After months of dozens of restaurant closures and publicity over its “endless shrimp” scandal, Red Lobster is set to soon emerge from Chapter 11 bankruptcy protection.
A U.S. bankruptcy judge on Thursday approved the casual seafood chain's restructuring plan and sale to a lending group led by asset management firm Fortress. The go-ahead comes just four months after Red Lobster filed for bankruptcy protection in an effort to sell itself after years of mounting losses and declining customer traffic while struggling to keep up with competitors.
At the time of the May filing, Red Lobster executives announced plans to “simplify our business” by reducing the number of restaurants. The Orlando, Fla.-based chain has closed dozens of North American locations in recent months, both before and during its bankruptcy proceedings. This included: Over 50 locations The company's facilities were auctioned off just days before it filed for Chapter 11 bankruptcy, which has led to dozens of additional factory closures throughout the bankruptcy process.
Red Lobster said Thursday it expects to operate about 544 restaurants in the U.S. and Canada once it emerges from bankruptcy, down from the 578 it had disclosed at the time of its filing in May.
The acquisition is expected to close at the end of September, and under the terms of the acquisition, the chain will continue to operate as an independent company.
The chain will have Damola Adamolekun, former chief executive officer of PF Chands, as its new CEO.
Adamolekun was named last week to head RL Investor Holdings, the new company that bought Red Lobster by Fortress Corp. In a statement Thursday, Adamolekun said Red Lobster has a “great future” and thanked departing CEO Jonathan Tibus for his leadership during the bankruptcy process.
Red Lobster's buyer is also providing additional capital to help the Orlando, Fla.-based chain recover from the crisis. Adamol-Kun said the company's long-term investment plan includes more than $60 million in new funding.
Red Lobster has changed hands many times in its 56-year history. The chain was founded in 1968 by Bill Darden, who sold Red Lobster to General Mills in 1970. General Mills then created Darden Restaurants, which owns chains such as Olive Garden. Darden Restaurants was separated from General Mills in 1995.
Darden Restaurants subsequently sold Red Lobster to a private equity firm in 2014. Thai Union GroupOne of the world's largest seafood suppliers Invested in Red Lobster in 2016 The company increased its stake in 2020 but announced its intention to exit its minority investment earlier this year.
Announcing the sale plans in January, Chief Executive Officer Teerapong Chansiri said the COVID-19 pandemic, industry headwinds and rising operating costs at Red Lobster had resulted in “prolonged negative financial contributions to Thai Union and its shareholders.” The company reported a $19 million loss from Red Lobster for the first nine months of 2023.
One reason for the loss, though not the only one, was yes, all-you-can-eat shrimp. Last year, Red Lobster significantly expanded its iconic all-you-can-eat special, but customer demand was outstripping what the chain could afford; Thai Union executives later noted that the special's $20 price tag didn't generate enough profit.
