Well after previously contemplating it, Red Lobster is officially filing for Chapter 11 bankruptcy. What does that mean for your local restaurants? Well, let's examine.
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According to a company statement, Red Lobster is filing for voluntary Chapter 11 bankruptcy in Florida. This comes after the seafood chain has struggled to turn a profit. Red Lobster said the move would "drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern."
However, if you're concerned that Red Lobster is going the way of Radio Shack, the chain plans to stay operational. However, a lot is changing under its hood. Red Lobster will be owned and controlled by its lenders in a stalking horse arrangement. In exchange, lenders gave the company $100 million in financing to stay operational. According to its bankruptcy petition, Red Lobster's assets are worth between $1 billion and $10 billion.
The company wants you to know that it doesn't plan to close any more restaurants. It's also "working with vendors to ensure that operations are unaffected." As someone who doesn't have a lot of good seafood options besides Red Lobster in the area, that's good to hear. However, it's still a bit worrisome.
Red Lobster Will Remain Operational
Jonathan Tibus, the Company's CEO, said, "This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth."
Sadly, the chain attempted to boost its stake by offering an Endless Shrimp promotion. That ended up causing a significant of amount of debt. That put the restaurant in a worse position. Thai Union Group CFO Ludovic Regis Henri Garnier said the promotion failed to boost sales in a way they had intended.
"We wanted to boost our traffic, and it didn't work," Garnier told investors in November 2023, according to Restaurant Business Magazine. "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."
