Red Lobster Faces Financial Struggles, May Close Over 125 Locations Amid Bankruptcy
Red Lobster, which recently shuttered over 50 restaurants, has revealed in bankruptcy court that it might close at least 125 additional locations as it tries to recover from significant financial losses incurred due to its “Ultimate Endless Shrimp” promotion. The company has filed for Chapter 11 bankruptcy, disclosing debts exceeding $1 billion and less than $30 million in cash on hand.
Financial Struggles and Bankruptcy Filing
In its bankruptcy petition, Red Lobster outlined plans to sell the business to its lenders in an attempt to keep some of its nearly 600 locations operational. The chain is struggling to renegotiate leases to avoid further closures, including locations in New Jersey at:
- 3003 Route 130 South, Delran
- 4411 Black Horse Pike, Mays Landing
- 211 Route 17 South, Paramus
Currently, 12 Red Lobster restaurants remain open in New Jersey, such as:
- 1298 Hooper Ave., Toms River
- 520 Highway 46, Wayne
- 700 Plaza Drive, Secaucus
- 1271 U.S. Route 22, Bridgewater
- 2100 Route 38, Cherry Hill
- 3255 Brunswick Pike, Lawrenceville
Impact of the “Ultimate Endless Shrimp” Promotion
The promotion, initially a limited-time offer, became a permanent menu item in June 2023 due to its popularity. However, the increased customer turnout did not translate into profitability, leading to a reported $12.5 million loss in the fourth quarter of 2023. The chain’s latest major shareholder, Thai Union, pushed for this promotion to sell its excess shrimp, contributing to significant financial losses.
Historical Context and Operational Challenges
Red Lobster, founded in 1968 in Lakeland, Florida, became a household name in casual dining, especially known for affordable seafood. However, a series of ownership changes and strategic missteps, including the sale to private equity firm Golden Gate Capital and subsequent real estate sale leasebacks, exacerbated financial pressures. These leasebacks left Red Lobster with high rental costs, further straining its financial health.
Future Outlook
Despite the financial turmoil, Red Lobster intends to keep its remaining restaurants open and operational throughout the bankruptcy process. CEO Jonathan Tibus stated, “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth.” The support from lenders and vendors is crucial for the company’s swift and efficient sale process.
Red Lobster’s situation underscores the challenges faced by the restaurant industry, especially when promotional strategies backfire. The company’s efforts to renegotiate leases and sell the business to lenders are aimed at stabilizing its operations and securing the future of its remaining locations.
This is a developing story. We will update this article when we learn more.
