The most popular seafood chain files for bankruptcy in the U.S., no updates on Canada
Published May 20, 2024 at 2:49 pm
A popular seafood chain struggling with financial troubles has reportedly filed bankruptcy in the U.S.
After reports surfaced last month (April 17) about considering bankruptcy, Red Lobster officially filed for Chapter 11 bankruptcy in the United States, according to a story in Bloomberg yesterday (May 19). This decision came after discussions to reach an out-of-court deal with lenders fell through.
In a Chapter 11 bankruptcy, the debtor retains control of the company, continues operations, and can seek new financing with court approval, as explained on the U.S. Courts government website.
Red Lobster has decided to keep its restaurants open during the bankruptcy process while planning to reduce its locations and sell off most of its assets.
The decision follows after the restaurant closed eight locations in the U.S. in 2023. Challenges reportedly stemming from pandemic lockdowns and rising labour costs affected its operations. Last week, it closed 93 underperforming stores as part of its restructuring efforts.
The bankruptcy filing further reveals that Red Lobster’s assets and liabilities are estimated to be between $1 billion and $10 billion.
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In addition, the company has secured $100 million in financing from its lenders, led by Fortress Investment Group, to support its operations during bankruptcy, according to Bloomberg.
Jonathan Tibus, Red Lobster’s CEO, mentioned in court papers that the business had been declining for years, with sales down about 30% since 2019. Although there were signs of recovery after the pandemic, sales reportedly dropped in the last year, resulting in a $76 million loss in 2023.
The $20 “Ultimate Endless Shrimp” promotion also believed to have contributed to an $11 million loss. However, Red Lobster is investigating this shrimp deal and examining the influence of its owner, Thai Union Group Plc, on shrimp purchases.
Red Lobster, known for its seafood and iconic Cheddar Bay Biscuits, has been a mainstay in the United States for over 50 years. Since opening its first location in 1968 in Lakeland, Florida, the restaurant chain has served nearly 64 million customers annually.
According to the Red Lobster website, the family-owned restaurant focuses on “making delicious, high-quality seafood available and affordable to everyone.”
The chain made its way to Canada in 1983. There are currently nine locations in the GTA, including restaurants in Toronto, Mississauga, Burlington, Brampton and Oshawa.
It’s unclear if the recent bankruptcy filing would also impact the Canadian Red Lobster restaurants.
The Red Lobster website states that the company currently employs 34,000 people in the U.S. and 2,000 in Canada, with over 700 locations globally. It remains uncertain how many of these locations will be abruptly shut down, potentially leaving thousands without jobs.
With files from Karen Longwell
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