Red Lobster Reportedly Considering Bankruptcy Amid Financial Woes
It's a favorite destination for indulgent seafood dishes and Cheddar Bay Biscuits, but the popular casual dining chain Red Lobster is reportedly considering filing for Chapter 11 bankruptcy in an effort to restructure mounting debts.
According to Bloomberg, which spoke to people with knowledge of the matter who asked not to be identified, Red Lobster has been getting advice from the law firm King & Spalding pertaining to its ongoing debt. The bankruptcy filing would reportedly help the company eliminate some long-term contracts and renegotiate leases. In recent years, Red Lobster's profits have been burdened by increased labor and operating costs.
Though a final decision has yet to be made, filing for bankruptcy would allow the company to stay in operation while working towards eliminating debt.
Thai Union Group Plc. has been in control of Red Lobster since 2021, when it took over majority stake from its previous parent company, Golden Gate Capital. However, earlier this year, the Thailand-based company said in a regulatory filing that it was planning an exit strategy from the investment because the chain's "ongoing financial requirements no longer align with Thai Union's capital allocation priorities."
In the first rumblings of financial woes for Red Lobster, last November it was reported that the company was on track to lose $20 million for the year, blaming the popular Ultimate Endless Shrimp promotion that had recently been made a permanent part of the menu. Initially advertised for $20, the chain was forced to raise the price to $25—a whopping 25 percent price increase.
"We knew the price was cheap, but the idea was to bring more traffic in the restaurants," Thai Union Group CFO Ludovic Regis Henri Garnier told investors on a call. "So we wanted to boost our traffic, and it didn't work."
"We want to keep it on the menu," he added. "And of course we need to be much more careful regarding what are the entry points and what is the price point we are offering for this promotion."