Yahoo Finance Red Lobster Is Heading For Bankruptcy After Losing $11M On Endless Shrimp Deal
It's been a tumultuous few years for Red Lobster. The restaurant shuttered eight locations in 2023, and the investment group that held most of its stakes reported a $22 million loss for the year. Now, the purveyor of Cheddar Bay Biscuits is facing potential bankruptcy.
According to Bloomberg, Red Lobster is considering a Chapter 11 bankruptcy filing in hopes of restructuring its debts. The company has reportedly received advice from law firm King & Spalding and is hoping to get out of long-term contracts and renegotiate leases in the process.
While Red Lobster's largest investor, Thai Union Group, has yet to sell its majority stakes, the company is seeking an exit route due to "ongoing financial requirements [that] no longer align" with its "allocation priorities."
"After detailed analysis, we have determined that Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities and therefore are pursuing an exit of our minority investment," said Thiraphong Chansiri, Thai Union Group’s CEO, in a statement earlier this year. He cited the pandemic, labor costs, industry headwinds, rising costs, and high interest rates for Red Lobster's decline.
"Red Lobster is done and over with," Chansiri said in the February meeting. "[We’re] just waiting for the sale to happen but we do not expect any significant value to be gained."
Fortress Investment Group is another key lender for the chain and is allegedly involved in the debt negotiations, Bloomberg reports.
The pandemic and labor costs aren't the only culprit of Red Lobster's declining profits. Those all-you-can-eat promotions have also caused a toll. Its $20 Ultimate Endless Shrimp deal cost the company $11 million in its third quarter alone, according to Restaurant Business. The chain ultimately raised the cost to $25, though, I hardly think that will the recoup $11 million.
Now, does news of Red Lobster's financial woes mean the chain is shuttering more locations? All signs point to no—for now, at least. While some closures are not out of the question, the company as a whole is seeking a way out of this mess via the bankruptcy filing.
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