Red Lobster’s chief executive claimed there was something fishy about its largest shareholder’s involvement in the ill-fated all-you-can-eat shrimp promotion that caused the nation’s largest seafood chain to file for bankruptcy.
The Orlando, Florida-based chain filed for Chapter 11 protection late Sunday after unexpectedly closing nearly 100 stores last week.
Red Lobster, which had 650 stores before closing, was pushed to the brink in part by a $20 all-you-can-eat shrimp promotion last summer, and its largest shareholder, Thai Union, lost 500 million yen in the fourth quarter. It was decided to write off $30 million.
CEO Jonathan Tibbs claims that the Thailand-based seafood company, which owns 49% of Red Lobster, has “exercised significant influence over the shrimp issue” and that the Thai union on the shrimp issue The company has announced that it is investigating the role of [company’s] Purchasing shrimp,” according to the filing.
According to the filing, Tibbs was the CEO of the former CEO who decided to introduce the $20 all-you-can-eat shrimp promotion as a permanent menu item in May 2023 “despite significant opposition from other executives.” Paul Kenny was held responsible.
Red Lobster suffered a major shrimp shortage after Thai Union and Kenney “encouraged over-merchandising” in store promotions, saying that “certain types of shrimp could be out of stock for several days. It often lasted for months or even weeks,” the application states. Said.
The company is investigating whether Kenney’s “decision-making process circumvented the company’s normal supply chain and demand planning processes.”,” according to the filing.
“The insinuation is that the price the company paid for Thai Union was above market,” Farrell Fritz bankruptcy attorney Patrick Collins told the Post on Monday.
Red Lobster has had five CEOs since 2021. Thai Union, which first invested in Red Lobster in 2016, increased its stake to 49% in 2020.
Employees also blamed the company’s downfall on penny-pinching by Thai labor unions.
A former Red Lobster executive said, “The company was forced to make major cost cuts, including a number of savings measures, which negatively impacted sales.” he told CNN.
Red Lobster has 36,000 employees and owes $16.7 million in unpaid wages, according to the filing.
Red Lobster said its remaining restaurants, including its only restaurant in Manhattan’s Times Square, will remain open as usual during the bankruptcy process.
However, the company plans to downsize its footprint and pursue the sale of substantially all of its assets.
Bankruptcy will allow Red Lobster to avoid eviction from landlords and other bills from vendors that haven’t been paid in recent months.
The company has secured $100 million in financing commitments from existing lenders, but has more than $1 billion in debt, according to filings.
The restaurant chain also announced that it has entered into a Stalking Horse acquisition agreement to sell the business to a corporation formed and managed by its existing long-term lender.
“This restructuring is the best path forward for Red Lobster. It allows us to address some financial and operational challenges, emerge stronger, and refocus on growth.” Tibbs said.
Many of the store’s employees, whose stores suddenly closed last week, found out about the closure when they arrived at work and were informed by a sign posted on the front door.
The company auctioned off furniture and equipment in 52 auctions held last week.
At least one Denver restaurant made $34,601 by selling all its furniture and most of its kitchen equipment, according to auction site TAGeX. Auction site TAGeX has not released the final bid amount, but has temporarily posted the bid amount online before bidding ends.
