Red Lobster, the nationwide restaurant chain known for its affordable seafood and Cheddar Bay biscuits, said late Sunday it filed for Chapter 11 bankruptcy protection.
In a statement, Red Lobster said It plans to sell a “substantial amount” of its assets. The company, which reported about $294 million in outstanding debt, said about 650 of its restaurants will remain open and operating during the bankruptcy.
“This restructuring is the best path forward for Red Lobster,” CEO Jonathan Dibus said in the statement. “This helps us face many financial and operational challenges, stay strong, and refocus on our growth. The support we’ve received from our lenders and vendors will help ensure we can complete the sale process quickly and efficiently while focusing on our employees and guests.”
A company that helps businesses liquidate restaurant equipment revealed to be Red Lobster is filing for bankruptcy a week later Scheduled to close Its about 50 restaurants.
The chain is partially owned by Thai seafood producer Thai Union, which first invested in Red Lobster in 2016. In January, the company announced plans to do so. to sell The pandemic, high interest rates and rising material and labor costs have affected Red Lobster’s financial performance, CEO Drabong Sansiri said.
Epidemic pain
Red Lobster’s roots date back to 1968 as a restaurant was opened Located in Lakeland, Florida, it’s a family-owned business under local restaurateur Bill Darden. The restaurant eventually expanded nationwide, allowing Americans from all corners of the United States to enjoy crab, shrimp, lobster and other seafood.
In court Filing, Red Lobster said its finances have deteriorated in recent years due to declining customers, rising food costs due to inflation and holding on to underperforming locations. The company has seen a roughly 30% decline in customer traffic since 2019, the documents show. Red Lobster reported a net loss of $76 million for its 2023 fiscal year.
As sales and customer visits fell, Red Lobster paid $190.5 million in rent in 2023 — about $64 million in underperforming stores. Renegotiating or terminating leases for those stores will be a big part of Red Lobster’s setup, said Judah Gross, senior director at Fitch Ratings.
End of the Endless Prawns
Another financial challenge was that the restaurant chain was limited in where it could buy seafood because the Thai union “exercised a large influence on the company’s shrimp purchases,” Red Lobster said in its filing.
Red Lobster blamed its decline on advertising for its “Ultimate Endless Shrimp,” which debuted in 2004 as a once-a-year, all-you-can-eat offering. However, former CEO Paul Kenney decided to make the deal a permanent menu item, costing $20 per order, “despite significant pressure from other members of the company’s management team,” court documents say. promotion leading to further losses to the parent union, court documents say.
“The company revealed to them [bankruptcy] They are currently investigating whether action has been taken [by] Mr. Kenny and the parent union were appropriate and compliant with the duties and obligations applicable to Red Lobster,” Gross said in an email to CBS MoneyWatch.
