After facing no bids and a failed auction, the well-known American seafood restaurant, Red Lobster, is set to be transferred to a group of lenders soon.
The promotional campaign “endless shrimp” at the restaurant led to losses and bankruptcy filing, and selling bankruptcy assets to major lenders may be Red Lobster’s second chance at transformation.
Headquartered in Orlando, Florida, Red Lobster filed for bankruptcy in May. The company later expressed hopes of selling through a stalking horse bid, but if no real buyer emerged to help repay its approximately $300 million loans, Red Lobster may have to hand over the keys to the lender group led by Fortress Investment Group, LLC.
Court documents reveal that Red Lobster canceled the auction scheduled to start on Tuesday, July 23. It is reported that no external buyers submitted bids by the deadline last week.
Established in 1968, Red Lobster is the largest seafood chain restaurant in North America. Since 2019, Red Lobster has seen a decrease in customer traffic by around 30%.
In recent years, this chain restaurant has undergone multiple changes in ownership and management. Thai Union Group Plc acquired control of Red Lobster in 2021, but reduced shares in 2024.
For this long-standing restaurant that barely survived the impact of the COVID-19 pandemic, unfortunately, there is no post-disaster recovery coming, as high rent and labor costs have led Red Lobster to the brink of filing for bankruptcy since April.
In the fiscal year of 2023, Red Lobster reported a net loss of $76 million. Some of the losses were attributed to the unlimited shrimp promotion.
In an effort to boost sales in the second half of the year, Red Lobster extended the promotion from one day a week to daily. While this promotion increased customer traffic, it couldn’t curb the hearty appetites of diners, ultimately weakening Red Lobster’s profitability further due to the heavy costs.
With consumers facing inflation tightening their wallets, the entire restaurant chain industry is grappling with declining customer traffic. Industry data shows that many casual dining chain restaurants rely on consumers with incomes of $50,000 or less, a segment of Americans who are dining out less frequently or ordering less when they do.
In the past year, several chain restaurants, including Tijuana Flats in Texas and Sticky’s Finger Joint in New York, have filed for bankruptcy or sought buyers.
Red Lobster restaurant needs court approval to transfer control to the lenders. Orlando Bankruptcy Court Judge Grace Robson plans to review the proposal at a hearing later this month.