Struggling restaurant chain Red Lobster is reportedly closing down at least 48 of its outlets across the US amid concerns that they may be heading toward bankruptcy. The chain has "temporarily closed" locations in Buffalo, Orlando, Jacksonville, and other cities, and is auctioning off kitchen equipment and furniture, as reported by CNN.
The brand is reportedly considering a potential Chapter 11 filing to restructure its debt, enabling it to terminate long-term contracts and negotiate new leases. Red Lobster's cash flows have been impacted by costly leases and elevated labor expenses. This comes after the company reported record losses of $11 million last year, which its CFO blamed on its unlimited shrimp deal.
Now Closed
The chain, which started as a single restaurant in Lakeland, Florida, in 1968, has around 650 locations across nearly all states. It is known for its cheese-flavored biscuits. The news of the bankruptcy was initially reported by Bloomberg, which stated that the restaurant chain is seeking guidance from the law firm King & Spalding.
Those familiar with the matter told the outlet that the decision had not yet been finalized, but bankruptcy would potentially enable the company to sustain operations.
Red Lobster's famous shrimp promotion was launched in a bid to attract more customers following substantial losses of $5.4 million in the second quarter of 2023.
However, those plans backfired as the "all you can eat" promotion proved to be overly generous. Diners could indulge in as much of the shellfish as they desired for just $20.
Initially introduced as a special, the 'Endless Shrimp' offer earned a permanent spot on the Red Lobster menu in June. Foot traffic reportedly increased by 4 percent as a result.
Famous Dishes to Be Missed by Patrons
The popularity of the Endless Shrimp exceeded the company's expectations, likely due to the promotion going viral on social media platforms like TikTok, where people showcased their hearty consumption to maximize the value of their meal.
"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.
"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.
The company hiked the price of their Endless Shrimp to $25 in a bid to recoup some of the losses.
Red Lobster has undergone multiple ownership changes in recent years. It was previously owned by the Darden restaurant group, which also owned Olive Garden, before being acquired by Golden Gate Capital in 2014.
In 2020, it was bought by Thai Union, which stated this year that its "ongoing financial requirements no longer align with Thai Union's capital allocation priorities."
