Swot Analysis Of Hooters
Hooters of America Financial Health and Liquidity
Charles Harper
Prof. Lisbeth Bundli
January 19, 2015
Hooters of America Financial Health and Liquidity Everyone is very well familiar with the name Hooters, and the brand they seem to personify. For the very few who are unaware, let’s take a quick look into Hooter’s beginnings and what they are all about. The very first Hooter’s was established on October 4, 1983 in Clearwater, Florida (“About Us”, 2012, para.1). When the restaurant first opened up, it originally included six founders who all shared the same vision for the upstart restaurant. The Hooter’s concept was very simple, create an environment where men can go and be men, while also remaining family friendly. Original …show more content…
concept included pretty girls, beer and sports. Eventually, the founders added the world famed Hooter’s uniform, which consists of a white tank top, and orange shorts to complement the Hooter’s girls “assets”. You may even be familiar with their slogan “Delightfully tacky, yet unrefined”. As of today, there are over 430 Hooters locations in 28 different countries (“About Us”, 2012, para.3). Safe to say the Hooters Empire has made a splash and became one of the fastest growing restaurants in the industry. Being the first of its kind, it was only a matter of time before other smart businessmen began to take notice, and model the successful business tactic of using pretty faces to sell food and alcohol. We already know Hooters is a major leader in the restaurant industry. They primarily offer the standard customer their world famed chicken wings, burgers, sandwiches and seafood to go along with their ice cold beers, flat screen TV’s, and beautiful young waitresses. Hooter’s was the first restaurant to be branded as a “Breastaurant” for the emphasis on the Hooters girls’ chest region. Hooters are the originators of this brand of restaurant, but as of 2015, they have given birth to other like-minded restaurants as well making the competition very stiff. A few that come to mind include Tilted Kilt, Twin Peaks, and Bikini’s. All three are also considered “bresataurants” with an emphasis on the waitresses being the main attraction. Each restaurant however has a slightly different variation, with some differences in the menus as well. Tilted Kilt sports a Celtic themed environment, with traditions kin to English pubs. Its servers are famous for wearing plaid skirts with matching plaid bras. Their slogan “A cold beer never tasted so good” alludes to the company of the waitresses. Similar menu, they offer appetizers, burgers, wings and salads. Twin Peaks has a mountain lodge vibe to it, where the waitresses wear small khaki shorts, a plaid bra-like shirt with comfy snow boots. They emphasize the scenic view of the mountains. Menu has more of a comfort food feel to it such as steaks, pork, and fried chicken as well as your typical sports environments with flat screens at almost every booth and bar area. Finally there is Bikini’s Sports Bar and Grill. As the name suggests, this restaurant sports a beach theme where waitresses wear bikini tops and shorts. Primarily located in the south, they are the youngest of the four, and are currently expanding. Their menu includes steaks, salads, and your typical bar food. It’s safe to say that the term “breastaurant” may be slightly offensive to some, being as it can be seen as degrading to women. But with the growth of these multiple chains, restaurants like Hooter’s are great companies to invest in.
Horizontal Analysis
In order to determine whether or not one should invest in a company such as Hooters, you must take a look at their financial statements in order to get an idea of whether the company is actually in the positive; meaning would you be seeing a positive return on your investment. Below is a simple horizontal analysis of Hooters income statement and balance sheet for the years 2013 and 2014 (“Financials” 2015).
