Red Lobster, the seafood chain, files for bankruptcy: NPR

This Maryland Red Lobster was among dozens of establishments that abruptly closed before the restaurant filed for bankruptcy.

Alina Selyukh/NPR

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Alina Selyukh/NPR

This Maryland Red Lobster was one of dozens of establishments that abruptly closed before the restaurant filed for bankruptcy.

Alina Selyukh/NPR

Red Lobster, America’s largest seafood chain known for its shrimp and Cheddar Bay biscuits, has filed for bankruptcy.

Its seafood restaurants are in hot water after a series of bad choices by a parade of executives, including an ill-fated promotion of all-you-can-eat shrimp starting at $20.

Nearly 580 locations in the United States and Canada are expected to remain open throughout the process, employing approximately 36,000 people. Last week, dozens of other Red Lobster locations abruptly closed. Their entire contents – including freezers, ovens, cabins and lobster tanks – have already been sold at auction.

The relief sale was a precursor to a highly anticipated bankruptcy filing, in which Red Lobster plans to sell “substantially all of its assets.” Since March, the chain has been led by its CEO Jonathan Tibus, known as an expert in corporate restructuring.

Red Lobster’s problems include “a challenging macroeconomic environment, a bloated and underperforming restaurant footprint, failed or misguided strategic initiatives, and increased competition within the restaurant industry,” Tibus wrote in court documents.

The brand crisis meets the property crises

Red Lobster, now the largest seafood chain, hasn’t been cooking recently. It has struggled for a decade as diners move away from large casual dining chains.

In this world, Red Lobster was one of the originals. It began in 1968 and exploded throughout the 1980s and 1990s, welcoming generations of Americans for celebrations and get-togethers – many of them cracking their very first lobsters at its tables.

In recent years of rising inflation, Red Lobster has lost out on both sides: to fresher, nicer, more local restaurants; and the rising tide of cheaper, faster spots, like Shake Shack or Surfside Taco.

And during this cultural shift, Red Lobster’s finances collapsed.

A private equity firm bought the chain a decade ago from Darden Restaurants, which owns competitors Olive Garden and LongHorn Steakhouse. Golden Gate Capital financed the transaction in part by selling Red Lobster’s real estate.

This meant the chain had to start paying rent. It’s now a major financial factor in Red Lobster’s bankruptcy filing, which is asking the court to reject 108 leases, allowing the company to abandon those locations.

Since 2020, Red Lobster has been managed by its first shareholder: Thai Union Group, a seafood supplier also behind the Chicken of the Sea brand. And the bankruptcy filing largely rejects the responsibility of Thai Union and its former CEO Paul Kenny.

After massive financial losses during the pandemic, followed by rising food and wage costs, Thai Union made significant cost cuts at Red Lobster. The chain was run by a conveyor belt of frames; it didn’t have a CEO for a year.

The bankruptcy filing alleges that Thai Union interfered in day-to-day operations and even kicked out two rival suppliers of breaded shrimp, thereby securing a more expensive exclusive deal for itself.

All-you-can-eat shrimp fiasco

Then came a reboot idea that turned into a huge disaster: Ultimate Endless Shrimp. Red Lobster took its classic promotion and made it permanent, with prices originally starting at $20.

Thai Union later cited this as the main cause of its $11 million loss that quarter. The goal was to attract more people, which happened. But many diners then stayed for hours, picking off plate after plate of shrimp dishes and – crucially – buying virtually nothing else.

Thai union CEO Thiraphong Chansiri later said the ordeal had left him scarred.

“Other people stop eating beef, I’m going to stop eating lobster,” he told investors.

In January, Thai Union washed its hands of Red Lobster. The owners said they would essentially give up their stake in the chain, putting the restaurant company on the path to bankruptcy.

In this week’s Chapter 11 filing, Red Lobster says it received a pre-agreed offer, known as a “hunting horse” offer, from its lenders to buy out the chain, unless before she receives a higher competing offer.

NPR’s Barclay Walsh contributed to this report.