Red Lobster has filed for Chapter 11 bankruptcy protection and is constant the method to shrink its footprint and discover a buyer, the corporate said in a press release.
The seafood chain also said it had received a so-called stalking horse offer from its existing lenders to purchase the corporate unless the next offer got here along.
CNBC reported last month that Red Lobster was looking for a buyer as the corporate was burdened by heavy debt and long-term leases. The company recently appointed a restructuring expert – Jonathan Tibus, managing partner of consulting firm Alvarez & Marsal – as CEO.
In a filing, Tibus blamed “a difficult macroeconomic environment, a bloated and underperforming restaurant footprint, failed or ill-advised strategic initiatives, and increasing competition within the restaurant industry” for forcing the chain to file for Chapter 11 protection.
Red Lobster currently operates 551 locations within the United States and 27 restaurants in Canada. The Chain closed 93 poorly performing locations as of May thirteenth. The company employs 36,000 people, most of whom work part-time.
Orlando-based Red Lobster has assets between $1 billion and $10 billion and estimated liabilities between $1 billion and $10 billion, based on its bankruptcy filing. The biggest creditor is the distributor Performance Food Groupthat claims the corporate owes it $24.4 billion.
“This restructuring is the best path forward for Red Lobster,” He said to you in a press release late Sunday. “It allows us to overcome various financial and operational challenges and emerge stronger and refocus on our growth. The support we have received from our lenders and suppliers will help ensure we can complete the sales process quickly and efficiently while remaining focused on our employees and guests.”
Red Lobster was founded in 1968 and purchased by General Mills two years later. In 1995, General Mills spun off its restaurant division into Darden Restaurantswhich also housed its sister chain Olive Garden.
Nearly 20 years later, Darden sold Red Lobster to personal equity firm Golden Gate Capital. Thai Union Group, a seafood purveyor and considered one of the chain's longtime sellers, bought a stake in Red Lobster in 2016. By 2020, Thai Union, members of Red Lobster management and investors under the pseudonym Seafood Alliance purchased Golden Gate's remaining stake within the chain.
Although Red Lobster survived the pandemic, its business has struggled since then. The chain's traffic has declined about 30% since 2019, based on its bankruptcy filing.
The company's longtime CEO, Kim Lopdrup, also retired in 2021, triggering a CEO turnover that left the chain with little stability to get its flagging business back on course. Tibus is Red Lobster's third CEO in as a few years.
In fiscal 2023, the corporate reported a net lack of $76 million. Part of this loss was resulting from the disastrous promoting of Endless Shrimp. Last yr it switched from once per week to each day to spice up weaker sales within the second half of the yr. But the offer put an excessive amount of strain on business as guests searched for bargain deals, putting pressure on Red Lobster's bottom line.
According to a court filing, the ill-conceived scheme's real goal can have been to spice up Thai Union's own sales. Red Lobster, under the leadership of interim CEO Paul Kenny, divested itself of two of its shrimp suppliers, leaving Thai Union as the only supplier of the shellfish. According to the filing, this decision resulted in higher costs for Red Lobster. The debtors are also investigating whether Thai Union and Kenny excessively pushed for in-store promotions, which frequently led to major shortages of shrimp.
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