Red Lobster Filed For Bankruptcy — What Happened to Red Lobster?

Several erroneous business decisions, including the Endless Shrimp promotion, will have tanked Red Lobster.

May 23 2024, Published 4:36 p.m. ET

Red Lobster is within the red.

On May 20, the company filed for Chapter 11 bankruptcy in Florida. This dire news got here after 87 Red Lobster locations throughout more than 20 states were indexed as “briefly closed” or “unavailable.”

Kitchen apparatus was also listed for auction at the eating place liquidator, TAGeX Brands. As of now, it’s unclear if different Red Lobster locations are at the chopping block.

All this begs the query: What happened to Red Lobster?

Why is Red Lobster final?

Red Lobster, based in 1968, has had its fair proportion of demanding situations. During the 2020 pandemic, the number of diners dwindled (visitor depend is down 30 percent from 2019, in accordance to bankruptcy documents). Mismanagement could also be to blame — the company has gone through five other CEOs since 2021.

When Red Lobster was sold to a personal equity firm called Golden Gate Capital, the deal didn’t lend a hand the chain.

Since the firm sold off Red Lobster’s real estate assets for 1.5 billion, they had to hire their locations back. This meant that Red Lobster was paying increased rent to their dad or mum company. Underperforming locations have been additionally stuck in condo contracts they couldn’t manage to pay for. These problems resulted within the corporate spending over $200 million last 12 months.

The hits saved on coming when Golden Gate Capital sold Red Lobster to Thai Union Group, a big seafood supplier.

Despite chopping prices around the board, Thai Union reported a $19 million loss within the first 9 months of 2023. By 2024, they shared their plans to go out the business.

“Sustained trade headwinds, upper interest rates and emerging subject matter and labor prices have impacted Red Lobster, leading to extended detrimental monetary contributions to Thai Union and its shareholders,” Thiraphong Chansiri, Thai Union’s CEO, said in a statement.

Death via unending shrimp?

The final nail in Red Lobster’s coffin will have been a promotional deal. In 2023, the seafood chain announced that they were bringing back their never-ending shrimp promotion. The deal permits customers to revel in never-ending shrimp for $20.

The promotion aimed to bring shoppers again into the places. While it achieved that, the demand become too much. Soon, many places even began working out of shrimp.

This reportedly played a big role in an $Eleven million loss in the company’s third quarter. The endless shrimp deal is now $25 and only to be had on Mondays.

According to the company, the chapter is intended to "drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets."

As of now, the remainder Red Lobster restaurants will keep open during the chapter court cases. "Red Lobster's restaurants will remain open and operating as usual during the Chapter 11 process," the statement persevered.

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