This Red Lobster in Maryland was one of dozens of locations that abruptly closed prior to the restaurant's bankruptcy filing.
Alina Seljuch/NPR
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Alina Seljuch/NPR
This Red Lobster in Maryland was one of dozens of locations that abruptly closed prior to the restaurant's bankruptcy filing.
Alina Seljuch/NPR
Red Lobster, America's largest seafood chain known for its shrimp and Cheddar Bay biscuits, has filed for bankruptcy.
The seafood restaurants are in hot water after a series of bad choices from a parade of executives, including an ill-fated promotion for all-you-can-eat shrimp starting at $20.
Nearly 580 locations in the U.S. and Canada are expected to remain open during the trial, with approximately 36,000 employees. Last week, dozens of other Red Lobster locations closed abruptly. Their entire contents – including freezers, ovens, cabins and lobster tanks – have already been auctioned.
The fire sale was a harbinger of a long-awaited one bankruptcy filingin which Red Lobster plans to sell “substantially all of its assets.” Since MarchThe chain is led by CEO Jonathan Tibus, known as an expert in the field of corporate restructuring.
Red Lobster's problems include “a difficult macroeconomic environment, a bloated and underperforming restaurant footprint, failed or ill-conceived strategic initiatives and increased competition within the restaurant industry,” Tibus wrote in court documents.
Brand crisis meets ownership crisis
Red Lobster, now the largest seafood chain, recently went uncooked. It has been struggling for a decade as diners have retreated from the big casual dining chains.
In that world, Red Lobster was one of the originals. It started in 1968 and exploded in the 1980s and 1990s, hosting generations of Americans for parties and dates – with many eating their very first lobsters at the tables.
In recent years, marked by rising inflation, Red Lobster has suffered losses on both sides: on fresher, nicer, more local restaurants; and the rising tide of cheaper, faster places, like Shake Shack or Surfside Taco.
And during this cultural shift, Red Lobster's finances have floundered.
A private equity firm bought the chain a decade ago from Darden Restaurants, owner of rivals Olive Garden and LongHorn Steakhouse. The company, Golden Gate Capital, financed the deal in part by selling Red Lobster's real estate.
This meant that the chain had to pay rent. That's now a major financial factor in Red Lobster's bankruptcy filing, which asks the court to reject 108 leases, allowing the company to leave those locations.
As of 2020, Red Lobster is run by its largest shareholder: Thai Union Group, a seafood supplier that is also behind the Chicken of the Sea brand. And the bankruptcy filing places a lot of blame on Thai Union and ex-CEO Paul Kenny.
After huge financial losses during the pandemic, followed by increases in the cost of food and wages, Thai Union implemented extensive cost cutting at Red Lobster. The chain was run by an assembly line of executives; it had no CEO for a year.
The bankruptcy filing alleges that Thai Union interfered in day-to-day operations and even pushed out two rival breaded shrimp suppliers, securing a more expensive exclusive deal for itself.
An all-you-can-eat shrimp fiasco
Then came a reboot idea that turned into a gigantic disaster: Ultimate Endless Shrimp. Red Lobster took the classic promotion and made it permanent, with prices originally starting at $20.
Thai Union later cited this as the main cause of the $11 million loss in that quarter. The goal was to get more people in, which happened. But many diners lingered for hours, picking from plate after plate of shrimp dishes and crucially buying little else.
Thai Union CEO Thiraphong Chansiri later said the ordeal left him scarred.
“Other people are going to stop eating beef, I'm going to stop eating lobster,” he says told investors.
In January, Thai Union washed its hands of Red Lobster. The owners said they would essentially be giving 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 has received a prearranged offer from its lenders, known as a stalking horse offer, to buy out the chain unless it receives a higher offer from its competitor .
NPR's Barclay Walsh contributed to this report.
