Red Lobster Filed For Bankruptcy — What Happened to Red Lobster?
Several misguided business decisions, including the Endless Shrimp promotion, may have tanked Red Lobster.
Published May 23 2024, 4:36 p.m. ET
Red Lobster logo
Red Lobster is in the red.
On May 20, the company filed for Chapter 11 bankruptcy in Florida. This dire news came after 87 Red Lobster locations across more than 20 states were listed as “temporarily closed” or “unavailable.”
Kitchen equipment was also listed for auction on the restaurant liquidator, TAGeX Brands. As of now, it’s unclear if other Red Lobster locations are on the chopping block.
All this begs the question: What happened to Red Lobster?
Why is Red Lobster closing?
Red Lobster, founded in 1968, has had its fair share of challenges. During the 2020 pandemic, the number of diners dwindled (guest count is down 30 percent from 2019, according to bankruptcy documents). Mismanagement is also to blame — the company has gone through five different CEOs since 2021.
When Red Lobster was sold to a private equity firm called Golden Gate Capital, the deal didn’t help the chain.
Since the firm sold off Red Lobster’s real estate assets for 1.5 billion, they had to lease their locations back. This meant that Red Lobster was paying increased rent to their parent company. Underperforming locations were also stuck in rental contracts they couldn’t afford. These issues resulted in the company spending over $200 million last year.
The hits kept on coming when Golden Gate Capital sold Red Lobster to Thai Union Group, a large seafood supplier.
Despite cutting costs across the board, Thai Union reported a $19 million loss in the first nine months of 2023. By 2024, they shared their plans to exit the business.
“Sustained industry headwinds, higher interest rates and rising material and labor costs have impacted Red Lobster, resulting in prolonged negative financial contributions to Thai Union and its shareholders,” Thiraphong Chansiri, Thai Union’s CEO, said in a statement.
Death by endless shrimp?
The final nail in Red Lobster’s coffin may have been a promotional deal. In 2023, the seafood chain announced that they were bringing back their endless shrimp promotion. The deal allows customers to enjoy endless shrimp for $20.
The promotion aimed to bring customers back into the locations. While it achieved that, the demand became too much. Soon, many locations even began running out of shrimp.
This reportedly played a major role in an $11 million loss in the company’s third quarter. The endless shrimp deal is now $25 and only available on Mondays.
According to the company, the bankruptcy 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 remaining Red Lobster restaurants will stay open during the bankruptcy proceedings. "Red Lobster's restaurants will remain open and operating as usual during the Chapter 11 process," the statement continued.
