Red Lobster files for bankruptcy: What happens now?

(WJET/WFXP) — Less than a week after Red Lobster announced the closure of dozens of restaurants across the United States, the company has officially filed for Chapter 11 bankruptcy protection.

The seafood chain has struggled in recent years with rising rent and labor costs. Management failures and poor store performance also contributed to the decision to file for bankruptcy.

Still, the chain plans to remain open, albeit with a smaller footprint.

A Red Lobster press release issued Sunday night said, “Red Lobster restaurants will remain open for business as usual during the Chapter 11 process and remain the world’s largest and most beloved seafood restaurant company.” .

Multiple factors led to Red Lobster’s bankruptcy filing. Inflationary pressures were pushing up menu prices, reducing customers’ appetite for eating out, and recent minimum wage hikes in many states were putting additional strain on public finances. The company was also spending tens of millions of dollars on leases for underperforming locations.

Red Lobster has started offering the limited-time menu “Ultimate Endless Shrimp” as a regular menu item from June 2023. The decision was reportedly made by former CEO Paul Kenny. “Important element” Red Lobster co-owner Thai Union Group said this led to an $11 million loss in the third quarter of 2023.

Thai Union Group, one of the world’s largest seafood suppliers, announced its intention to exit its minority stake in the restaurant chain earlier this year.

In its bankruptcy filing Sunday, Red Lobster estimated it owed between $1 billion and $10 billion to more than 100,000 creditors. The bankruptcy filing was signed by CEO Jonathan Tibbs, a corporate restructuring expert who took the top job at Red Lobster in March.

“This realignment is the best path forward for Red Lobster,” Tibbs said in a statement included in Sunday’s press release. “This allows us to address some financial and operational challenges, emerge stronger and refocus on growth. Thanks to the support we have received from our lenders and vendors, we are grateful to our employees and This allows us to complete the sale process quickly and efficiently while focusing on our guests.”

In an attempt to cut losses, Red Lobster previously suggested: There are approximately 100 restaurants nationwide, It will be closed. Going forward, the company plans to reduce limited-time offers and implement a smarter promotional calendar.

The Associated Press contributed to this report.