Is Red Lobster Going Out of Business? Bankruptcy Reports Leave Customers Concerned

Concerned Red Lobster enthusiasts are expressing their fears that they may no longer be able to enjoy the beloved cheddar bay biscuits, following reports of the restaurant chain’s bankruptcy filing.

Despite clever marketing campaigns in recent years, such as their successful April Fools’ prank, Red Lobster continues to struggle despite being a popular destination for a lobster dinner and their famous Cheddar Bay Biscuits.

According to a report released on April 16 by Bloomberg, Red Lobster is contemplating filing for Chapter 11 bankruptcy in order to restructure their debt and continue operating as usual. The chain has faced some challenges in the last few years, including the appointment of their third CEO in just two years.

Chapter 11 Bankruptcy Explained

According to the United States Courts, a chapter 11 bankruptcy case is commonly referred to as a “reorganization”bankruptcy. In this type of bankruptcy, the debtor is allowed to continue operating their business and retain the powers and duties of a trustee. They may also seek court approval to borrow additional funds. This essentially means that Red Lobster can continue their operations as usual, despite being in a state of bankruptcy.

How did shrimp contribute to Red Lobster’s bankruptcy?

All you can eat shrimp Red Lobster — Red Lobster

All-you-eat shrimp was a bad idea for the brand

Based on Restaurant Business’s report, the decline of Red Lobster can be attributed to “issues with leadership, a challenging economic climate, and the popularity of all-you-can-eat shrimp.”

In 2022, Red Lobster faced financial losses of $33 million and had to shut down 16 of their restaurants. In an attempt to attract customers back to their establishments, they introduced a $20 all-you-can-eat shrimp deal in the summer of 2023. Although the promotion was a hit and drew in many seafood lovers, the cost of supplying such a large amount of shrimp to their locations resulted in a loss of $11 million in one quarter, as reported by The New York Times.

The brand’s current owners, Thai Union Group, purchased the chain for $2.1m in 2014 and are now in the process of preparing it for sale.

Despite these challenges, Red Lobster still maintains a strong presence in the US with 650 restaurants. Even if the chain is sold, there is potential for re-branding or implementing cost-effective marketing strategies instead of the current expenditure of $11 million.

Despite recent consideration of filing for bankruptcy, Red Lobster is not currently going out of business. This decision may actually benefit the company by allowing them to focus on building their brand rather than managing their debt. It’s worth noting that other fast-food chains, such as McDonald’s and Wendy’s, have also filed for bankruptcy in the past. The implications of this for Red Lobster’s future are still uncertain.