sports bettors within the restaurant.
FSR recently caught up with Melilli to learn more about Hooters’ engagement with sports betting, and what the future opportunities are inside dining rooms.
What progress have you made with integrating sports betting into restaurants?
I would say we’re definitely in the early innings of sports betting, right? And for our particular case, on the Hooters’ side, we’re such a destination place, and we’re such an experience that really it lent itself to be a natural fit for us and for [sports betting partners]. Because people are already coming to our place. We already have a world-class, a AV/TV package. We already show all the sports. So for us, the partnership was easy, right? And as states are coming on legalizing sports gaming, we then add more and more states. So whether it’s our corporate stores or whether it’s our franchisees, we just naturally tucked them in. So the states that are legal, we’re off and running.
And really what the partnership does for us and for them, it just creates more excitement and enthusiasm as the whole gaming market begins to emerge and explode. It’s what we call the dwell time. Folks are able to sit in the restaurant longer, order more food, perhaps there’s a bet, “hey, all bets at Hooters pay double in the next 10 minutes.” So people have a tendency to want to linger longer and increase the dwell time. But for us, already being in the sporting business and the sporting world of being such a destination, it’s really just a natural add-on for our customer experience.
Could you describe how it looks inside locations?
We’ve got so many flat screens in our restaurant that we’ve dedicated to basically put the odds beds up so that if you’re a sports gambler, you can see what the odds are, you can see what the games are, and then a lot more to be able to watch the games in real time. It’s very interactive, very user-friendly. We actually have our Hooters girls educate those that haven’t downloaded the app—what to do, recognize and point out the television—so [customers] can really see it and immerse themselves in the restaurant. And again, I just think because we’re such a destination, it’s just a natural fit, and I think the customer appreciates and sees it because it’s all right there at their fingertips.
You’ve previously mentioned in-store gaming machines in Georgia. Could you share more about how that works in restaurants?
Certain states have allowed in-restaurants gaming devices. I know we have them in Illinois. We have them in Georgia currently. Again, being a destination and an experience, people are able to experience different things in the restaurant. So in those particular cases, they can sit and play the video games with respect to the gambling portion and then still have the games on TV and still be able to eat and drink and dine-in and still watch the sport. It’s just a nice add-on in those states to the whole gaming portfolio.
Could you describe the nature of your relationship with DraftKings and PointsBet and how that manifests itself inside restaurants?
Each of them will get creative with our marketing department, and they’ll do two things—one is the offer or the incentive in terms of placing the bet through our particular place. And then the second piece is the creative and the point of sale that then we can use from an exterior standpoint to market to our consumer, social media, and the likes, and then internally when they come in.
What did you all gather from the Super Bowl?
First of all, it’s a reason to engage and communicate with our customers, the biggest football game of the year, you can come into Hooters and place bets from your phone in states that are legal and you watch the game and the world-famous Hooters girls and the world-famous wings. We were able to get in front of them if they were thinking about getting out or going somewhere. We became top of mind for that. We did hear from a lot of our franchisees as well as our corporate stores that folks did come in. You can see them on their phones, you can see them watching the game in real time, and it just creates a good dialogue at the table between the server, “Hey, who do you bet on, who do you pick?” It certainly is so far reaching. It’s not just them coming in the door. It also engages our staff.
What have been the biggest takeaways so far from sports betting, and what are the opportunities?
The biggest opportunity is definitely more states coming online. That’s really where it’s at is more come on, we’ve already got the model built, our franchisees are already on board. So we have a mix today of corporate and franchisees. So as more states come on, that’s just nothing but opportunity. And then, we also don’t know what we don’t know, meaning the partnerships in terms of what the wages are, what the odds bets are going to be, incentives for people to come in and wager and stay longer. So I think there’s definitely opportunity on that front as more states come online.
And the takeaways are we want to be as many things as possible to our consumer. So they’re already coming in. This has a tendency for them to linger longer. And if they haven’t come in and they recognize that a Hooters is a place that, “hey I can go, I can watch the game, I can place bets on my phone” and that we’re setting up the environment to help cater to that customer, I just think it just makes it more user-friendly and easier selection when it comes time to decide where you’re going to watch the big game.
Have you compared restaurants with sports betting to those that don’t have it yet?
In terms of measuring the ROI or measuring the impact, when I say we’re in the early innings, that’s really where we are. Fortunately, our entire system is up double digits in sales. So it’s not like there’s been a big delta between the two. We had Super Bowl under our belt. It was the first big event. March Madness now will be the second one. That’s why I say we’re still probably in inning one or two in terms of being able to see it, measure it, and feel it other than anecdotally you hear customers talk, you hear the feedback from your staff.