- The chain has been hit by expensive leases and high labor costs.
- It is reportedly closing 48 outlets in the US.
Troubled restaurant chain Red Lobster is reportedly abruptly closing at least 48 of its locations across the United States amid warnings that it could file for bankruptcy.
The chain has “temporarily closed” locations in Buffalo, Orlando, Jacksonville and other cities, and is auctioning off kitchen equipment and furniture. according to CNN.
The brand is reportedly considering a possible Chapter 11 filing to restructure its debt, which will allow it to scrap long-term contracts and renegotiate new leases.
Red Lobster’s cash flows have been hit by expensive leases and high labor costs.
Red Lobster is considering filing for bankruptcy as high costs and low sales ruin the business.
This comes after the company last year reported record losses of $11 million, which its chief financial officer attributed in part to its unlimited shrimp deal.
The chain, which began as a single restaurant in Lakeland, Florida, in 1968, has about 650 locations in nearly every state. It is famous for its cheese-flavored crackers.
The news of the bankruptcy was first reported by Bloombergwhich stated that the restaurant chain is receiving advice from law firm King & Spalding.
People familiar with the matter told the outlet that the decision had not yet been made, but that bankruptcy would allow the company to continue operating.
Red Lobster’s famous shrimp promotion came about because it wanted to attract more customers after significant losses of $5.4 million in the second quarter of 2023.
The chain has ‘temporarily closed’ locations in Buffalo, Orlando, Jacksonville and other cities
But those plans fell through as the all-you-can-eat promotion was too generous.
For just $20, diners could enjoy as much seafood as they could handle.
The ‘Endless Shrimp’ offering was initially special, but in June it claimed a permanent spot on Red Lobster’s menu. As a result, foot traffic increased by 4 percent.
More people were ordering Endless Shrimp than the company anticipated, likely because the deal went viral on social media platforms like TikTok, where people showed how much they ate to get their money’s worth.
‘For those who have been to the United States recently, $20 was very cheap. And the reason for this promotion was to say that we knew the price was cheap, but the idea was to attract more traffic to the restaurants,” CFO Ludovic Garnier said in November.
The chain, which started as a single restaurant in Lakeland, Florida, in 1968 has about 650 locations in nearly every state and its menu offers variations of shrimp-infused dishes.
For just $20, diners could enjoy as much seafood as they could handle, but the price later jumped to $25.
“But what differs from our expectations is that the proportion of people who selected these promotions was much higher compared to expectations,” he added.
Eventually, the company raised the price of its Endless Shrimp to $25 in an attempt to recoup some of the losses.
Red Lobster has had several owners in recent years. It was previously owned by restaurant group Darden, which also owned Olive Garden, but was acquired by Golden Gate Capital in 2014.
In 2020 it was bought by Thai Union, which this year said its “current financial requirements no longer align with Thai Union’s capital allocation priorities.”