Red Lobster Has Officially Filed for Bankruptcy
UPDATE: May 21, 2024
Editor's note: On May 19, Red Lobster confirmed it has filed for Chapter 11 bankruptcy. Nearly 580 of its restaurants will remain open through the restructuring process.
In a press release announcing the bankruptcy filing, CEO Jonathan Tibus said, "This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we've received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests."
The chain's Endless Shrimp promotion, which offered unlimited shrimp for $20 (later increased to $25), has been blamed for causing significant operating losses that ultimately led to the bankruptcy. It remains unclear whether Endless Shrimp will continue to be offered following the Chapter 11 filing; we have reached out to Red Lobster for confirmation.
Our original story, published on April 17, addressed the rumors that the chain was considering bankruptcy; that reporting appears below.
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The past few years have been rife with bankruptcies in the world of restaurants, with Backyard Burgers, Wild Wing Cafe, and several Burger King franchisees among the chains that have been impacted. Now, one of America's most iconic seafood chains could also potentially join the growing list of restaurant bankruptcies.
Bloomberg, citing people familiar with the matter, reported on April 16 that Red Lobster is considering filing for Chapter 11 bankruptcy. The unidentified sources told the publication that Red Lobster has been receiving advice from the law firm King & Spalding ahead of the potential bankruptcy filing.
Red Lobster believes a Chapter 11 filing could help it renegotiate leases and drop some long-term contracts, though a final decision on declaring bankruptcy has yet to be made, the people said, per Bloomberg.
If Red Lobster does file for bankruptcy, the move will round out what has undeniably been a difficult couple of years for the company. The chain has struggled with high food and labor costs, significant operating losses, and a string of underperforming restaurant closures.
Red Lobster took a particularly large blow in June of 2023 when it brought back its popular Ultimate Endless Shrimp deal, which allows customers to order unlimited helpings of several shrimp dishes for a set price. The deal was far more popular with customers than Red Lobster anticipated, resulting in $11 million in operating losses. The chain ultimately raised the price of the deal from $20 to $25 to help stem the bleeding.
Red Lobster's owner, the Thailand-based seafood producer Thai Union Group, recently began looking for a buyer for the struggling seafood chain due to its "prolonged negative financial contributions," according to a press release. Soon after announcing the plans to offload the chain, Thai Union Group President and CEO Thiraphong Chansir admitted in a February earnings call that they're "not expecting to get anything much from the sale."
It's important to note that Red Lobster's potential Chapter 11 filing won't mean that its restaurants will cease operations. Rather, the move would allow Red Lobster to continue running its business while it works to restructure its debt. Still, the possibility of an impending Red Lobster bankruptcy casts additional uncertainty on what the future holds for the problem-plagued chain.
Red Lobster did not immediately respond to our queries for confirmation and comment on the bankruptcy reports.
This story has been updated to include new information following the confirmation that Red Lobster has officially filed for bankruptcy.
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