Red Lobster has abruptly closed 48 restaurants and put the entire contents of each restaurant up for auction.
Red Lobster is closing down between 48 and 99 of its 600+ locations. The news comes a month after it became known that the restaurant chain was considering Chapter 11 bankruptcy. Restaurant supply liquidator TAGeX Brands is auctioning off whole restaurant interiors, with the auctions ending on May 16. On the web page about the auctions, TAGeX called it “the largest restaurant equipment auction ever”, and “winner take all.”
There is some confusion over the number of closures. TAGeX is auctioning the interiors of 50+ locations in 48 cities, according to its website. The Red Lobster entry in Wikipedia mentions 87 restaurants across the U.S., and ABC News claims that the total is at least 99 locations in 27 states.
The Wall Street Journal writes that Red Lobster is expected to file for Chapter 11 bankruptcy on the week of May 20. In April, the news that the company had hired troubled company consultants emerged, and majority owner Thai Union Group announced that it was looking for a buyer for the chain.
Endless Shrimp Does NOT Equal Bankruptcy, After All
When the news broke in April, attention was fixed on the losses incurred by the 2023 Endless Shrimp promotion. Endless Shrimp had been a long-standing and popular occasional promotion. In June 2023, however, management made it a permanent part of the menu. Over Q3 2023, the promotion brought in a 4% year-on-year rise in traffic, along with $11 million in losses. Raising the price of the offering from $20 to $25 helped but by the time that happened, the damage had been done.
Behind the promotion fiasco, however, lay a variety of ills that made it tough to keep Red Lobster a going concern. Thai Union Group pointed to “a combination of [the] Covid-19 pandemic, sustained industry headwinds, higher interest rates and rising material and labor costs” earlier in the year.
Analysts point to other casual dining chains closing because of decreased demand from key target customer groups. However, another take on Red Lobster’s fate comes from the act that after a 2014 sale to a private equity firm that stripped out the real estate held by Red Lobster and then rented the same properties to the restaurants, resulting in a drag that stalled innovation and increased pressure to the point that mistakes were made.
Argomenti
