After weeks of speculation and the abrupt closing of multiple restaurants, Red Lobster has filed for bankruptcy. The chain announced the news last night (May 19), voluntarily filing for relief under Chapter 11 in Florida.
As part of the filing, Red Lobster will enter a “stalking horse purchase agreement,” per a press release from the company, meaning it will be selling its business. In the meantime, the remaining Red Lobster locations will remain open and operational. In order to do this, Red Lobster has received a $100 million “debtor-in-possession ("DIP") financing commitment from its existing lenders.”
"This restructuring is the best path forward for Red Lobster,” said Jonathan Tibus, the Company's CEO. “It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we've received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests."
There are a number of reasons that have been cited for Red Lobster’s recent hardships. The most popular and wild is the “Endless Shrimp Debacle,” when Endless Shrimp was added as a permanent menu item last year and ended up costing the company a reported $11 million.
That’s certainly the funniest reason for Red Lobster closing locations nationwide and filing for bankruptcy, but it’s not the real reason – nor does it tell the whole story. In fact, the troubles seem to have started with Thai Union Group, a seafood distributor that has owned 49% of Red Lobster since 2020.
Since Thai Union took a larger stake in the company, Red Lobster has gone through five CEOs. In addition, the pandemic – like most of the fast-casual sector – caused Red Lobster to take a significant hit – sales fell as much as 13% – something it clearly hasn’t recovered from.Thai Union has stated they took a $530 million loss this year, and things clearly have not gotten better. Earlier this year, Thai Union announced its plans to sell its stake in Red Lobster, and now that seems to be moving into the next stages.
So yes, Endless Shrimp is part of it. But endless business and customer churn seem to be a more likely culprit for the closing of 99 of the company’s nearly 700 locations. As Beyoncé once sang, you will still be able to take his a** to Red Lobster. But better go there quick, because who knows what the future holds.