Red Lobster files for Chapter 11 bankruptcy protection

Pink Lobster, the informal eating chain that introduced seafood to the plenty with innovations like popcorn shrimp and “countless” seafood offers, has filed for Chapter 11 chapter safety.

The 56-year-old chain made the submitting late Sunday, days after shuttering dozens of eating places.

“This restructuring is one of the best path ahead for Pink Lobster. It permits us to handle a number of monetary and operational challenges and emerge stronger and re-focused on our development,” CEO Jonathan Tibus stated. Tibus, a company restructuring professional, took the highest submit on the chain in March.

Pink Lobster stated its 600 eating places would proceed to function by the chapter proceedings, that are meant to simplify operations, shut places and pursue a sale. As a part of the submitting, Pink Lobster entered right into a so-called “stalking horse” settlement, which means it plans to promote its enterprise to an entity shaped and managed by its lenders.

Based on court docket filings, Pink Lobster has 551 U.S. eating places, 27 eating places in Canada and 27 franchised places in Mexico, Japan, Ecuador and Thailand. The corporate stated it has 36,000 workers within the U.S. and Canada.

Aaron Allen, the founding father of restaurant consulting agency Aaron Allen & Associates, stated Monday that the chapter was the fruits of 20 years of bother at Pink Lobster, which has struggled with rising competitors from sooner, cheaper chains like Chipotle and Panera.

Typically, Pink Lobster would decrease its costs to compete, a transfer that was usually disastrous. In 2003, the corporate misplaced hundreds of thousands of {dollars} on an all-you-can-eat “Limitless Crab” promotion when crab costs rose, Allen stated. Twenty years later, the chain did the identical factor with an “Final Limitless Shrimp” promotion.

“The truth that they might have this type of company amnesia is an enchanting case examine in company meals service,” Allen stated.

He stated Pink Lobster had extra success within the mid-2000s, when it repositioned itself as an upscale restaurant. It raised costs and renovated shops. Nevertheless it nonetheless struggled with rising lease and labor prices and altering client tastes.

“This slow-moving prepare wreck has been in movement for 20 years now,” Allen stated.

Orlando, Florida-based Pink Lobster stated in court docket filings that its annual visitor counts had been down 30% from 2019. The chain misplaced $76 million in 2023.

The chain was based by Invoice Darden, who wished to make seafood eating places extra accessible and inexpensive for households.

Darden obtained his begin within the restaurant enterprise in Waycross, Georgia, in 1938, when he opened The Inexperienced Frog. He boldly refused to segregate the restaurant’s patrons by race, which went in opposition to state legal guidelines on the time. When he opened the primary Pink Lobster close to Orlando in 1968, he once more invited prospects to take a seat anyplace they selected.

Darden bought Pink Lobster to Basic Mills in 1970, and he continued to run eating places as a Basic Mills govt. Basic Mills later went on to kind Darden Eating places, which owns Olive Backyard and different chains. Darden Eating places was spun off from Basic Mills in 1995.

Pink Lobster had legions of followers for dishes like lobster linguini and its buttery Cheddar Bay biscuits.

“There isn’t a one of-woman-born who doesn’t like Pink Lobster cheddar biscuits. Anybody who claims in any other case is a liar and a Socialist,” comic and actress Tina Fey wrote in her memoir “Bossypants.”

However the restaurant had bother maintaining with rivals and bringing in youthful prospects. Darden Eating places bought Pink Lobster to a personal fairness agency in 2014. Thai Union Group, one of many world’s largest seafood suppliers, first invested in Pink Lobster in 2016 and upped its stake in 2020.

Then final fall, Pink Lobster misplaced hundreds of thousands of {dollars} on its “Final Limitless Shrimp” promotion, which charged $20 for all-you-can-eat shrimp deal.

“We knew the worth was low cost, however the thought was to deliver extra visitors within the eating places,” Ludovic Garnier, the chief monetary officer of Thai Union Group, stated in an earnings name with buyers.

Garnier stated the deal did work, and restaurant visitors elevated. However extra friends opted for the $20 deal than Pink Lobster anticipated, and “we don’t earn some huge cash at $20,” he stated. For the primary 9 months of 2023, Thai Union Group reported a $19 million loss from Pink Lobster.

In January, Thai Union Group introduced its intention to exit its minority funding in Pink Lobster. CEO Thiraphong Chansiri stated the COVID-19 pandemic, business headwinds and rising working prices had hit the eating chain onerous and brought about “extended destructive monetary contributions to Thai Union and its shareholders.”

Restaurant liquidator TAGeX Manufacturers introduced final week that it will be auctioning off the gear of over 50 Pink Lobster places that had been not too long ago closed. The shop closures span throughout greater than 20 states — decreasing Pink Lobster’s presence in cities like Denver, San Antonio, Indianapolis and Sacramento, California.

Allen expects Pink Lobster’s restaurant footprint to shrink by one-third to one-half as a part of the chapter course of. Many potential consumers simply need the chain’s actual property, Allen stated.

“Almost definitely whoever buys it’s not going to need to repair up Pink Lobster,” he stated.

Pink Lobster stated within the court docket submitting that it has greater than 100,000 collectors and estimated property between $1 billion and $10 billion. The corporate’s estimated liabilities are between $1 billion and $10 billion.