All-you-can-eat shrimp deal helps sink Red Lobster

Not even Cheddar Bay Biscuits could save America’s largest seafood restaurant chain from sinking to the ocean floor. Red Lobster has officially filed for Chapter 11 bankruptcy in Florida, according to court documents.

How the company got here: The time-honored potion of higher costs, lower demand, and executive mismanagement.

• A “material portion” of Red Lobster’s leases are priced above market rates. At the same time, the chain is facing higher labor costs eating into its margins, as well as high inflation negatively impacting consumer demand.
• Plus, an all-you-can-eat shrimp special also led to some not-so-shrimpy losses. In May 2023, Red Lobster changed its $20 “Ultimate Endless Shrimp” from a limited-time offer to a permanent promotion – a decision that ended up directly costing the company $11 million (for context, the chain posted a $76 million net loss in 2023).

Fun facts: Red Lobster purchases 20% of all North American lobster tails, as well as 16% of all rock lobsters worldwide. It also serves 64 million customers/year.

~580 restaurants in the US and Canada are expected to stay open through the bankruptcy process, employing ~36,000 workers. However, dozens of other Red Lobster locations closed abruptly last week. And their entire contents – freezers, ovens, booths, lobster tanks, etc. – have already been auctioned off, per NPR.