US restaurant chain Red Lobster goes bust after shrimp offer backfires

The Florida-based company succumbed to onerous leases, high labour costs, and an unlimited shrimp promotion

Red Lobster last week shuttered 93 underperforming stores. Picture: Bloomberg

Seafood restaurant chain Red Lobster has gone bust, succumbing to onerous leases, high labour costs, and a disastrous unlimited shrimp promotion.

The Florida-based company filed for bankruptcy and is listing assets and liabilities of $1bn (€920m) to $10bn each in its bankruptcy petition. The filing allows the company to keep operating while it works out a plan to repay creditors.

Red Lobster plans to hand control of the company to its lenders, led by Fortress Investment, who have agreed to provide $100m in financing to support the chain through bankruptcy.

The takeover offer is in the form of a stalking horse bid, meaning it will set the floor price for Red Lobster’s assets and is subject to better bids should any materialise in the coming weeks, according to court documents.

The restaurant chain had been deteriorating for several years, with diners down around 30% since 2019, chief executive Jonathan Tibus wrote in court papers.

Sales decline 

While the business had shown signs of recovery since the pandemic, sales declined sharply in the last 12 months, Mr Tibus wrote. It lost $76mn in the 2023 fiscal year.

Inflationary pressures have kept customers from dining out and higher labour costs strained the company’s finances. A “material portion” of Red Lobster’s leases were priced above market rates.

In May 2023, the company changed its $20 'Ultimate Endless Shrimp' from a limited-time offer to a permanent promotion, costing it $11m as diners devoured expensive plates of shrimp.

Red Lobster expanded rapidly in the 1970s and 1980s and now operates more than 550 restaurants in the US and Canada.

The chain employs 34,000 people in the US and an additional 2,000 in Canada. Last week, it shuttered 93 underperforming stores.

• Bloomberg