Red Lobster to abruptly shut dozens of restaurants as it considers Chapter 11 bankruptcy
The chain has been hit by expensive leases and high labor costsIt is reportedly shutting 48 outlets across the US
Struggling restaurant chain Red Lobster is reportedly abruptly closing at least 48 of its outlets across the US amid warnings they may file for bankruptcy.
The chain has 'temporarily closed' locations in Buffalo, Orlando, Jacksonville and other cities, and is auctioning off kitchen equipment and furniture, according to CNN.
The brand is reportedly eyeing up a possible Chapter 11 filing to restructure its debt, allowing it to discard long-term contracts and renegotiate new leases.
Red Lobster's cash flows have been hit by expensive leases and high labor costs.
Red Lobster is considering filing for bankruptcy as high costs and low sales ground the business
It comes after the company last year reported record losses of $11 million, which its CFO partly blamed on its unlimited shrimp deal.
The chain, which started as a single restaurant in Lakeland, Florida, in 1968 has around 650 locations across almost all states. It's famous for its cheese-flavored biscuits.
News of the bankruptcy was first reported by Bloomberg, which said the restaurant chain is taking advice from the law firm King & Spalding.
Those familiar with the matter told the outlet the decision was yet to be finalized, but that bankruptcy would allow the company to continue operating.
Red Lobster's famous shrimp promotion came as it wanted to lure in more customers after significant losses of $5.4 million in the second quarter of 2023.
The chain has 'temporarily closed' locations in Buffalo, Orlando, Jacksonville and other cities
The chain has 'temporarily closed' locations in Buffalo, Orlando, Jacksonville and other cities
But those plans backfired since the 'all you can eat' promotion was too generous.
For just $20, diners could indulge in as much of the shellfish as they could stomach.
The 'Endless Shrimp' offer was initially a special but in June it claimed a permanent spot on the Red Lobster menu. Foot traffic reportedly increased by 4 percent as a result.
More people were ordering the Endless Shrimp than the company anticipated - likely because the deal went viral on social media platforms like TikTok, where people showed off how much they ate to get their money's worth.
'For those who have been in the US recently, $20 was very cheap. And the rationale for this promotion was to say we knew the price was cheap, but the idea was to bring more traffic in the restaurants,' said CFO Ludovic Garnier in November.
The chain, which started as a single restaurant in Lakeland, Florida , in 1968 has around 650 locations across almost all states with its menu offering variations of shrimp-infused items
For just $20, diners could indulge in as much of the shellfish as they could stomach, but the price was later bumped to $25
'But something which was different from our expectation is the proportion of the people selecting these promotions was much higher compared to expectation,' he added.
Eventually, the company bumped the price of their Endless Shrimp up to $25 in a bid to reclaim some of the losses.
Red Lobster has had multiple owners in recent years. It was previously owned by the Darden restaurant group, which also owned Olive Garden, but was taken over by Golden Gate Capital in 2014.
In 2020 it was purchased by Thai Union, which this year said its 'ongoing financial requirements no longer align with Thai Union's capital allocation priorities.'