Chanticleer Holdings (Hooters)
Income Statement
Horizontal Common Size Report
2014 Change Over 2013
Sales
+
449%
Cost of Goods Sold
+
408%
Gross Profit
+
474%
Operating Expenses
+
440%
Income Before Tax
+
828%
Income Taxes
+
312%
Net Income
+
402%
The importance of the horizontal analysis according to Wainwright is that it “compares data from two or more time periods to show the change in certain accounts from two separate accounting periods” (Wainwright, 2012). It can identify certain trends whether positive or negative within a company. According to the horizontal analysis of the income statement, there were some huge changes that took place over the two year time period. This can be accredited to expansion. When companies see great change sales and cost of goods sold at such a high rate, it is assumed they have opened up more restaurants, therefore are making more sales, and the cost of those goods also rise. Of course with expansion, you will see every other category rise tremendously as well. According to research, not only are they expanding, but the Hooters are remodeling multiple locations as well to better serve its customers all over the country. This could also be an indicator the increase in expenses (“Hooters of America, 2014, para.2). If there were any negatives, then that would illicit some problems that may need to be looked into. Now let’s take a look at the balance sheet.
Chanticleer Holdings (Hooters)
Balance Sheet
Horizontal Common Size Report 2014 and 2013 2014
Cash
73%
Accounts Receivables
169.97%
Inventory
142.2%
Property and Equipment
259.63%
Investments
62.24%
Total Assets
201.61%
Accounts Payable
221.31%
Notes Payable
280%
Total Liabilities
226.45%
Common Stock
129.39%
Total Equity
182.06%
Total Liabilities and Equity
201.61%
By looking at the horizontal analysis of the balance sheet, there are some trends one should focus on.
Chanticleer Holdings has reduced its cash and investments. Normally this would be more alarming, but as the other trends show, they may have been used for other accounts that have a positive trend such as inventory and property and equipment. Again, this goes hand in hand with the possible expansion mentioned from the income statement. There is an extensive change in liabilities, but once again, this may be due to openings of new restaurants and the costs that go along with such.
Ratios
The current ratio of Chanticleer Holdings stands at .18:1, while the quick ratio is .07:1. The cash to current liabilities ratio stands at .03:1. In any typical business, with the current, quick and cash to current liabilities ratios not being favorable, one would assume that Hooters is a failing business that are not able to satisfy its payables. However, the aforementioned other competing “breastaurants” all have similar ratios. In this sort of restaurant business, a lot of the companies purchase their inventory on credit terms, causing a huge liability, as well as customers normally paying for the goods and services with cash which wouldn’t show favorably in the ratios. The only liquidity issues that are immediately evident are the small amount of cash for such a huge franchise. However, they remain financially healthy through their investments, and other …show more content…
assets. As a financial advisor, I would recommend investing in Hooters after taking a look at the above information. The company has expanded so much in such a short amount of time, and is still growing. This shows they not only are making a profit, but gaining notoriety and demand as well. This can only boast well for a potential investor. The finances all seem to point in a positive direction. Also, the restaurant industry as a whole has been on the rise and booming over the last couple of years. “Restaurant sales are gaining for the third consecutive year, according to Dawn Sweeney the president and CEO of the National Restaurant Association” (Daly, 2012). With Hooters being one of the leaders in the restaurant industry, it only makes sense for one to invest in a company that is growing with the rest of the industry. As far as any problems I foresee when it comes to Hooters, or any other “breastaurants”, it’s not so much from a financial standpoint.
The statements show the company is healthy financially; however, a human element to watch would be the public opinion of the company as far as its respect to women in general. With the sensitivity of the topic, it may present an issue one day that could directly affect the sales, therefore affecting the stock in the company. But as a financial advisor, I would put my stamp of approval on anyone looking to invest in Hooters!
References
Chanticleer Holdings. (2015, January 1). Retrieved January 16, 2015, from http://ir.stockpr.com/chanticleerholdings/financials
Daly, Pete. Grand Rapids Business Journal. 7/30/2012, Vol. 30 Issue 31, p14-14. 2/3p. , Database: Corporate ResourceNet
Hooters. (2012, January 1). Retrieved January 16, 2015, from https://www.hooters.com/Company/About.aspx
Hooters of America, LLC. Business Wire (English). 12/15/2014.
Wainwright, S. (Ed.). (2012). Principles of Accounting: Volume I. San Diego, CA: Bridgepoint Education,
Inc.
