Red Lobster files for bankruptcy, restaurants will remain open

Red Lobster has filed for voluntary Chapter 11 bankruptcy in Florida, the company confirmed in a statement Sunday evening — but intends to keep its locations open.

The 56-year-old seafood chain, the largest of its kind in the United States, said it would “make operational improvements, simplify the business through a reduction in locations and continue selling substantially all of its assets as a going concern”. “

The company said it lost $76 million last year and saw a 30% drop in customers since 2019.

As part of its reorganization, Red Lobster agreed to sell its business to a new entity fully owned and controlled by its lenders, known as a stalking agreement. The company said it received a financial commitment of $100 million to fund its ongoing operations.

The bankruptcy filing says the company’s assets are worth between $1 billion and $10 billion and debts are in the same range.

The chain had recently announced the closure of some 99 branches across the country.

But the company stressed that its remaining restaurants will remain open during the bankruptcy proceedings and that it is “working with vendors to ensure operations are not impacted.”

In its bankruptcy filing, Red Lobster said it employs 36,000 people and serves some 64 million customers a year.

Jonathan Tibus, CEO of the company, said: “This restructuring is the best path forward for Red Lobster. It allows us to meet several financial and operational challenges and emerge stronger and refocused on our growth.

Founded in 1968, Red Lobster had nearly 700 establishments in 2019. But it failed to regain its footing after the pandemic. Between 2019 and 2023, sales in the United States fell by a net 13%. The private company has since struggled with debt, while also seeing payments to suppliers disrupted.

This coincided with a series of announcements of management changes and ill-fated strategic moves, including an all-you-can-eat shrimp offering that led to heavy losses.

In the bankruptcy filing, CEO Tibus cited “the challenging macroeconomic environment, a bloated and underperforming restaurant footprint, failed or misguided strategic initiatives and increased competition within the restaurant industry” as reasons for his difficulties. He pointed to the fact that meal costs have outpaced grocery costs and 50 percent of U.S. states have raised their minimum wages, further reducing Red Lobster’s profit margin.

Perhaps the most significant of the bad decisions was an offering of “endless shrimp” by a former CEO that Tibus says ultimately cost the company $11 million. The circumstances that led to the promotion are currently under investigation, Tibus said.

The business has also gone through several owners over the past five years; More recently, seafood conglomerate Thai Union took a majority stake, but announced plans to sell it in January.