OAN’s James Meyers
10:26 AM – Monday, May 20, 2024
The Seafood chain Red Lobster, which lost millions over its all-you-can-eat-shrimp promotion last year, has officially filed for bankruptcy after the chain shut down almost 100 locations last week.
Red Lobster filed for voluntary Chapter 11 bankruptcy in Florida, the company said in a statement late on Sunday night. However it still intends to keep its locations open.
The company stated that it received a $100 million financing commitment to fund ongoing operations.
The seafood chain said it would “drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern.”
The announcement comes after the company lost $76 million last year and had seen a 30% drop-off in guest count since 2019.
Red Lobster listed its assets and liabilities to be between $1 billion and $10 billion, according to Sunday’s court filing.
Meanwhile, the bankruptcy will allow Red Lobster to hold off evictions from landlords and other bills from vendors it hasn’t paid in recent months.
“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,” said Jonathan Tibus, CEO of Red Lobster.
The biggest seafood chain in the U.S., which had 650 locations before the closures, was brought down by the all-you-can-eat shrimp promotion it ran last summer, which caused their largest shareholder Thai Union to write-off $530 million in the fourth quarter.
The $20 promotion was eventually raised to $25.
At the same time, Red Lobster has had five CEOs since 2021 as it has struggled in the past few years to fight against its declining business.
The Thailand-based company “forced huge cost reductions, including many that were pennywise and pound foolish because they hurt sales,” a former Red Lobster executive told CNN.
The filing also stated that Red Lobster has 36,000 employees and owes them $16.7 million in unpaid wages.
The company was founded in 1968, and had almost 700 locations by 2019. However, it failed to regain traction after the pandemic, with sales decreasing by 13% between 2019 and 2023.
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