The seafood chain restaurant Red Lobster is currently undergoing bankruptcy proceedings and has announced the closure of more than 20 of its stores in the coming days. The new owner has appointed a former executive from the Chinese restaurant chain P.F. Chang’s China Bistro as its CEO.
According to a report by CNN on Monday, August 26th, recent court documents show that Red Lobster will be closing an additional 23 restaurants by August 31st (this Saturday). These 23 restaurants are deemed as being potentially unprofitable, and Red Lobster may continue to close such underperforming chains in the future, opting not to renew their leases.
Red Lobster has long been a pioneer in the food industry, but mismanagement, industry competition, and inflation have led to its bankruptcy. Earlier this summer, Red Lobster had already closed more than a hundred of its restaurants. The chain currently has approximately 500 stores in North America, significantly down from 650 stores last year.
Headquartered in Orlando, Florida, Red Lobster filed for bankruptcy in May. In July, after a failed auction with no bids, Red Lobster had to hand over the keys to a group of lenders led by Fortress Investment Group, LLC. Red Lobster owes debts totaling over $300 million.
Fortress Investment Group has extensive experience in restaurant management, owning chains such as Krystal, Logan’s Roadhouse, and J. Alexander’s. Recently, the group provided Red Lobster with a $100 million loan to sustain its operations.
On Monday, Fortress Investment Group announced that once Red Lobster emerges from bankruptcy, they will appoint Damola Adamolekun, the former CEO of the Chinese restaurant chain P.F. Chang’s China Bistro, as Red Lobster’s new CEO.
Established in 1968, Red Lobster is the largest seafood chain restaurant in North America. Since 2019, Red Lobster has seen a decrease in customer foot traffic by approximately 30%.
In recent years, this chain restaurant has undergone multiple changes in ownership and management. Thai Union Group Plc acquired controlling interest in Red Lobster in 2021, but filed for bankruptcy in May 2024.
Especially with the introduction of the $20 unlimited shrimp promotion last year, which shifted from being a one-day promotion to daily, while this promotion initially boosted customer traffic, it couldn’t withstand the hefty costs and ultimately weakened Red Lobster’s profitability. Red Lobster incurred a loss of $11 million due to this scheme.
As consumers face tightening budgets amid inflation, the entire restaurant chain industry is grappling with declining customer traffic. Industry data shows that many casual dining chains rely on consumers with incomes of $50,000 or less, a demographic whose dining out frequency and order size are decreasing.