Red Lobster suddenly closed at least 50 restaurants nationwide and reportedly auctioned off equipment and furniture from selected locations. This is the first time in a popular chain restaurant’s history to close this many locations at the same time.
Years of struggle
Red Lobster has been struggling with profit in the past several years. Bloomberg reported that the restaurant chain considered filing for Chapter 11 bankruptcy in April 2024. The outlet added that leases and cash flow became increasing issues, but there were more.
Thousands of workers affected
MacroEdge, which specializes in economic intelligence, research, and data, estimated that around 6500 workers could be affected by the closings. The exact number is unknown because Red Lobster did not comment on the closures. However, staffers have been sharing stories about unexpected closures on social media.
Auctioning of the equipment
The liquidator TAGeX Brands confirmed the largest restaurant equipment auction on its website. The website added that the actions are live, and the auction includes refrigerators and freezers, furniture, cooking equipment, and fixtures from nearly 50 Red Lobster locations nationwide. Neil Sherman, CEO and founder of TAGeX Brands verified the news on LinkedIn.
Ultimate Endless Shrimp promotion led to a loss of millions
The Ultimate Endless Shrimp deal from 2023 became so popular that it cost the company $11 million in the third quarter of 2023, according to Restaurant Business. The promotion allowed customers to pick two shrimp types and enjoy them endlessly for $20.
The move backfired
Parent company Thai Union Group announced in late 2023 that Red Lobster could lose $20 million during the last year. Endless Shrimp’s price was raised to $25. Union Group CFO Ludovic Regis Henri Garnier told Restaurant Business Magazine that the initiative was supposed to boost traffic. However, the price had to be changed, and Garnier added that the company should have been more careful.
The number of locations is shrinking
Red Lobster has over 650 restaurants across the States. However, sudden closes were reported in Buffalo and Watertown in New York; Danville, Illinois; Elkhart, Indiana; Gaithersburg, Maryland; Jacksonville and Tampa in Florida; Salina, Kansas; Waterloo, Iowa; and Red Lobster’s hometown, Orlando, Florida, and more. Danville Mayor commented on Facebook that local managers were fired without notice after over 30 years of serving.
Some locations are listed as temporarily closed
The official website confirmed the closings of some of the establishments, though two, Wauwatosa and La Crosse, Wisconsin, were listed as temporarily closed. The total number of closed locations is growing, and some have signs thanking customers and notifying them that there will be new locations.
The workers reportedly got three days to pack up
According to WKBW, a Buffalo employee, Ramon Garcia, found out about the closings from a cook. Garcia added that they had three days to clean out the restaurant. Garcia did not know about the financial troubles but noticed that the company had begun cutting off on many things.
Costs and COVID
The Thailand-based company that owns Red Lobster discussed its intention to pursue an exit from its minority investment due to rising costs and the COVID-19 pandemic. The seafood company expects to divest from Red Lobster by the end of 2024, Restaurant Dive reported in May. The company cited that Red Lobster’s financial requirements no longer align with its capital allocation priorities.
Looking for a buyer
Red Lobster’s previous parent company, Golden Gate Capital, sold the chain to Thai Union in 2016. Thai Union Group announced plans to sell its stake in Red Lobster in January, and there were reports in April that a new buyer was interested, but the deal wasn’t realized, CNBC found. A report by Creditsafe revealed that the chain is having trouble paying its bills on time.
The revolving door of CEOs
Reports claim that since longtime leader Kim Lopdrup retired in 2021, Red Lobster has had difficulties finding a CEO. Kelli Valade and Horace Dawson moved to better positions outside the company. In March, veteran bankruptcy expert Jonathan Tibus joined the company as the new CEO.
The competition
Another issue was believed to be the rise of competition. This has been a problem for nearly two decades, and many pointed out that Panera Bread and Chipotle Mexican Grill were among the Red Lobster’s biggest rivals. The combination of cheap deals, the pandemic, and rising costs leaves people wondering what’s next for the beloved chain restaurant.
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