Red Lobster expected to file for bankruptcy after closing dozens of restaurant locations
Seafood chain reportedly shuttering restaurants in 20 US states including Colorado, California, Maryland, Texas and Florida
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Your support makes all the difference.Red Lobster is expected to file for bankruptcy as early as next week, after recently announcing the closure of dozens of restaurants across the US, according to a report.
The beleaguered seafood dining chain faced serious financial damage done by a $20 “endless shrimp” promotion that proved unexpectedly popular with customers, and reportedly cost it millions of dollars last year.
Restaurants are expected to close in locations spanning around 20 states including Colorado, California, Maryland, Texas and Florida, where the chain’s headquarters are based.
The company is preparing to file a Chapter 11 bankruptcy petition in Orlando, Florida, before Memorial Day on 27 May, sources told The Wall Street Journal.
It aims to use the bankruptcy process to negotiate concessions from landlords and strike a deal with creditors to continue operating, according to the outlet.
Red Lobster earned $2.2bn from domestic business in 2023, down 8 per cent from the previous year, according to the Journal.
The closure of at least 48 Red Lobster restaurants was announced on Monday by a restaurant liquidation company.
Neal Sherman, the chief executive of TAGeX Brands, said on LinkedIn that it was assisting with the rapid closure of Red Lobsters in 21 US states. All of the equipment from the restaurants will now be sold.
"TAGeX Brands is proud to launch the largest restaurant liquidation EVER through its online auction marketplace," said Mr Sherman. "The furniture, fixtures, and equipment from select Red Lobster locations MUST GO ASAP!"
In 2023, Red Lobster was further knocked off balance by the $20 endless shrimp offer.
The all-you-can-eat menu option was previously a time-limited promotional offer. But when Red Lobster made it permanent, patrons ended up eating far more shrimp than the restaurant could afford, while taking up tables and lengthening wait times for new arrivals.
"We were expecting an increase of 20 per cent in customer traffic, but the actual number was up to 40 per cent," said Thiraphong Chansiri, the chief executive of Red Lobster’s parent company Thai Union, last November.
In January, Thai Union announced it would end its involvement with Red Lobster after eating a $530m loss on its initial investment, which it blamed on the Covid-19 pandemic and the rise of interest rates around the world.
Dennis Gemberling, founder and principal of hospitality industry consultancy group, Perry Group International, told The Independent that a greater shift in consumer behavior – opting for more “grab and go” food, or full dinner experiences, is pushing out middle-ground -or fast-casual restaurants such as Red Lobster.
“The whole market… is starting to dwindle. Gone are the days of the Martini lunch,” he said.
The Independent has contacted Red Lobster for comment on the rumours of looming bankruptcy.
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