Billion or bust: Hooters boosts bottom line with diversification: airline, magazine, credit card, Las Vegas resort propel restaurant brand toward sales landmark

Nation's Restaurant News, July 18, 2005 by Milford Prewitt

MIAMI BEACH, FLA. -- Branding an airline, a Las Vegas resort, a men's magazine, a credit card and even gourmet potato chips, the globally expansive Hooters chain is pursuing an aggressive brand diversification campaign unlike any seen before in foodservice.

Having vanquished the U.S. Equal Employment Opportunity Commission in a landmark lawsuit that upheld Hooters' right to hire only women as servers, the Atlanta-based chain has reunited what was once a splintered franchise community while on the verge of becoming the newest member of the industry's billion-dollar-a-year sales club.

Parents still may pull their sons out of Hooters-sponsored baseball teams--as was the case recently in Taylor Mill, Ky.--and critics may complain about the perceived sexist double-entendre in Hooters' name and wide-eyed-owl mascot, but detractors may have no choice other than to get used to seeing the logo in the most unexpected places.

The company, eager to keep its brand top-of-mind, is adding more cities to the service area of Hooters Air, its 2-year-old, Myrtle Beach, S.C.-based airline, whose fleet of five 737s and 757s currently serves 15 cities, including Las Vegas and Chicago.

Hooters Air's flights have professional stewards for safety, but also on board to provide cabin service are a pair of the curvaceous, short-shorts-and-tank-top-clad Hooters Girls, who arguably are the restaurant chain's best-known signature attraction.

Coming next February will be the 700-room Hooters Las Vegas casino and resort. It will be operated by Hooters Management Corp., a 22-unit franchisee based in Clearwater, Fla., that founded the concept in 1983. Exempted from having to pay royalties to Hooters of America Inc., or HOA, when the founders sold their franchising rights to the Atlanta-based franchisor years ago, Hooters Management Corp. has repaired a relationship between the two companies that had been bumpy in the past.

At the chain's recent franchisee convention, HOA president Coby Brooks hailed the new spirit of cooperation between the two companies, as evidenced by the franchisee's agreement to pay royalties on its casino revenues.

In other revenue-generating activities, HOA has turned its in-store Hooters magazine into a paid-subscription, mass-distributed men's lifestyle and culture publication to compete head-to-head with such young men's mags as Maxim or FHM.

Hooters" branded line of gourmet potato chips, once available only through vending machines and flavored to mimic the taste of the chain's French fries, are "doing phenomenal" in retail establishments, said Mike McNeil, Hooters' vice president of marketing.

Later this fall the company will introduce a branded revolving-credit card with a major financial institution. On top of all of that, Hooters is sponsoring a series of NASCAR-sanctioned car racing events and golf tournaments around the nation.

On the charitable side of the ledger, Hooters and its franchisees are major backers--contributing more than $8 million in the past few years--to the Jimmy V Foundation, a cancer research group named after late North Carolina State University basketball coach and ESPN commentator Jimmy Valvano, who died of the disease in 1993.

All of those activities come as Hooters is zeroing in on breaking the billion-dollar sales threshold.

After tallying systemwide sales of about $760 million in 2004, Hooters--whose 402 restaurants now operate in all but four states and in a total of 17 countries--will top $1 billion in food and beverage sales by the second or third quarter next year, Brooks predicted while addressing his company's franchisees at their annual convention. The chain would have 470 branches by that time, he added.

At the Fountainebleau Resort in Miami Beach--where the convention took place as perhaps the only annual franchise gathering to include a pageant of 100 bikini-attired beauties--Brooks was joined by nearly 600 enthusiastic franchisees, vendors and senior-level executives.

Among them was Brooks' father, Bob, the 68-year-old chairman of HOA. He made his fortune developing the non-dairy creamers airlines once served with coffee and by launching a still-thriving food company, Naturally Fresh. In 1984 he invested in the Clearwater, Fla., group that had founded Hooters.

Coby Brooks had worked for years at Naturally Fresh, a key Hooters vendor, where he came to know many of the chain's franchisees closely.

"Hooters makes you happy," said Bob Brooks, in repeating the chain's tag line to explain why the brand is thriving. But, he admitted, in examining other companies that spread their brands into other business lines and lose sight of their core product, there are dangers in too much cross-pollination.

"Can you have too many balls in the air at one time?" Brooks asked in a deep South Carolinian drawl. "I suppose so. I just hope that if the day ever comes when we are spread too thin, I recognize it."

Brooks argues that leadership and developing the right people are going to keep Hooters on target. "Leaders have a job to do, and I believe as long as they fill their niche the rest will take care of itself," he said.