Red Lobster Contemplates Bankruptcy Amidst $11 Million Loss Linked to Endless Shrimp Promotion
Red Lobster Contemplates Chapter 11 Bankruptcy Amid Mounting Debt, Sources Say
Reports suggest that Red Lobster is weighing the option of filing for Chapter 11 bankruptcy, as disclosed by insiders familiar with the situation to Bloomberg.
Challenged by escalating debt burdens and operational expenses, the restaurant chain grapples with profitability issues tied to existing leases and labor expenditures. Seeking strategic counsel, Red Lobster is reportedly engaging with commercial law firm King & Spalding to explore restructuring measures aimed at cost reduction.
According to the sources, Red Lobster has yet to reach a definitive verdict regarding the potential bankruptcy filing. However, they indicated that such a move could facilitate ongoing operations as the company strategizes its next steps. This may entail renegotiating leases and terminating certain contracts as part of their forthcoming plan.
Amidst challenging financial circumstances, Red Lobster faced a $12.5 million operating loss in the final quarter of 2023, despite its promotional efforts like endless shrimp, as per CNN reports.
Shortly thereafter, Thai Union Group Plc, the company’s owner since 2021, disclosed intentions to divest from Red Lobster due to its adverse impact on financial performance, as detailed by the outlet.
Furthermore, recent internal adjustments include the appointment of Jonathan Tibus as the new CEO, as reported by the Orlando Business Journal. Tibus brings a track record of expertise in revitalizing restaurant operations facing financial distress, as noted by Nation’s Restaurant News.
Over recent months, Red Lobster has endeavored to generate buzz with various promotional initiatives. In February, the chain unveiled plans to treat a select number of patrons to a complimentary meal featuring endless lobster as part of their annual Lobsterfest celebration.
Dubbed the inaugural Endless Lobster Experience, this promotion offered 150 lucky winners nationwide the opportunity to indulge in a two-hour dining experience complete with limitless lobster, two side dishes, and the restaurant’s famed cheddar biscuits.
Established by Bill Darden in 1968 in Lakeland, Florida, Red Lobster expanded under the stewardship of Darden Restaurants to numerous locations across the United States before being acquired by Golden Gate Capital in 2014, as indicated by its website and Bloomberg. Subsequent to the COVID-19 pandemic, Thai Union Group Plc assumed ownership of the company.
Red Lobster’s renowned endless shrimp deal became a fixture on the menu in June, albeit with a price hike from $20 to $25 attributed to financial setbacks.
