Red Lobster, the largest seafood restaurant chain in the U.S., has filed for bankruptcy protection.
The company said it had more than $1 billion in debt and less than $30 million in cash on hand. It plans to sell its business to its lenders, and in turn, it will receive financing to stay afloat. It expects to continue to close restaurants in the meantime.
Red Lobster, known for its cheddar bay biscuits, crab legs and shrimp dishes, spread around the country during the 1980s and 1990s. In 2016, Beyoncé mentioned Red Lobster in her song “Formation,” describing bringing a romantic partner to Red Lobster, causing sales to surge.
With 578 restaurants across 44 states and Canada, Red Lobster serves 64 million customers a year, and it brings in $2 billion in annual sales, the company said in its bankruptcy filing. One in five lobster tails purchased in North America is bought by Red Lobster.
But recent mismanagement, competition, inflation and other factors brought down Red Lobster, analysts and former Red Lobster employees say.
Years of underinvestment in Red Lobster’s marketing, food quality, service and restaurant upgrades hurt the chain’s ability to compete with growing fast-casual and quick-service chains.
Red Lobster started in 1968 by Bill Darden, an architect of the casual dining revolution in America, and General Mills soon bought the restaurant. Red Lobster later became part of Darden Restaurants, the owner of Olive Garden and other chains.
In 2014, Darden sold off Red Lobster to Golden Gate Capital, a private equity firm, for $2.1 billion. Since 2020, seafood distributor Thai Union Group, based in Thailand, has been the largest Red Lobster shareholder. Thai Union owns 49% of the company.
But Red Lobster has struggled under Thai Union.
The number of customers coming to Red Lobster tumbled 30% since 2019 and has only slightly improved since the pandemic. Earlier this year, Thai Union said it would divest from Red Lobster and take a $530 million loss on its investment.
Former Red Lobster employees say Thai Union’s cost-cutting efforts and strategy mistakes hurt the chain.
Red Lobster has been telegraphing its bankruptcy for months.
In January, the company hired Jonathan Tibus, a restructuring veteran, to assess its business. It named Tibus as CEO in March. Last week, the company began shutting down 93 restaurants in preparation for its bankruptcy.
As it ran out of cash, the company stopped paying its vendors last year.
The company plans to stay afloat with a $100 million financing agreement, it said in its bankruptcy petition.
via: CNN
