Red Lobster is reportedly considering filing for bankruptcy.
A report from Bloomberg on Wednesday, citing people familiar with the situation, says that the seafood restaurant chain is weighing a Chapter 11 bankruptcy filing in an attempt to stay afloat and alleviate recent financial pressures that have plagued the company.
The outlet reported that while no final decisions have been made about a possible filing, the chain is being advised by law firm King & Spalding on next steps.
Red Lobster Canada did not immediately respond to Global News’ inquiry about the fate or financial state of operations north of the border.
The purveyor of the beloved Cheddar Bay Biscuits and Endless Shrimp has been in hot water on multiple occasions in the past year; its largest investor, Thai Union Group, made it known that it is looking for an out, and plans to sell its minority stake in the company.
“After detailed analysis, we have determined that Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities and therefore are pursuing an exit of our minority investment,” said Thiraphong Chansiri, Thai Union Group’s CEO, in a statement earlier this year, citing a number of factors for Red Lobster’s decline, including labour costs, pressure from the pandemic, rising costs and high interest rates.
To make matters worse, last year’s Endless Shrimp debacle ended up backfiring, tanking Red Lobster’s profits to the tune of US$11 million.
In an effort to boost visits to their restaurants, the chain expanded its all-you-can-eat shrimp deal in the U.S., but the $20 deal was too good and Americans couldn’t stay away.
For years, the Endless Shrimp promotion was only offered one day per week. But, last June, the guest-favourite deal was added as a permanent fixture to the menu.
And while the company succeeded in its goal of bringing more diners into its locations — traffic rose about two per cent compared to the second quarter and by four per cent over 2022 — the insatiable American appetite for shellfish ultimately lost Red Lobster millions.
News of a bankruptcy filing doesn’t necessarily mean the company will close up shop, however. A Chapter 11 bankruptcy means the company could continue to operate while it works with creditors and investors to come up with a debt reduction plan. Burdensome leases could be renegotiated, as well as other long-term contracts.
That hasn’t stopped social media users from having a field day with these latest rumours.
For now, we’ll just have to wait and see how far Red Lobster’s business is in the tank.
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