Red Lobster Prepares for Bankruptcy Protection Amid Closures

Red Lobster continues to face post-pandemic woes, and now, the company is reportedly intending to file for Chapter 11 bankruptcy protection.

The Wall Street Journal spoke to a source familiar with the situation, who alerted the outlet that the popular casual dining seafood restaurant would be filing for the protection in Orlando, Florida, before Memorial Day.

The outlet also claims that the restaurant chain will use the Chapter 11 protection to negotiate concessions with landlords and other debtors, in the hopes that the restructuring will “trim down” the company’s growing debt.

Red Lobster first contemplated filing for Chapter 11 bankruptcy protection last month. The rising cost of labor and land leases is one factor contributing to the restaurant’s financial difficulties. 

The infamous “Endless Shrimp” incident also had a part in Red Lobster’s Q4 2023 loss. At the time, the company was hemorrhaging money because of the rising cost of food, even though more people were visiting the restaurants because of the all-you-can-eat platter Red Lobster was offering for $20. The deal now costs $25 as a result of the chain’s financial struggles.

Just yesterday, over 48 outlets of the casual dining restaurant were abruptly closed. Even more locations around the country were marked as “temporarily closed” on its website, despite the company having not formally announced or commented on the closures.

The mayor of Danville, Illinois, Ricky Williams Jr., released a formal statement following the closure of the city’s lone Red Lobster.

“I was just notified by one of our local Red Lobster managers that after 31 years of serving our community, without notice, their parent company laid off the entire crew and closed the restaurant effective immediately,” he stated. “This is despite the fact that they were rated number 15 out of over 600 stores for customer service & satisfaction last year.”

Red Lobster is also auctioning off all the supplies from its newly closed restaurants through the liquidation service TAGeX.