Red Lobster Files for Bankruptcy Amid Financial Struggles

Red Lobster, the iconic seafood restaurant chain known for bringing affordable shrimp and lobster to middle-class America, has filed for bankruptcy. The company, once the largest seafood restaurant chain in the world, cited over $1 billion in debt and less than $30 million in cash on hand as it seeks to restructure its business.

The chain plans to sell its operations to its lenders, who will provide financing to keep the company afloat during the transition. Despite the planned sales and restructuring, Red Lobster expects to continue closing some of its 578 restaurants spread across 44 states and Canada.

Red Lobster, famous for its cheddar bay biscuits and seafood dishes, experienced significant growth during the 1980s and 1990s. The brand even saw a sales surge in 2016 after being mentioned in Beyoncé’s hit song “Formation.” However, recent challenges such as mismanagement, competition, and inflation have taken a toll on the company’s performance.

Founded in 1968 by Bill Darden, Red Lobster became a pioneer in the casual dining sector. It was later acquired by General Mills and then became part of Darden Restaurants, which also owns Olive Garden. In 2014, Red Lobster was sold to Golden Gate Capital for $2.1 billion. Since 2020, Thai Union Group, a seafood distributor based in Thailand, has held a 49% stake in the company.

Under Thai Union’s management, Red Lobster struggled with declining customer numbers and frequent leadership changes. The company saw a 30% drop in customers since 2019 and has had five CEOs since 2021. Efforts to cut costs and strategic missteps under Thai Union’s ownership further compounded the chain’s difficulties.

One notable decision was turning the $20 endless shrimp promotion into a permanent menu item, which cost the company $11 million and significantly impacted profits. This move, along with supplier issues and increased competition from fast-casual chains like Chipotle and quick-service chains like Chick-fil-A, contributed to the company’s financial woes.

Casual dining has seen a decline in market share, dropping from 36% of total restaurant industry sales in 2013 to 31% in 2023, according to restaurant research firm Technomic. Red Lobster’s bankruptcy filing highlighted its “bloated and underperforming restaurant footprint” and a challenging economic environment as key factors in its financial struggles.

The company hired restructuring expert Jonathan Tibus as CEO in March and began closing 93 restaurants in preparation for the bankruptcy. Red Lobster plans to continue operations with a $100 million financing agreement as it navigates the restructuring process.