Red Lobster seeks bankruptcy protection
Red Lobster, the casual dining chain that brought seafood to the masses with inventions like popcorn shrimp and “endless” seafood deals, has filed for Chapter 11 bankruptcy protection.
The 56-year-old chain made the filing late Sunday, days after shuttering dozens of restaurants.
“This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and refocused on our growth,” said Red Lobster CEO Jonathan Tibus, a corporate restructuring expert who took the top post at the chain in March.
Red Lobster said it will use the bankruptcy proceedings to simplify its operations, close restaurants and pursue a sale. As part of the filings, Red Lobster has entered into a “stalking horse” agreement, meaning it plans to sell its business to an entity formed and controlled by its lenders.
In recent years, Red Lobster has been struggling with increasing competition from fast casual chains like Chipotle and Panera as well as rising lease and labor costs. Its all-you-can-eat deals for shrimp and lobster, which it has offered for decades, also became increasingly expensive.
The chain is based in Orlando, Fla., and was founded by Bill Darden, who wanted to make seafood restaurants more accessible and affordable for families.
Darden got his start in the restaurant business in Waycross, Ga., in 1938, when he opened The Green Frog. He boldly refused to segregate the restaurant’s patrons, which went against state laws at the time. When he opened the first Red Lobster near Orlando in 1968, he again invited customers to sit anywhere they chose.
Darden sold Red Lobster to General Mills in 1970, and he continued to run restaurants as a General Mills executive. General Mills went on to form Darden Restaurants, which owns Olive Garden and other chains. Darden Restaurants was spun off from General Mills in 1995.
Red Lobster had legions of fans for dishes like lobster linguini and its buttery Cheddar Bay biscuits.
But the restaurant had trouble keeping up with competitors and bringing in younger customers. Darden Restaurants sold Red Lobster to a private equity firm in 2014. Thai Union Group, one of the world’s largest seafood suppliers, first invested in Red Lobster in 2016 and upped its stake in 2020.
Last fall, Red Lobster lost millions of dollars on its Ultimate Endless Shrimp promotion, which charged $20 for an all-youcan-eat shrimp deal.
“We knew the price was cheap, but the idea was to bring more traffic in the restaurants,” Ludovic Garnier, the chief financial officer of Thai Union Group, Red Lobster’s former coowner, said in an earnings call with investors.
Garnier said the deal did work and that restaurant traffic increased. But more guests opted for the $20 deal than Red Lobster expected, Garnier said, adding that “we don’t earn a lot of money at $20.” For the first nine months of 2023, Thai Union Group reported a $19 million share of loss from Red Lobster.