NEW YORK (AP) — After months of dozens of restaurant closures and public reports of its “endless shrimp” woes, Red Lobster has announced it will soon emerge from Chapter 11 bankruptcy protection.
A U.S. bankruptcy judge on Thursday approved the casual seafood chain’s restructuring plan, which includes a lending group led by asset management firm Fortress buying the business — the green light came just four months after Red Lobster emerged from bankruptcy. Filed for bankruptcy The company was in the process of selling itself after years of mounting losses and dwindling customers while struggling to keep up with competitors.
At the time of the May filing, Red Lobster executives announced plans to “simplify our operations” by reducing the number of locations. The chain, which posted a $76 million loss in 2023, closed dozens of locations across North America before and during the bankruptcy proceeding. These included: Over 50 locations The company’s facilities were auctioned off just days before the Chapter 11 bankruptcy filing, and further closures have followed throughout the bankruptcy process.
Red Lobster said Thursday that it plans to operate about 544 restaurants in the U.S. and Canada once it emerges from bankruptcy, down from the 578 restaurants it had disclosed at the time of its bankruptcy filing in May.
The acquisition is expected to close by the end of September, and under the terms of the acquisition, the chain will continue to operate as an independent company.
If the deal goes through, Red Lobster will have Damola Adamolekun, former chief executive officer of PF Chang’s, as its new CEO.
Adamolekun was named last week to head RL Investor Holdings, the new company that bought Red Lobster by Fortress Corp. In a statement Thursday, Adamolekun said Red Lobster has a “great future” and thanked departing CEO Jonathan Tibus for his leadership during the bankruptcy process.
Red Lobster’s buyer is also providing additional capital to help the Orlando, Fla.-based chain recover from the crisis. Adamol-Kun said the company’s long-term investment plan includes more than $60 million in new funding.
Known for its affordable seafood and cheddar biscuits, Red Lobster has changed hands many times in its 56-year history. The brand was founded in 1968 by Bill Darden, who sold Red Lobster to General Mills in 1970. General Mills then founded Darden Restaurants, which owns chains such as Olive Garden. Darden Restaurants was separated from General Mills in 1995.
Darden Restaurants subsequently sold Red Lobster to a private equity firm in 2014. Thai Union GroupOne of the world’s largest seafood suppliers Invested in Red Lobster in 2016 The company increased its stake in 2020 but announced its intention to exit its minority investment earlier this year.
Announcing the sale plans in January, Chief Executive Officer Teerapong Chansiri said the COVID-19 pandemic, industry headwinds and rising operating costs at Red Lobster had resulted in “prolonged negative financial contributions to Thai Union and its shareholders.” The company reported a $19 million loss from Red Lobster for the first nine months of 2023.
One reason for the loss, though not the only one, was yes, all-you-can-eat shrimp. Last year, Red Lobster significantly expanded its iconic all-you-can-eat special, but customer demand was outstripping what the chain could afford; Thai Union executives later noted that the special’s $20 price tag didn’t generate enough profit.
Last year’s shrimp debacle isn’t the first time Red Lobster has seen the consequences of its “endless” promise: In 2003, the company reportedly lost millions of dollars on its all-you-can-eat “endless crab” promotions when crab prices soared.