Red Lobster is but one of the many restaurant chains who have fallen victim to Chapter 11 Bankruptcy in 2024. The seafood chain officially filed for bankruptcy in May, citing financial struggle and operational pitfalls. In an effort to salvage the business they liquidated equipment and began shutting down locations. As of October, the chain has shut down more than 87 locations, with more sure to follow.
One Fifth of Red Lobster Locations are Shut Down
Despite being one of the country’s most beloved seafood chains, Red Lobster has been forced to close the doors on one fifth of their locations across the country. Most recently, there have been more than 25 closures across the country, including states such as Arkansas, Minnesota, and Ohio, which had previously been spared. Florida was the state that suffered the most losses, although there are still 37 locations open and operating in the Sunshine State.
Factors that Led to Red Lobster Store Closures and Bankruptcy Filing
The company explained that operational issues and financial struggle were the main reasons for the bankruptcy filing. But another factor that caught the attention of media outlets and contributed to the financial strain in 2023 was a promotional deal that became far more popular than expected. The “Ultimate Endless Shrimp” promotion resulted in huge losses for the company, making up a large portion of the $11 million loss they incurred in Q3 of 2023. The deal was launched in June of 2023 and allowed customers to enjoy endless shrimp for only $20. The unexpected popularity of the deal resulted in a major financial loss for the company so they raised the price to $25 to try to course correct. Red Lobster’s parent company CFO explained, “We wanted to boost our traffic and it didn’t work. We want to keep it on the menu. And of course we need to be much more careful regarding what are the entry points and what is the price point we are offering for this promotion.”
How Red Lobster Plans to Survive Bankruptcy
Despite many store closures, the business plans to regroup and hopefully reopen some of their failed locations. The company explained that they plan to use the bankruptcy to “drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets.” According to the bankruptcy petition, the company estimates its assets to be worth between $1 billion and $10 billion. The chain has been operating since 1968 and remains the largest chain in the U.S. with more than 500 locations despite the many closures.
