Red Lobster employees stunned as dozens of locations abruptly close, sparks bankruptcy fears

Iconic seafood chain Red Lobster abruptly shuttered dozens of locations across the country on Monday, taking employees by surprise in what many believe is a move presaging an impending bankruptcy filing.

The chain closed at least 50 locations nationwide according to the New York Post. Over a dozen locations were shut down in New York and New Jersey alone.

“More than 80 Red Lobster locations in at least 27 states were listed as ‘temporarily closed’ on the restaurant’s website,” 9news pointed out.

TAGeX Brands, a restaurant liquidator, revealed it is auctioning off kitchen items and furniture from shuttered Red Lobster locations as part of its ‘largest restaurant equipment sale ever,'” the New York Post reported.

(Video Credit: ABC 7 Chicago)

“Fourteen locations in New York and New Jersey were ‘temporarily closed’ for the foreseeable future, according to Red Lobster’s website, as the struggling company weighed a possible Chapter 11 bankruptcy filing,” the media outlet added.

Red Lobster boasts 649 locations across America. The company is not commenting on the closures and employees are reportedly being left in the dark over the move.

WKBW reported that both employees and customers were greeted with a sign that was taped to a window at the chain’s Buffalo location, informing them it had been closed indefinitely.

The sign read, “This location is closed. We look forward to serving you at another Red Lobster location in the future.”

(Video Credit: Action News Now)

In an interview with WKBW, an employee named Ramon Garcia said that he learned of his store’s closure from a fellow worker, “This happened out of nowhere. All the people that we work with, they’re losing their jobs and not knowing what to expect after that. It’s taking a toll on them. I didn’t know we were going bankrupt, but I kind of knew if you know what I’m saying. They were cutting back on a lot of stuff.”

In April, reports surfaced that Red Lobster was considering Chapter 11 bankruptcy in order to restructure its debts.

Bloomberg reported that the chain retained the services of law firm King & Spalding to handle some long-term contracts and negotiate a number of its leases.

“In January, Thai Union Group PCL, a Thailand-based seafood giant that owns Red Lobster, revealed its intention to pursue an exit of its minority investment, blaming rising costs and the COVID-19 pandemic,” the New York Post noted.

“The combination of the COVID-19 pandemic, sustained industry headwinds, higher interest rates, and rising material and labor costs have impacted Red Lobster, resulting in prolonged negative financial contributions to Thai Union and its shareholders,” Thai Union Group’s CEO Thiraphong Chansiri commented in a statement.

“After detailed analysis, we have determined that Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities and therefore are pursuing an exit of our minority investment,” Chansiri further stated.

The group ponied up $575 million to Golden Gate Capital, which was Red Lobster’s then-parent company, for a 25 percent stake in the restaurant chain back in 2016. According to Thai Union Group, Red Lobster sustained a share loss of $19 million during the first nine months of 2023.

Red Lobster also blamed the “Ultimate Endless Shrimp” deal that it promoted which allowed customers to pay $20 for an all-you-can-eat shrimp order. It attributed its $11 million loss in the third quarter of 2023 to the promotion.

Restaurant Business Magazine spoke with Union Group CFO Ludovic Regis Henri Garnier who remarked the promotion was meant to “boost traffic” but “it didn’t work.” The chain raised the price to $25 and it bombed.

“We want to keep it on the menu. And of course, we need to be much more careful regarding what are the entry points and what is the price point we are offering for this promotion,” Garnier said.

In March, the company appointed veteran bankruptcy expert Jonathan Tibus as its new CEO in what was widely interpreted as a move toward bankruptcy. Red Lobster is now seeking a buyer to take over the chain, according to CNBC.

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