Restaurants
Red Lobster said it would use the bankruptcy proceedings to simplify its operations, close restaurants and pursue a sale.
Red Lobster, the casual dining chain that won fans with inventions like popcorn shrimp and “endless” seafood offerings, has filed for Chapter 11 bankruptcy protection.
The 56-year-old chain filed this case Sunday evening, a few days after closing dozens of restaurants.
“This restructuring is the best path forward for Red Lobster. This allows us to address several financial and operational challenges and emerge stronger and focused on our growth,” said Red Lobster CEO Jonathan Tibus, a corporate restructuring expert who took the helm of the chain in March. .
Red Lobster said it would use the bankruptcy proceedings to simplify its operations, close restaurants and pursue a sale. As part of those documents, Red Lobster entered into a so-called “horse stalking” agreement, meaning it plans to sell its business to an entity formed and controlled by its lenders.
The Orlando, Florida-based chain was founded by Bill Darden, who wanted to make seafood restaurants more accessible and affordable for families. Darden sold Red Lobster to General Mills in 1970. General Mills then created Darden Restaurants, owner of Olive Garden and other chains, and spun off the company in 1995.
In recent years, Red Lobster has faced increasing competition from fast-food chains like Chipotle, as well as rising rental and labor costs. Its all-you-can-eat offerings for shrimp and lobster have also become increasingly expensive.
Last fall, Red Lobster lost millions of dollars on its Ultimate Endless Shrimp promotion, which charged $20 for an all-you-can-eat shrimp deal.
“We knew the price was cheap, but the idea was to attract more restaurant traffic,” Ludovic Garnier, chief financial officer of Thai Union Group, former co-owner of Red Lobster, said on a conference call. with investors.
Garnier said the deal worked and restaurant traffic increased. But more customers opted for the $20 deal than Red Lobster expected, Garnier said, adding that “we don’t make a lot of money at $20.” For the first nine months of 2023, Thai Union Group – which is one of the world’s largest seafood suppliers – reported a loss share of $19 million from Red Lobster.
In January, Thai Union Group announced plans to exit its minority investment in Red Lobster. CEO Thiraphong Chansiri said the COVID-19 pandemic, industry headwinds and rising operating costs had hit the restaurant chain hard and caused “prolonged negative financial contributions to Thai Union and its shareholders”.
Thai Union Group first invested in Red Lobster in 2016 and increased its stake in 2020.
Restaurant liquidator TAGeX Brands announced last week that it would auction equipment from more than 50 recently shuttered Red Lobster locations. The store closures span more than 20 states, reducing Red Lobster’s presence in cities like Denver, San Antonio, Indianapolis and Sacramento, California.
The seafood restaurant chain said in a court filing that it has more than 100,000 creditors and its assets are estimated at between $1 billion and $10 billion. The company’s estimated liabilities are between $1 billion and $10 billion.
Red Lobster operates 700 locations worldwide.
Boston
