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Red Lobster, which brought affordable shrimp and lobster to middle-class America and grew to go the largest seafood edifice concatenation successful the world, has filed for bankruptcy.
The institution said it had much than $1 cardinal successful indebtedness and little than $30 cardinal successful currency connected hand. It plans to merchantability its concern to its lenders, and successful turn, it volition person financing to enactment afloat. It expects to proceed to adjacent restaurants successful the meantime.
Red Lobster, known for its cheddar bay biscuits, crab legs and shrimp dishes, dispersed astir the state during the 1980s and 1990s. In 2016, Beyoncé mentioned Red Lobster successful her opus "Formation," describing bringing a romanticist spouse to Red Lobster, causing income to surge.
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With 578 restaurants crossed 44 states and Canada, Red Lobster serves 64 cardinal customers a year, and it brings successful $2 cardinal successful yearly sales, the institution said successful its bankruptcy filing. One successful 5 lobster tails purchased successful North America is bought by Red Lobster.
But caller mismanagement, competition, ostentation and different factors brought down Red Lobster, analysts and erstwhile Red Lobster employees say.
Years of underinvestment successful Red Lobster's marketing, nutrient quality, work and edifice upgrades wounded the chain's quality to vie with increasing fast-casual and quick-service chains.
Pioneering chain
Red Lobster started successful 1968 by Bill Darden, an designer of the casual eating gyration successful America, and General Mills soon bought the restaurant. Red Lobster aboriginal became portion of Darden Restaurants, the proprietor of Olive Garden and different chains.
In 2014, Darden sold disconnected Red Lobster to Golden Gate Capital, a backstage equity firm, for $2.1 billion. Since 2020, seafood distributor Thai Union Group, based successful Thailand, has been the largest Red Lobster shareholder. Thai Union owns 49% of the company.
But Red Lobster has struggled nether Thai Union.
The fig of customers coming to Red Lobster tumbled 30% since 2019 and has lone somewhat improved since the pandemic. Earlier this year, Thai Union said it would divest from Red Lobster and instrumentality a $530 cardinal nonaccomplishment connected its investment.
Former Red Lobster employees accidental Thai Union's cost-cutting efforts and strategy mistakes wounded the chain.
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"Thai Union forced immense outgo reductions, including galore that were penny omniscient and lb foolish due to the fact that they wounded sales," a erstwhile Red Lobster enforcement who spoke nether the information of anonymity due to the fact that of a non-disclosure statement with the institution told CNN earlier this month. Thai Union did not respond to requests for remark connected that article.
Red Lobster executives began to tally for the doors nether Thai Union's management, resulting successful a immense magnitude of C-suite churn. Red Lobster has had 5 CEOs since 2021. In 2021 and 2022, Red Lobster brought connected a caller CEO, main selling officer, main fiscal serviceman and main accusation officer. All were gone wrong 2 years.
Last summer, nether Thai Union, Red Lobster turned $20 endless shrimp into a imperishable point connected the paper for the archetypal time, alternatively of its accepted limited-time connection deal. The alteration outgo the institution $11 cardinal and chopped into Thai Union profit. In its bankruptcy filing, Red Lobster said it is investigating the circumstances of that promotion, which the company's absorption opposed.
"We request to beryllium overmuch much careful," Thai Union CFO Ludovic Garnier said connected an net telephone successful November 2023.
But the institution successful its bankruptcy filing blamed Thai Union for the losses. Noting that nether the guise of a "quality review," Red Lobster eliminated 2 of its breaded shrimp suppliers, leaving Thai Union with an exclusive deal. That led to higher costs for the edifice chain, and did not comply with the company's emblematic decision-making process for picking suppliers based connected projected demand.
RELATED: Red Lobster abruptly closing dozens of restaurants nationwide
The explosive maturation and popularity of fast-casual chains similar Chipotle and quick-service chains similar Chick-fil-A implicit the past 2 decades besides squeezed Red Lobster.
Casual eating has slipped from 36% of full edifice manufacture income successful 2013 to 31% successful 2023, according to Technomic, a edifice probe firm.
In its bankruptcy filing, Red Lobster conceded it had "a bloated and underperforming edifice footprint" and cited a hard economical situation and accrued contention for its caller fiscal failures.
Bankruptcy plans
Red Lobster has been telegraphing its bankruptcy for months.
In January, the institution hired Jonathan Tibus, a restructuring veteran, to measure its business. It named Tibus arsenic CEO successful March. Last week, the institution began shutting down 93 restaurants successful mentation for its bankruptcy.
As it ran retired of cash, the institution stopped paying its vendors past year.
The institution plans to enactment afloat with a $100 cardinal financing agreement, it said successful its bankruptcy petition.
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