Red Lobster is contemplating bankruptcy, reportedly in part because of a record $11 million loss last year that the seafood restaurant partly blamed on its promotional offer of unlimited shrimp.
Experts familiar with the situation indicate that Red Lobster might pursue a Chapter 11 bankruptcy protection filing, the Daily Mail reported. The legal maneuver would facilitate the restructuring of the company’s debt, enabling the chain to terminate enduring contracts and enter into negotiations for new leases under more favorable terms.
The restaurant’s famous $20 Ultimate Endless Shrimp promotion — created as a short-term offer that became permanent — came after the company lost $5.4 million in the second quarter of 2023. The promotion was successful in bringing in diners, especially after the deal went viral on social media platforms.
“For those who have been in the U.S. recently, $20 was very cheap. And the rationale for this promotion was to say we knew the price was cheap, but the idea was to bring more traffic in the restaurants,” Chief Financial Officer Ludovic Garnier said in November.
“But something which was different from our expectation is the proportion of the people selecting these promotions was much higher compared to expectation,” he added.
The company eventually raised the price of Endless Shrimp to $25, but it didn’t help.
The brand, with 650 outlets nationwide, has grappled with other significant financial pressures, among them costly leases and elevated labor expenses.
Bloomberg was first to break the news about the potential bankruptcy, noting that Red Lobster is seeking guidance from the law firm King & Spalding. While the decision on whether to proceed with bankruptcy has yet to be made, insiders suggest that such a move would let the chain maintain its operations.
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