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| This Red Lobster in Maryland was among dozens of locations that closed abruptly ahead of the restaurant's bankruptcy filing |
Red Lobster, America's largest seafood chain famous for its shrimp and Cheddar Bay biscuits, has filed for bankruptcy.
The chain's financial troubles stem from a series of poor decisions by a succession of executives, including a problematic all-you-can-eat shrimp promotion priced at $20.
Despite the bankruptcy, nearly 580 locations in the U.S. and Canada will remain open, employing about 36,000 workers. However, dozens of other Red Lobster locations recently closed abruptly, with their contents—freezers, ovens, booths, and lobster tanks—already auctioned off.
This asset liquidation preceded the anticipated bankruptcy filing, where Red Lobster plans to sell "substantially all of its assets." Since March, CEO Jonathan Tibus, a corporate restructuring expert, has been at the helm.
Red Lobster's issues include "a difficult macroeconomic environment, a bloated and underperforming restaurant footprint, failed or ill-advised strategic initiatives, and increased competition within the restaurant industry," Tibus detailed in court documents.
**Brand Crisis Meets Ownership Crises**
Red Lobster's decline has been a decade in the making, as diners moved away from large casual-dining chains. Founded in 1968, Red Lobster thrived in the 1980s and 1990s, becoming a popular spot for celebrations and dates.
In recent years, however, Red Lobster has struggled against fresher, more local restaurants and cheaper, quicker options like Shake Shack and Surfside Taco. Rising inflation has further strained the chain's finances.
A private equity firm bought Red Lobster from Darden Restaurants, which owns Olive Garden and LongHorn Steakhouse, ten years ago. Golden Gate Capital funded the deal partly by selling Red Lobster's real estate, forcing the chain to start paying rent, a significant financial burden leading to the bankruptcy filing, which seeks to reject 108 leases.
Since 2020, Thai Union Group, a major seafood supplier, has been Red Lobster's largest shareholder. The bankruptcy filing attributes significant blame to Thai Union and former CEO Paul Kenny.
The pandemic, followed by rising food and wage costs, led Thai Union to implement extensive cost-cutting measures at Red Lobster. The chain went through multiple executives and had no CEO for a year. The filing alleges that Thai Union interfered with operations and secured a costlier exclusive deal for breaded shrimp by pushing out rival suppliers.
**All-You-Can-Eat Shrimp Fiasco**
One major misstep was the "Ultimate Endless Shrimp" promotion. Red Lobster made this classic promotion permanent at a starting price of $20, which Thai Union later cited as the primary cause of an $11 million loss that quarter. While the promotion attracted diners, many stayed for hours, consuming large quantities of shrimp and buying little else.
Thai Union CEO Thiraphong Chansiri expressed his frustration with the promotion, telling investors, "Other people stop eating beef, I'm going to stop eating lobster."
In January, Thai Union decided to abandon its stake in Red Lobster, setting the chain on a path to bankruptcy. In the Chapter 11 filing, Red Lobster disclosed a prearranged "stalking horse" bid from its lenders to buy out the chain unless a higher rival bid emerges.
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