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Red Lobster has confirmed they’re filing for Chapter 11 bankruptcy protection in Florida. This move comes after months of speculation and follows the closure of dozens of locations across the country.
Despite the woes, Red Lobster is assuring customers that its remaining restaurants will stay open for business and the company aims to use this bankruptcy as an opportunity to restructure, improve operations, and potentially find a buyer.
Before the weekend, outlets were indicating 50+ closures but that number has now (officially) risen to 93. And they intend to close 108 more locations by filing a motion in bankruptcy court to reject their leases.
Does Red Lobster Have A Future?
Red Lobster said in a statement:
“This is a strategic decision to allow Red Lobster to invest in our future and ensure we can continue serving our loyal guests delicious seafood for years to come.”.
Last week we saw reports indicating an alarming amount of Red Lobster closures had gone into effect around the country. The locations seemed to close their doors overnight and an auction company named TAGeX posted to their website:
“These auctions are winner takes all – meaning, each winner will receive the entire contents of the Red Lobster location they bid on.”
On social media, the reports kept rolling in as locals wondered if their Red Lobster gift cards were now defunct because they couldn’t find an open location anywhere near their area.
Several factors contributed to Red Lobster’s struggles. The restaurant chain cites a “difficult macroeconomic environment, a bloated and underperforming restaurant footprint, failed or ill-advised strategic initiatives, and increased competition within the restaurant industry”. Then the final blow? The Endless Shrimp promo which the chain says left them over $11 million in the hole.
Sink Or Swim
According to the restructuring expert hired by Red Lobster, Jonathan Tibus, who spoke in a statement on Sunday night: “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we’ve received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”
The company secured a $100 million financing commitment to keep things running during the bankruptcy process. and they’ll also be seeking to reduce their footprint further by closing any underperforming locations.
While Red Lobster isn’t the first, and likely won’t be the last, restaurant chain to face financial difficulties, their commitment to staying afloat offers a glimmer of hope for seafood fans.Will they successfully navigate these choppy waters? Or will they founder and sink into the sea?
