CLAWING BACK IN: Red Lobster out of bankruptcy under former PF Chang’s CEO – after endless shrimp deal led to demise of 100 restaurants
According to THE SUN, Red Lobster has successfully exited Chapter 11 bankruptcy, marking a significant turnaround for the popular seafood chain known for its affordable menu and famous cheddar biscuits. The reorganization plan was approved earlier this month by a U.S. bankruptcy judge, leading to the acquisition of the business by a lender group led by Fortress Investment Group.
Financial Struggles and Strategic Changes
The decision to file for bankruptcy came less than four months ago, driven by ongoing financial challenges and a need to adapt to a competitive market. In 2023, the Orlando-based chain reported a loss of $76 million and closed over 50 locations. The financial strain was further exacerbated by the closure of additional restaurants during the bankruptcy proceedings.
New Leadership and Investment
Red Lobster’s new CEO, Damola Adamolekun, previously the chief executive of PF Chang’s, now leads the company. Adamolekun, who was appointed to head RL Investor Holdings—the entity that acquired Red Lobster—has committed over $60 million in new funding to support the chain’s long-term investment plans. “Red Lobster is now a stronger, more resilient company,” Adamolekun stated. “Today marks the beginning of a new chapter in our history.”
Operational Challenges and the Ultimate Endless Shrimp Promotion
The seafood chain faced significant struggles due to rising food and labor costs, underperforming locations, and increasing operating expenses. A key factor contributing to the chain’s financial difficulties was the Ultimate Endless Shrimp promotion, which, while initially boosting sales, led to unexpectedly high demand and subsequent operational strain. The promotion, initially priced at $20 for unlimited shrimp, was later increased to $25 to manage the surge in orders.
Thai Union’s Role and Financial Impact
Thai Union Group, a Thailand-based seafood producer, had previously announced its intention to divest from Red Lobster due to “prolonged negative financial contributions.” Thai Union’s President and CEO, Thiraphong Chansiri, acknowledged that the sale might not yield significant returns. The bankruptcy filing allowed Red Lobster to reorganize and sell off many of its assets to address its financial and operational issues.
Looking Ahead
The restructuring process has been crucial for Red Lobster’s recovery, enabling the chain to address its financial challenges and focus on growth. “This restructuring is the best path forward for Red Lobster,” said CEO Jonathan Tibus. “It allows us to address several financial and operational challenges and emerge stronger and refocused on our growth.”
Red Lobster is now an independent, privately-held entity with 545 locations across 44 states and four Canadian provinces. The chain is poised to enter a new phase under its revamped leadership and strategic investments.
