Endless Shrimp May Be The Cause Of Red Lobster's Bankruptcy Concerns
America's top seafood restaurant chain is in hot water. According to a Bloomberg report, Red Lobster is considering filing for Chapter 11 bankruptcy. The company is currently in consultation with King & Spalding, a corporate law firm that has previously represented such notable names as Harvard University and Johnson & Johnson. However, representatives for Red Lobster say the company has not thrown in the towel just yet and are considering alternative measures to cut costs, including renegotiating leases and contracts.
Red Lobster posted a $12.5 million loss in the final quarter of 2023, the worst in the company's history, according to CNN. That loss was made all the worse by the company's Ultimate Endless Shrimp deal, which successfully brought more customers to the chain, but still caused a net loss from shrimp (not prawn) expenses. After a disastrous third quarter in 2023, which saw the company post an $11 million loss, Red Lobster raised the Ultimate Endless Shrimp price, but it wasn't enough to recuperate from the damages.
Despite financial losses, Red Lobster launched a new all-you-can-eat deal
In February, amidst the avalanche of financial woes, Red Lobster did the last thing you'd expect. The brand launched a new all-you-can-eat deal — the Endless Lobster Experience. Offered as a new part of the company's famous Lobsterfest, the Endless Lobster Experience established far stricter rules than the Ultimate Endless Shrimp deal in an effort to avoid the mistakes of the past. For starters, only 150 people will receive the Endless Lobster Experience, selected via social media.
On top of that, guests who win the Endless Lobster Experience are limited to 12 lobsters over a two-hour dining period (with Cheddar Bay Biscuits, of course), and they must make a reservation a week in advance. These precautionary measures suggest that Red Lobster learned its lesson from the Ultimate Endless Shrimp deal, but it may be too late. While filing for Chapter 11 bankruptcy wouldn't mean the end of Red Lobster entirely, it could mean major shakeups in the company structure and potential store closures.
Red Lobster has had a turbulent start to 2024. At the beginning of the year, Thai Union Group, a holding group that owns such seafood companies as Chicken of the Sea and King Oscar, announced that it was looking to sell Red Lobster, but expected that it would take months to find a buyer. In light of everything, it may be a hard sell.