Red Lobster files for bankruptcy after missteps including all-you-can-eat shrimp

Purple Lobster, America’s largest seafood chain recognized for its shrimp and Cheddar Bay biscuits, has filed for chapter.

Its seafood eating places are in sizzling water after a sequence of dangerous selections by a parade of executives, together with an ill-fated promotion for all-you-can-eat-shrimp beginning at $20.

Nearly 580 areas within the U.S. and Canada are anticipated to remain open by way of the method, using about 36,000 staff. Final week, dozens of different Purple Lobster areas closed abruptly. Their complete contents — together with freezers, ovens, cubicles and lobster tanks — have already been auctioned off.

The fireplace sale was a precursor to a long-expected chapter submitting, wherein Purple Lobster plans to promote “considerably all of its property.” Since March, the chain has been run by CEO Jonathan Tibus, often called a corporate-restructuring skilled.

Purple Lobster’s troubles embody “a tough macroeconomic surroundings, a bloated and underperforming restaurant footprint, failed or ill-advised strategic initiatives, and elevated competitors throughout the restaurant trade,” Tibus wrote in court docket paperwork.

Model disaster meets possession crises

Purple Lobster, now the biggest seafood chain, didn’t get cooked only recently. It has struggled for a decade as diners have pulled away from massive casual-dining chains.

In that world, Purple Lobster was one of many originals. It began in 1968 and exploded by way of the Eighties and Nineties, internet hosting generations of Individuals for celebrations and dates — with many cracking their very first lobsters at its tables.

In recent times, marked by rising inflation, Purple Lobster has been dropping out on each ends: to more energizing, nicer, extra native eating places; and to the rising tide of cheaper, faster spots, like Shake Shack or Surfside Taco.

And through this cultural shift, Purple Lobster’s funds have floundered.

A non-public fairness agency purchased the chain ten years in the past from Darden Eating places, which owns rivals Olive Backyard and LongHorn Steakhouse. The agency, Golden Gate Capital, funded the deal partly by promoting Purple Lobster’s actual property.

That meant the chain needed to begin paying hire. That’s now a significant monetary think about Purple Lobster’s chapter submitting, which asks the court docket to reject 108 leases, letting the corporate abandon these areas.

Since 2020, Purple Lobster has been run by its largest shareholder: Thai Union Group, a seafood provider additionally behind the Hen of the Sea model. And the chapter submitting lays a lot blame on Thai Union and ex-CEO Paul Kenny.

After huge monetary losses through the pandemic, adopted by will increase within the prices of meals and wages, Thai Union pursued in depth cost-cutting at Purple Lobster. The chain was run by a conveyor belt of executives; it had no CEO for a 12 months.

The chapter submitting alleges that Thai Union interfered with every day operations and even pushed out two rival suppliers of breaded shrimp, securing a costlier unique deal for itself.

All-you-can-eat shrimp fiasco

Then got here a reboot concept that become a jumbo catastrophe: Final Infinite Shrimp. Purple Lobster took its basic promotion and made it everlasting, with costs initially beginning at $20.

Thai Union later cited this as the principle reason behind its $11 million loss that quarter. The purpose was to get extra folks within the door, which did occur. However many diners then stayed for hours, selecting at plate after plate of shrimp dishes and — critically — shopping for little else.

Thai Union CEO Thiraphong Chansiri later mentioned the ordeal left him scarred.

“Different folks cease consuming beef, I’m going to cease consuming lobster,” he instructed traders.

In January, Thai Union washed its palms of Purple Lobster. The house owners mentioned they might basically abandon their stake within the chain, setting the restaurant firm on a path to chapter.

On this week’s Chapter 11 submitting, Purple Lobster says it has a prearranged bid, often called a “stalking horse” bid, from its lenders to purchase out the chain, except it receives the next rival bid.