Red Lobster is deep in the red, and shrimp may be to blame. In recent weeks, rumors have swirled that Red Lobster could be heading to Chapter 11 bankruptcy in an attempt to sort out their finances. The restaurant chain has also apparently been negotiating with debtors and may soon be put up for sale.
Ironically, one of the reasons Red Lobster is struggling is because one of their promotions became too popular. The company offered a $19.99 "Ultimate Endless Shrimp" deal. The promotion proved to be highly effective for luring people in, but customers ate far more shrimp than the company anticipated — so much that it propelled Red Lobster into an $11 million loss in the third quarter, according to Restaurant Business. The chain later raised the price to $25 to stem the tide, but challenges remain.
Another red flag: One of Red Lobster’s biggest investors, Thai Union Group, is looking for an exit. In a statement, Thai Union Group CEO Thiraphong Chansiri said, "Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities." He argued that rising costs, including labor and higher interest rates, were sinking Red Lobster.
Red Lobster shuttered eight locations in 2023 and ultimately lost $22 million last year. Currently, the company is under the leadership of CEO Jonathan Tibus, who has made a career out of helping restaurants restructure through Chapter 11 bankruptcy. In 2020, Tibus helped lead burger chain Krystal through Chapter 11. In the months ahead, Red Lobster may be facing a sink-or-swim scenario as it tries to rehab its finances.
