Red Lobster out of bankruptcy under former PF Chang’s CEO – after endless shrimp deal led to demise of 100 restaurants
Red Lobster has successfully emerged from Chapter 11 bankruptcy, marking a significant turnaround for the seafood chain known for its affordable menu and beloved cheddar biscuits. The reorganization plan was approved by a U.S. bankruptcy judge earlier this month, facilitating the acquisition of the business by a lender group led by Fortress Investment Group.
Bankruptcy Filing and Financial Struggles
The decision to file for bankruptcy protection came less than four months ago, driven by ongoing financial struggles and a pressing need to adapt to a competitive market. In 2023, the Orlando-based chain reported a substantial loss of $76 million and closed over 50 locations, with additional restaurant closures occurring during the bankruptcy proceedings.
Leadership Changes
The new CEO, Damola Adamolekun, who previously led PF Chang’s, now heads Red Lobster. Appointed to lead RL Investor Holdings—the entity that acquired Red Lobster—Adamolekun has committed over $60 million in new funding to support the company’s long-term investment plans. He expressed optimism about the chain’s future, stating, “Red Lobster is now a stronger, more resilient company. Today marks the beginning of a new chapter in our history.”
Current Status of the Company
Red Lobster is now an independent, privately-held entity, operating 545 locations across 44 states and four Canadian provinces. The restructuring has positioned the chain to better navigate the challenges of the current market.
Challenges Faced
Red Lobster, which filed for Chapter 11 protection on May 19, has faced years of difficulties stemming from rising food and labor costs, underperforming locations, and increasing operating expenses. One particularly problematic promotion, the Ultimate Endless Shrimp, initially boosted sales but ultimately contributed to the chain’s financial woes. The deal allowed customers unlimited shrimp for $20, but the unexpected high demand forced Thai Union, Red Lobster’s parent company, to raise the promotion’s price to $25.
Parent Company’s Decision to Divest
In January, Thai Union Group, a Thailand-based seafood producer, announced its intention to divest from Red Lobster due to “prolonged negative financial contributions.” Thai Union’s President and CEO, Thiraphong Chansir, acknowledged during a February earnings call that the sale might not yield significant returns.
Restructuring for Recovery
The bankruptcy filing allowed Red Lobster to reorganize and sell off many of its assets to address its financial and operational issues. Former CEO Jonathan Tibus emphasized the importance of the restructuring process for the chain’s recovery, stating, “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and refocused on our growth.”
Looking Ahead
As Red Lobster charts a new course under Adamolekun’s leadership, there are plans to revitalize the brand and adapt to the evolving seafood market. Stay tuned for more coverage on CEO Damola Adamolekun’s strategies for the seafood chain and insights into the reasons behind the recent closures.
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