Charles Harper
Prof. Lisbeth Bundli
January 19, 2015
Hooters of America Financial Health and Liquidity Everyone is very well familiar with the name Hooters, and the brand they seem to personify. For the very few who are unaware, let’s take a quick look into Hooter’s beginnings and what they are all about. The very first Hooter’s was established on October 4, 1983 in Clearwater, Florida (“About Us”, 2012, para.1). When the restaurant first opened up, it originally included six founders who all shared the same vision for the upstart restaurant. The Hooter’s concept was very simple, create an environment where men can go and be men, while also remaining family friendly. Original …show more content…
concept included pretty girls, beer and sports. Eventually, the founders added the world famed Hooter’s uniform, which consists of a white tank top, and orange shorts to complement the Hooter’s girls “assets”. You may even be familiar with their slogan “Delightfully tacky, yet unrefined”. As of today, there are over 430 Hooters locations in 28 different countries (“About Us”, 2012, para.3). Safe to say the Hooters Empire has made a splash and became one of the fastest growing restaurants in the industry. Being the first of its kind, it was only a matter of time before other smart businessmen began to take notice, and model the successful business tactic of using pretty faces to sell food and alcohol. We already know Hooters is a major leader in the restaurant industry. They primarily offer the standard customer their world famed chicken wings, burgers, sandwiches and seafood to go along with their ice cold beers, flat screen TV’s, and beautiful young waitresses. Hooter’s was the first restaurant to be branded as a “Breastaurant” for the emphasis on the Hooters girls’ chest region. Hooters are the originators of this brand of restaurant, but as of 2015, they have given birth to other like-minded restaurants as well making the competition very stiff. A few that come to mind include Tilted Kilt, Twin Peaks, and Bikini’s. All three are also considered “bresataurants” with an emphasis on the waitresses being the main attraction. Each restaurant however has a slightly different variation, with some differences in the menus as well. Tilted Kilt sports a Celtic themed environment, with traditions kin to English pubs. Its servers are famous for wearing plaid skirts with matching plaid bras. Their slogan “A cold beer never tasted so good” alludes to the company of the waitresses. Similar menu, they offer appetizers, burgers, wings and salads. Twin Peaks has a mountain lodge vibe to it, where the waitresses wear small khaki shorts, a plaid bra-like shirt with comfy snow boots. They emphasize the scenic view of the mountains. Menu has more of a comfort food feel to it such as steaks, pork, and fried chicken as well as your typical sports environments with flat screens at almost every booth and bar area. Finally there is Bikini’s Sports Bar and Grill. As the name suggests, this restaurant sports a beach theme where waitresses wear bikini tops and shorts. Primarily located in the south, they are the youngest of the four, and are currently expanding. Their menu includes steaks, salads, and your typical bar food. It’s safe to say that the term “breastaurant” may be slightly offensive to some, being as it can be seen as degrading to women. But with the growth of these multiple chains, restaurants like Hooter’s are great companies to invest in.
Horizontal Analysis
In order to determine whether or not one should invest in a company such as Hooters, you must take a look at their financial statements in order to get an idea of whether the company is actually in the positive; meaning would you be seeing a positive return on your investment. Below is a simple horizontal analysis of Hooters income statement and balance sheet for the years 2013 and 2014 (“Financials” 2015).
