Red Lobster Officially Files for Bankruptcy After Abruptly Closing Restaurants

Seafood restaurant chain Red Lobster has filed for Chapter 11 bankruptcy protection after the abrupt closure of dozens of restaurants across the country.

The company released a statement regarding this long-predicted financial news on May 19. The statement reads that Red Lobster Management LLC has voluntarily filed for relief under Chapter 11 of the Bankruptcy Code for the Middle District of Florida. Red Lobster intends to use the proceedings from this filing to drive operational improvements, simplify its business by reducing restaurant locations, and “pursue a sale of substantially all of its assets.”

As part of the bankruptcy filings, Red Lobster has signed a stalking horse purchase agreement to sell its business to an entity created and managed by its current term lenders.

Subsequently, Red Lobster’s remaining restaurants will remain open and will operate as usual during the Chapter 11 process. Per the press release, “The Company has been working with vendors to ensure that operations are unaffected and has received a $100 million debtor-in-possession (“DIP”) financing commitment from its existing lenders.”

Jonathan Tibus, the company’s CEO, stated, “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.”

According to Axios, Red Lobster’s estimated liabilities were between $1 billion and $10 billion, per its bankruptcy filing. The restaurant’s subsequent struggles came after compounding financial stress brought on by COVID-19 and inflation tied to rising food and labor costs.

Founded in 1968 in Florida by Bill Darden, Red Lobster now has over 700 locations. In 1974, the chain was the first to debut popcorn shrimp. Ten years later, its iconic Lobsterfest was introduced on Valentine’s Day. The chain debuted its famous Cheddar Bay Biscuits in 1992. By 2004, the company’s Endless Shrimp promotion had put it on the map.

However, that promotion may be related to the company’s current financial troubles. Bon Appétit reports that the popular Endless Shrimp deal cost the company around $20 million in losses.

For $20, customers could choose two types of shrimp from Red Lobster’s menu and eat as much of the crustaceans as possible. However, a 2023 report by Restaurant Business revealed that the restaurant chain put itself in the red financially in its attempt to give customers a steep menu bargain. Even raising the promotion’s price to $25 hasn’t added financial wins to the company’s bottom line.