Florida-born seafood restaurant chain Red Lobster is considering a Chapter 11 bankruptcy. This is in part caused by $11 million in losses in Q3 2023 from making Endless Shrimp a permanent part of the menu.
Florida-born restaurant chain Red Lobster is openly considering filing for bankruptcy. Bloomberg reported on April 16 that company representative had told it that a restructuring was necessary. Red Lobster never recovered fully from COVID, despite promotions such as a February 2024 “Endless Lobster Experience” promotion for 150 winners. The promotion gave each winner as much lobster as they could eat for two hours. Another promotion, Endless Shrimp, had become a permanent part of the menu in June 2023, and in Q3 2023 caused $11 million in losses, despite an eventual price raise from $20 to $25 and a 4% year-on-year increase in traffic.
Losses in Q3 2023 totaled $12.5 million. In January 2024, owner Thai Union decided to divest itself of Red Lobster. In a press release, the company stated that,
“The combination of Covid-19 pandemic, sustained industry headwinds, higher interest rates and rising material and labor costs have impacted Red Lobster, resulting in prolonged negative financial contributions to Thai Union and its shareholders,” said Thiraphong Chansiri, Thai Union Group’s CEO. “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.”
Endless? Challenge Accepted!
A detailed analysis of the Endless Shrimp promotion had underestimated Americans’ lust for bottomless shrimp servings. Thai Union CFO Ludovic Regis Henri Garnier told investors in an early November 2023 call that they had not expected customers to order the shrimp special as often as they had. A $5 price rise for the all-you-can-eat meal accompanied the call, and Garnier told investors that an eye was being kept on efficiency and marketing as well. However, despite eight restaurant closures in 2023 and further optimizations, the chain is no longer a going concern. All restaurants are expected to remain in operation until the final decision is made on bankruptcy.
Restructuring
Whether the company goes through a Chapter 11 process or not, it has already restructured its board, with EVP and General Counsel Horace Dawson taking the CEO’s role in September 2023. The position had been vacant for a year and a half. As EVP and General Counsel, Dawson had handled communications, government relations, legal affairs, and risk management at the chain. Red Lobster told Bloomberg in March 2024 that it had engaged troubled firm specialists King & Spalding to renegotiate leases and long-term contracts.
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