Red Lobster is reportedly considering the possibility of filing for Chapter 11 bankruptcy to restructure its mounting debt.
The seafood restaurant chain, which has 649 locations nationwide, has sought advice from law firm King & Spalding on how to terminate some long-term contracts and renegotiate portions of its leases, according to a person familiar with the matter. a person involved said. bloomberg.
Red Lobster’s cash has been hurt in recent months by aggressive leasing and rising labor costs, people familiar with the matter said on condition of anonymity, Bloomberg reported.
A final decision on the bankruptcy filing has not yet been made, and restructuring discussions are underway between Red Lobster, its owner Thai Union Group, and major lenders Fortress Investment Group and King & Spalding. is still in progress.
According to Bloomberg, filing for Chapter 11 would allow the casual chain to continue serving its popular Cheddar Bay biscuits and affordable seafood menu while it works on a debt reduction plan.
Thai Union Group, which previously owned only 25% of the company, took control of Orlando-based Red Lobster in 2021 after purchasing Golden Gate Capital’s stake. .
But Thai Union Group, best known for exporting canned and frozen seafood, wrote down its stake in Red Lobster earlier this year.
The company said in a document: statement The restaurant’s “ongoing financial requirements are no longer consistent with the Thai Union’s capital allocation priorities,” the website said.
Thai Union Group Chief Thirapong Chansiri said: “The COVID-19 pandemic, continuing industry headwinds, rising interest rates, and rising material and labor costs are impacting Red Lobster; “The financial contribution to Thai Union and its shareholders has been negative for a long time,” he added.
Thai Union Group also noted that Red Lobster alone recorded a stock loss of approximately $19 million in the first nine months of 2023.
As a result, the Thailand-based company recorded a $530 million non-cash impairment charge on its investment in Red Lobster in its fourth quarter earnings report.
Representatives for Thai Union Group and Red Lobster did not immediately respond to The Post’s requests for comment.
Red Lobster isn’t the only chain struggling with rising labor costs.
California franchise owners need new wage laws for fast food chains, or eateries with at least 60 locations nationwide, that take payment before you eat, and that have no or limited table service. has been under particular pressure since April 1, when the
Franchise owners in the Golden State must now pay their workers at least $20 an hour, which is 25% above the state’s prevailing minimum wage.
Wage hikes have led restaurant owners to raise menu prices, delay renovations and rethink operating hours as a way to offset increased labor costs.
Anadolu Agency (via Getty Images)
Even without new minimum wage requirements, many restaurant owners have been forced to raise prices just to combat inflation, which rose to an unexpectedly high 3.5% in March.
Rising grocery costs were one of the main factors driving up the latest consumer price index — Track changes in the cost of everyday goods and services — Government data shows it’s higher.
