Red Lobster's bankruptcy report is revealing details about how the chain, famous for trying to turn a profit selling "all you can eat" shrimp to a country that has gotten so fat it needs to occupy two seats on most airline flights, went under.
In a post-mortem, CNN detailed that the chain first struggled due to decisions by a private equity firm that acquired it from Darden Restaurants in 2014, which involved selling and leasing back its property at high rates.
The situation worsened - as it did for many restaurants - with the 2020 pandemic and subsequent inflation, plunging the chain into financial distress with $1 billion in debt and less than $30 million in cash.
Then, management errors compounded these issues, particularly under CEO Paul Kenny, appointed by major stakeholder Thai Union. Kenny's policies, including securing an exclusive, costly shrimp supply deal for Red Lobster, led to further financial strain.
This culminated in the decision to make the "Ultimate Endless Shrimp" promotion a permanent, yet controversial, menu item. Which led to videos like this, from the channel "HUNGRY FATCHICK":
The all-you-can-eat shrimp deal, a longtime hit when offered temporarily for $20, exacerbated Red Lobster's financial woes during a period of inflation as fat Americans descended back unto the chain like locusts when restaurants re-opened, costing the chain $11 million in one quarter, according to CNN.
The promotion, underestimated in its appeal, led to extended customer stays and longer wait times, straining staff and customer patience. This is part of a broader narrative where, like many iconic brands, Red Lobster fell into private equity's grasp, leading to significant changes and challenges.
As we noted about a week ago, the chain was forced to promptly shut down multiple locations this month. More than 80 locations in at least 27 states have now been listed as "temporarily closed" on the restaurant chain's website.
A report said that workers at the locations were offered "no notice whatsoever" as to the closings. CBS reported earlier this month that Thai Union, Red Lobster's top supplier, has severed ties with the chain.
A liquidation company has started an online auction for kitchen equipment and other contents from the closed Red Lobster locations, the report also said.
