Red Lobster Faces Further Closures After Chapter 11 Bankruptcy Filing

By: David Donovan | Published: Jun 06, 2024

More than 100 Red Lobster locations are facing closure unless the company can negotiate for cheaper rents from landlords.

The fast-food chain had already closed 93 of its restaurants on May 13 and the following week filed for Chapter 11 bankruptcy in the hope of restructuring its debts.

Over 100 Locations in Danger

According to court documents, 135 locations in the franchise are under threat of closing due to high costs.

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A plate of three different kinds of shrimp with salad.

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If leases stay at their current rates the restaurants will continue to lose money with the options being either negotiate lower rents or close them.

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Iconic Restaurants

The locations that are facing closure include the iconic Times Square restaurant although the company claims they are doing their best to keep it open.

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Times Square New York City, there are many people walking with billboards on the buildings.

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The 22-year lease on the New York establishment is facing double the rent, upping the cost to $2.2 million a year.

Limited Window

There’s only a couple of weeks that Red Lobster will be able to negotiate a deal with the new landlord as the lease is due to begin on June 30.

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Shrimp, cheddar bay biscuits and mozzarella sticks on a platter outdoors with pepsi cans.

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Publicizing the list of leases that are under threat and including the high-profile location may be a tactic to aid in their negotiation.

Bankruptcy Attorney Weighs In

According to the bankruptcy attorney Patrick Collins in a comment to The Post, the strategy “could be a way to exert pressure on the landlord.”

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Cheddar bay biscuits from Red Lobster in a basket with steam rising off them.

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Collins continued to say: “It’s a way for the company to signal to the landlord that unless something changes it’s prepared to close that store.”

More Than 200 Leases Causing Losses

As per bankruptcy court documents, there are 228 leases that are causing losses for the company and will continue to do so unless rents are slashed.

Two women enjoying drinks and food at a Red Lobster

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This includes the previously closed 93 locations which leaves the 135 other restaurants at risk of closing.

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Well-Established Brand

Red Lobster was established back in 1968 with the first location opening in Lakeland, Florida highlighting the storied history of the brand.

Lobster from Red Lobster, a man is holding a lobster cracker

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On May 19 the restaurant chain filed for Chapter 11 bankruptcy, partly due to the endless shrimp promotion losses.

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Liquidator Auctioning Off Assets

Before the bankruptcy filing was announced, the restaurant liquidator TAGeX Brands was employed to auction off equipment from 48 shuttered Red Lobster locations.

Lobster, shrimp, cheddar bay biscuits and broccoli on a plate with a glass of wine.

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The issues with the fast-casual brand can be traced back to increased rents and labor costs as the country looks towards higher minimum wages for service workers.

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Making The Same Mistakes

The endless shrimp promotion that has plagued Red Lobster has echoes of a 2003 promotion the restaurant had involving endless crab.

Crab dish in a bowl with chopsticks coming out of it.

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The offer for seafood lovers two decades ago was a hit with customers but ended up costing the company $3.3 million.

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Setting a Challenge

The endless shrimp promotion inspired people to challenge themselves to see how much they could stomach.

Lobster, potatoes, broccoli on a plate, there is a person holding a fork ready to eat.

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Some customers were reported to have stayed in restaurants for hours on end to see how many they could eat, with one customer allegedly managing 108 in just four hours.

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Majority Owner Losses

The never-ending shrimp debacle has caused more losses than the endless crab offer of the past.

Four business people in suits holding awards with a Thai Union sign in the background.

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Thai Union, the majority owner of Red Lobster, posted $11 million in losses only three months after the deal launched.

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CFO Speaks Out

Ludovic Garnier, the chief financial officer explained their rationale in a statement: “We knew the price was cheap, but the idea was to bring more traffic in the restaurants.”

Ludovic Garnier posing for a headshot, he wears a dark blue suit with a light blue tie and is smiling

Thai Union

He went on to say: “So we wanted to boost our traffic, and it didn’t work”, lamenting the failure of the promotion.

As troubles continue for Red Lobster, the casual dining franchise is trying its best to stay afloat amidst rising operational costs.

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