Red Lobster, which franchises internationally and in nontraditional locations such as airports in the United States, filed for Chapter 11 bankruptcy protection after closing dozens of restaurants last week.
The brand filed in the United States Bankruptcy Court for the Middle District of Florida May 19. Red Lobster listed more than 100,000 creditors and assets between $1 billion and $10 billion. It listed liabilities in the same range. Berger Singerman partner Paul Steven Singerman is the attorney on the case.
In a release from Red Lobster, the company said it’s entered into a stalking horse purchase agreement “pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.”
Red Lobster reported its intention to close more stores, sell “substantially all of its assets” and improve operations. Existing lenders financed a $100 million debtor-in-possession commitment for the seafood chain.
Thai Union Group purchased the brand from Golden Gate Capital in 2020 after acquiring a 25 percent stake in the brand in 2016.
TAGeX Brands is handling restaurant liquidations through an online auction, according to a LinkedIn post from the company’s CEO, Neal Sherman.
The company did not immediately respond to request for comment.
The Los Angeles Times reported that, in part, Red Lobster’s 2023 all-you-can-eat shrimp special “accelerated the company’s downward spiral.” The $20 deal allowed customers to eat as much shrimp as they could. One woman on TikTok said she ate 108 shrimps in four hours. Red Lobster increased the price to $22 and later $25.
“$20 was very cheap. The rationale for this promotion was to say we knew the price was cheap, but the idea was to bring more traffic into restaurants,” Thai Union Group Chief Finance Officer Ludovic Garnier said in a third quarter meeting last year. He noted traffic is typically slower in the later half of the year.
Traffic did increase by 2 percent in the third quarter, Garnier said, but the number of customers opting in for the special was “much higher” than Thai Union anticipated.
“The bottom line, in terms of financial performance, it did not deliver what we were expecting and is one of the key reasons for the losses we generated in Q3 2023,” Garnier said.
This isn’t the first time Red Lobster underestimated American’s preference to get as much bang as possible for their bucks. In 2003, the brand offered a $23 all-you-can-eat crab special when wholesale prices for crab were higher than normal.