Red Lobster files for bankruptcy after missteps including all-you-can-eat shrimp

Pink Lobster, America’s largest seafood chain recognized for its shrimp and Cheddar Bay biscuits, has filed for chapter.

Its seafood eating places are in sizzling water after a sequence of dangerous decisions by a parade of executives, together with an ill-fated promotion for all-you-can-eat-shrimp beginning at $20.

Virtually 580 areas within the U.S. and Canada are anticipated to remain open by way of the method, using about 36,000 employees. Final week, dozens of different Pink Lobster areas closed abruptly. Their whole contents — together with freezers, ovens, cubicles and lobster tanks — have already been auctioned off.

The hearth sale was a precursor to a long-expected chapter submitting, through which Pink Lobster plans to promote “considerably all of its property.” Since March, the chain has been run by CEO Jonathan Tibus, referred to as a corporate-restructuring knowledgeable.

Pink Lobster’s troubles embody “a tough macroeconomic atmosphere, a bloated and underperforming restaurant footprint, failed or ill-advised strategic initiatives, and elevated competitors inside the restaurant business,” Tibus wrote in courtroom paperwork.

Model disaster meets possession crises

Pink Lobster, now the biggest seafood chain, didn’t get cooked only in the near past. It has struggled for a decade as diners have pulled away from massive casual-dining chains.

In that world, Pink Lobster was one of many originals. It began in 1968 and exploded by way of the Eighties and Nineteen Nineties, internet hosting generations of People for celebrations and dates — with many cracking their very first lobsters at its tables.

Lately, marked by rising inflation, Pink Lobster has been shedding out on each ends: to more energizing, nicer, extra native eating places; and to the rising tide of cheaper, faster spots, like Shake Shack or Surfside Taco.

And through this cultural shift, Pink Lobster’s funds have floundered.

A personal fairness agency purchased the chain ten years in the past from Darden Eating places, which owns rivals Olive Backyard and LongHorn Steakhouse. The agency, Golden Gate Capital, funded the deal partly by promoting Pink Lobster’s actual property.

That meant the chain needed to begin paying lease. That’s now a significant monetary think about Pink Lobster’s chapter submitting, which asks the courtroom to reject 108 leases, letting the corporate abandon these areas.

Since 2020, Pink Lobster has been run by its largest shareholder: Thai Union Group, a seafood provider additionally behind the Hen of the Sea model. And the chapter submitting lays a lot blame on Thai Union and ex-CEO Paul Kenny.

After large monetary losses in the course of the pandemic, adopted by will increase within the prices of meals and wages, Thai Union pursued in depth cost-cutting at Pink Lobster. The chain was run by a conveyor belt of executives; it had no CEO for a 12 months.

The chapter submitting alleges that Thai Union interfered with every day operations and even pushed out two rival suppliers of breaded shrimp, securing a costlier unique deal for itself.

All-you-can-eat shrimp fiasco

Then got here a reboot concept that became a jumbo catastrophe: Final Limitless Shrimp. Pink Lobster took its basic promotion and made it everlasting, with costs initially beginning at $20.

Thai Union later cited this as the primary reason for its $11 million loss that quarter. The purpose was to get extra folks within the door, which did occur. However many diners then stayed for hours, choosing at plate after plate of shrimp dishes and — critically — shopping for little else.

Thai Union CEO Thiraphong Chansiri later stated the ordeal left him scarred.

“Different folks cease consuming beef, I’m going to cease consuming lobster,” he advised buyers.

In January, Thai Union washed its arms of Pink Lobster. The house owners stated they’d primarily abandon their stake within the chain, setting the restaurant firm on a path to chapter.

On this week’s Chapter 11 submitting, Pink Lobster says it has a prearranged bid, referred to as a “stalking horse” bid, from its lenders to purchase out the chain, until it receives a better rival bid.