Red Lobster seeks bankruptcy protection days after closing dozens of restaurants

(AP) – Crimson Lobster, the informal eating chain that introduced seafood to the plenty with innovations like popcorn shrimp and “infinite” seafood offers, has filed for Chapter 11 chapter safety.

The 56-year-old chain made the submitting late Sunday, days after shuttering dozens of eating places.

“This restructuring is one of the best path ahead for Crimson Lobster. It permits us to deal with a number of monetary and operational challenges and emerge stronger and re-focused on our development,” CEO Jonathan Tibus mentioned. Tibus, a company restructuring skilled, took the highest publish on the chain in March.

Crimson Lobster mentioned its 600 eating places would proceed to function by the chapter proceedings, that are meant to simplify operations, shut places and pursue a sale. As a part of the submitting, Crimson Lobster entered right into a so-called “stalking horse” settlement, that means it plans to promote its enterprise to an entity shaped and managed by its lenders.

Based on courtroom filings, Crimson Lobster has 551 U.S. eating places, 27 eating places in Canada and 27 franchised places in Mexico, Japan, Ecuador and Thailand. The corporate mentioned it has 36,000 workers within the U.S. and Canada.

Aaron Allen, the founding father of restaurant consulting agency Aaron Allen & Associates, mentioned Monday that the chapter was the end result of 20 years of bother at Crimson Lobster, which has struggled with growing competitors from quicker, cheaper chains like Chipotle and Panera.

Typically, Crimson Lobster would decrease its costs to compete, a transfer that was typically disastrous. In 2003, the corporate misplaced tens of millions of {dollars} on an all-you-can-eat “Countless Crab” promotion when crab costs rose, Allen mentioned. Twenty years later, the chain did the identical factor with an “Final Countless Shrimp” promotion.

“The truth that they might have this sort of company amnesia is an interesting case examine in company meals service,” Allen mentioned.

He mentioned Crimson Lobster had extra success within the mid-2000s, when it repositioned itself as an upscale restaurant. It raised costs and renovated shops. However it nonetheless struggled with rising lease and labor prices and altering client tastes.

“This slow-moving prepare wreck has been in movement for 20 years now,” Allen mentioned.

Orlando, Florida-based Crimson Lobster mentioned in courtroom filings that its annual visitor counts had been down 30% from 2019. The chain misplaced $76 million in 2023.

The chain was based by Invoice Darden, who wished to make seafood eating places extra accessible and inexpensive for households.

Darden received his begin within the restaurant enterprise in Waycross, Georgia, in 1938, when he opened The Inexperienced Frog. He boldly refused to segregate the restaurant’s patrons by race, which went in opposition to state legal guidelines on the time. When he opened the primary Crimson Lobster close to Orlando in 1968, he once more invited clients to sit down wherever they selected.

Darden offered Crimson Lobster to Normal Mills in 1970, and he continued to run eating places as a Normal Mills government. Normal Mills later went on to kind Darden Eating places, which owns Olive Backyard and different chains. Darden Eating places was spun off from Normal Mills in 1995.

Crimson Lobster had legions of followers for dishes like lobster linguini and its buttery Cheddar Bay biscuits.

“There isn’t a one of-woman-born who doesn’t like Crimson Lobster cheddar biscuits. Anybody who claims in any other case is a liar and a Socialist,” comic and actress Tina Fey wrote in her memoir “Bossypants.”

However the restaurant had bother maintaining with rivals and bringing in youthful clients. Darden Eating places offered Crimson Lobster to a non-public fairness agency in 2014. Thai Union Group, one of many world’s largest seafood suppliers, first invested in Crimson Lobster in 2016 and upped its stake in 2020.

Then final fall, Crimson Lobster misplaced tens of millions of {dollars} on its “Final Countless Shrimp” promotion, which charged $20 for all-you-can-eat shrimp deal.

“We knew the worth was low cost, however the thought was to carry extra site visitors within the eating places,” Ludovic Garnier, the chief monetary officer of Thai Union Group, mentioned in an earnings name with buyers.

Garnier mentioned the deal did work, and restaurant site visitors elevated. However extra company opted for the $20 deal than Crimson Lobster anticipated, and “we don’t earn some huge cash at $20,” he mentioned. For the primary 9 months of 2023, Thai Union Group reported a $19 million loss from Crimson Lobster.

In January, Thai Union Group introduced its intention to exit its minority funding in Crimson Lobster. CEO Thiraphong Chansiri mentioned the COVID-19 pandemic, trade headwinds and rising working prices had hit the eating chain arduous and prompted “extended damaging monetary contributions to Thai Union and its shareholders.”

Restaurant liquidator TAGeX Manufacturers introduced final week that it will be auctioning off the tools of over 50 Crimson Lobster places that had been not too long ago closed. The shop closures span throughout greater than 20 states — lowering Crimson Lobster’s presence in cities like Denver, San Antonio, Indianapolis and Sacramento, California.

Allen expects Crimson Lobster’s restaurant footprint to shrink by one-third to one-half as a part of the chapter course of. Many potential consumers simply need the chain’s actual property, Allen mentioned.

“Most certainly whoever buys it isn’t going to need to repair up Crimson Lobster,” he mentioned.

Crimson Lobster mentioned within the courtroom submitting that it has greater than 100,000 collectors and estimated property between $1 billion and $10 billion. The corporate’s estimated liabilities are between $1 billion and $10 billion.

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