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Red Lobster has recently made headlines by filing for Chapter 11 bankruptcy protection. The company, grappling with over $1 billion in debt and less than $30 million in cash, plans to sell its business to lenders while receiving financing to stay afloat. The iconic chain, with 578 locations across 44 states and Canada, serves 64 million customers annually, generating $2 billion in sales.
Founded in 1968 by Bill Darden, Red Lobster expanded rapidly in the 1980s and 1990s. Its popularity was boosted by cultural references, such as Beyoncé’s mention in her 2016 song "Formation." However, recent challenges have been too many. Analysts and former employees cite mismanagement, competition, inflation and a failure to modernize as key issues.
In 2014, Darden Restaurants sold Red Lobster to Golden Gate Capital for $2.1 billion. Since 2020, Thai Union Group has been its largest shareholder. Under Thai Union's management, the chain has struggled, with customer numbers dropping 30% since 2019. Thai Union's cost-cutting measures and strategic missteps further worsened the situation. "Thai Union forced huge cost reductions, including many that were penny wise and pound foolish because they hurt sales," a former executive stated.
The company has experienced significant executive turnover, with five CEOs since 2021. According to Thai Union's CFO, Ludovic Garnier, a critical mistake was making the $20 endless shrimp promotion a permanent menu item, which led to a substantial $11 million loss. He acknowledged, "We need to be much more careful."
Jonathan Tibus, a restructuring expert, was appointed CEO in March 2024 to navigate the bankruptcy. The company began closing 93 underperforming restaurants and ceased payments to vendors. In a statement, Tibus said, "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 we've received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests," he went on. Despite the closures, the remaining restaurants will stay open and the company is working with vendors to ensure continued service.