Chanticleer Holdings (Hooters)
Income Statement
Horizontal Common Size Report
2014 Change Over 2013
Sales
+
449%
Cost of Goods Sold
+
408%
Gross Profit
+
474%
Operating Expenses
+
440%
Income Before Tax
+
828%
Income Taxes
+
312%
Net Income
+
402%
The importance of the horizontal analysis according to Wainwright is that it “compares data from two or more time periods to show the change in certain accounts from two separate accounting periods” (Wainwright, 2012). It can identify certain trends whether positive or negative within a company. According to the horizontal analysis of the income statement, there were some huge changes that took place over the two year time period. This can be accredited to expansion. When companies see great change sales and cost of goods sold at such a high rate, it is assumed they have opened up more restaurants, therefore are making more sales, and the cost of those goods also rise. Of course with expansion, you will see every other category rise tremendously as well. According to research, not only are they expanding, but the Hooters are remodeling multiple locations as well to better serve its customers all over the country. This could also be an indicator the increase in expenses (“Hooters of America, 2014, para.2). If there were any negatives, then that would illicit some problems that may need to be looked into. Now let’s take a look at the balance sheet.
Chanticleer Holdings (Hooters)
Balance Sheet
Horizontal Common Size Report 2014 and 2013 2014
Cash
73%
Accounts Receivables
169.97%
Inventory
142.2%
Property and Equipment
259.63%
Investments
62.24%
Total Assets
201.61%
Accounts Payable
221.31%
Notes Payable
280%
Total Liabilities
226.45%
Common Stock
129.39%
Total Equity
182.06%
Total Liabilities and Equity
201.61%
By looking at the horizontal analysis of the balance sheet, there are some trends one should focus on.
Chanticleer Holdings has reduced its cash and investments. Normally this would be more alarming, but as the other trends show, they may have been used for other accounts that have a positive trend such as inventory and property and equipment. Again, this goes hand in hand with the possible expansion mentioned from the income statement. There is an extensive change in liabilities, but once again, this may be due to openings of new restaurants and the costs that go along with such.
Ratios
The current ratio of Chanticleer Holdings stands at .18:1, while the quick ratio is .07:1. The cash to current liabilities ratio stands at .03:1. In any typical business, with the current, quick and cash to current liabilities ratios not being favorable, one would assume that Hooters is a failing business that are not able to satisfy its payables. However, the aforementioned other competing “breastaurants” all have similar ratios. In this sort of restaurant business, a lot of the companies purchase their inventory on credit terms, causing a huge liability, as well as customers normally paying for the goods and services with cash which wouldn’t show favorably in the ratios. The only liquidity issues that are immediately evident are the small amount of cash for such a huge franchise. However, they remain financially healthy through their investments, and other …show more content…
assets. As a financial advisor, I would recommend investing in Hooters after taking a look at the above information. The company has expanded so much in such a short amount of time, and is still growing. This shows they not only are making a profit, but gaining notoriety and demand as well. This can only boast well for a potential investor. The finances all seem to point in a positive direction. Also, the restaurant industry as a whole has been on the rise and booming over the last couple of years. “Restaurant sales are gaining for the third consecutive year, according to Dawn Sweeney the president and CEO of the National Restaurant Association” (Daly, 2012). With Hooters being one of the leaders in the restaurant industry, it only makes sense for one to invest in a company that is growing with the rest of the industry. As far as any problems I foresee when it comes to Hooters, or any other “breastaurants”, it’s not so much from a financial standpoint.
The statements show the company is healthy financially; however, a human element to watch would be the public opinion of the company as far as its respect to women in general. With the sensitivity of the topic, it may present an issue one day that could directly affect the sales, therefore affecting the stock in the company. But as a financial advisor, I would put my stamp of approval on anyone looking to invest in Hooters!
References
Chanticleer Holdings. (2015, January 1). Retrieved January 16, 2015, from http://ir.stockpr.com/chanticleerholdings/financials
Daly, Pete. Grand Rapids Business Journal. 7/30/2012, Vol. 30 Issue 31, p14-14. 2/3p. , Database: Corporate ResourceNet
Hooters. (2012, January 1). Retrieved January 16, 2015, from https://www.hooters.com/Company/About.aspx
Hooters of America, LLC. Business Wire (English). 12/15/2014.
Wainwright, S. (Ed.). (2012). Principles of Accounting: Volume I. San Diego, CA: Bridgepoint Education,
Inc.