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Red Lobster Files For Bankruptcy After Closing Dozens Of Restaurants

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Red Lobster
(AP Photo/Nam Y. Huh)

(CTN News) – Red Lobster, renowned for its “endless” seafood and popcorn prawns, initiated the process of Chapter 11 bankruptcy. Late on Sunday, the 56-year-old chain filed for bankruptcy, numerous locations having been closed.

“Restructuring is Red Lobster’s optimal course of action moving forward.” It enables us to refocus on growth and surmount operational and financial obstacles, according to CEO Jonathan Tibus. Tibus, an authority on business reorganization, was elevated to a leadership role in March.

While bankruptcy proceedings are ongoing, Lobster’s 600 restaurants will remain operational in an effort to restructure the company, close locations, and potentially sell. Red Lobster stated in the application’s “stalking horse” provision that it intended to transition the company to a vehicle owned by the lender.

Court documents indicate that Lobster operates 551 restaurants in the United States, 27 restaurants in Canada, and 27 franchised locations in Japan, Thailand, China, and Ecuador. Organizationally, 36,000 Canadians and Americans are employed.

The proprietor of restaurant consulting firm Aaron Allen & Associates, Aaron Allen, asserts that Red Lobster’s insolvency was the consequence of twenty years of difficulties. Increased competition from affordable fast-casing restaurants such as Chipotle and Panera has confronted the corporation.

Red Lobster occasionally reducesprices to remain competitive.

A strategy that frequently faltered. Allen claims the 2003 increase in crab prices cost the “Endless Crab” unlimited-eating campaign millions of dollars. Twenty years later, the chain implemented the same approach in its “Ultimate Endless Shrimp” campaign.

“It’s an interesting case study in corporate food service that they would have this kind of corporate amnesia,” according to him.

Midway through the twenty-first century, Red Lobster reportedly rebranded as a high-end restaurant, which contributed to its success. It increased prices and renovated its retail locations. Changing consumer preferences, as well as rising labor and leasing costs, hampered the corporation, nevertheless.

Allen asserts “This slow-moving train wreck has been in motion for the past 20 years.”

Red Lobster of Orlando disclosed in court documents a 30% decline in yearly patronage since 2019. The chain incurred a loss of $76 million in 2023.

The brand was established by Bill Darden with the intention of rendering seafood restaurants more affordable and suitable for families.

In 1938, Darden established The Green Frog in Waycross, Georgia. He avoided ethnic segregation at the restaurant, despite the fact that it was prohibited by law. In 1968, he once more provided patrons with seating options when he opened the first Red Lobster in the vicinity of Orlando.

Following the 1970 sale of Red Lobster to General Mills,

Darden assumed the role of restaurant executive. Subsequently, Darden Restaurants, the proprietor of Olive Garden and additional trademarks, was established by General Mills. In 1995, Darden Restaurants separated from General Mills.

Lobster was a popular destination for guests in search of its buttery Cheddar Bay biscuits and lobster linguini.

One could not conceive of anyone else but Red Lobster cheddar biscuits. In her autobiography “Bossypants,” Fey asserted, “Anyone who disagrees is a socialist and a liar.”

It was difficult for the restaurant to remain competitive and attract younger patrons. Red Lobster was sold to private equity by Darden Restaurants in 2014. A significant provider of seafood, Thai Union Group, made two investments in Lobster in 2016 and 2020.

By charging $20 for an all-you-can-eat shrimp feast during their “Ultimate Endless Shrimp” campaign last autumn, Red Lobster lost millions of dollars.

CFO of Thai Union Group Ludovic Garnier stated during an earnings call with investors, “We were aware of the low prices, but our primary goal was to enhance customer visitation at the restaurants.”

According to Garnier, the acquisition bolstered restaurant foot traffic. He remarked, “At $20, we don’t make a lot of money,” in reference to the fact that Lobster received a greater number of customers than anticipated. Thai Union Group disclosed that Red Lobster incurred a loss of $19 million during the initial nine months of 2023.

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Salman Ahmad is a seasoned writer for CTN News, bringing a wealth of experience and expertise to the platform. With a knack for concise yet impactful storytelling, he crafts articles that captivate readers and provide valuable insights. Ahmad's writing style strikes a balance between casual and professional, making complex topics accessible without compromising depth.

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