Red Lobster Faces Possible Bankruptcy Amid Financial Struggles

Red Lobster is contemplating filing for Chapter 11 bankruptcy due to mounting debts and financial challenges, people familiar with the matter told Bloomberg. The restaurant chain reported an operating loss of $12.5 million in the fourth quarter of 2023, despite increasing the price of its endless shrimp deal.

The company is grappling with high lease and labor costs, making it difficult to generate profits. Seeking guidance, Red Lobster is consulting with the commercial law firm King & Spalding on potential restructuring plans to reduce expenses. Although no final decision has been made regarding bankruptcy, it could offer the business a chance to continue operations while addressing its financial situation.

In addition to its financial woes, Red Lobster has recently experienced internal changes. Jonathan Tibus was appointed as the new CEO in March, known for his expertise in turning around restaurants facing financial difficulties.

The restaurant chain’s financial troubles led to Thai Union Group Plc, which has a majority ownership of the company, announcing its intention to exit Red Lobster in January, citing negative financial contributions.

Despite its challenges, Red Lobster has tried to attract customers with special offers. Earlier this year, the chain announced the Endless Lobster Experience, offering 150 winners a complimentary two-hour dinner featuring endless lobster, two side dishes, and cheddar biscuits.

Founded in 1968 by Bill Darden in Lakeland, Florida, Red Lobster expanded under Darden Restaurants before being acquired by Golden Gate Capital in 2014. After the acquisition, Golden Gate sold much of the restaurant chain’s real estate. Golden Gate exited its position in Red Lobster when it sold its entire interest to Thai Union in 2020.

The endless shrimp deal has been a signature offering for Red Lobster, but the company recently increased its price from $20 to $25 due to financial losses.

As Red Lobster faces these challenges, it remains to be seen how the restaurant chain will navigate its financial difficulties and whether restructuring efforts will lead to improved profitability.