FILE - Signage at a Red Lobster restaurant on May 20, 2024, in Lincolnwood, Illinois. (AP Photo/Teresa Crawford, File)
After a challenging period marked by multiple restaurant closures and financial struggles, Red Lobster is set to exit Chapter 11 bankruptcy protection. A U.S. bankruptcy judge recently approved the seafood chain’s reorganization plan, which includes a sale to a group led by asset manager Fortress. This decision comes just four months after Red Lobster filed for bankruptcy in May, driven by years of financial losses and declining customer numbers as it tried to keep pace with competitors.
The bankruptcy filing led to the closure of numerous Red Lobster locations across North America. The chain, which experienced a $76 million loss in 2023, shut down over 50 restaurants before filing for bankruptcy, with additional closures occurring during the bankruptcy process.
Following the approval, Red Lobster plans to operate around 544 locations in the U.S. and Canada, a reduction from the 578 locations it had at the time of the filing. The acquisition deal, expected to be finalized by the end of September, will see Red Lobster continue as an independent company.
A key change will be the appointment of a new CEO, Damola Adamolekun, previously the chief executive of P.F. Chang’s. Adamolekun was chosen by Fortress to lead the newly formed entity, RL Investor Holdings, which will oversee the acquisition. In his statement, Adamolekun praised Red Lobster’s potential and expressed gratitude to Jonathan Tibus, the outgoing CEO, for his leadership during the bankruptcy process.
The purchaser will also inject additional funds into Red Lobster to support its recovery. Adamolekun revealed that the company’s investment plan includes over $60 million in new funding.
Red Lobster, known for its seafood dishes and cheddar biscuits, has undergone several ownership changes since its founding in 1968. Initially owned by Bill Darden, the chain was sold to General Mills in 1970, later becoming part of Darden Restaurants, which was spun off in 1995. Darden sold Red Lobster to a private equity firm in 2014. Thai Union Group, a major seafood supplier, acquired a stake in Red Lobster in 2016 and increased its investment in 2020 but decided to exit earlier this year due to ongoing financial losses exacerbated by rising operating costs and disappointing promotions.
The chain's attempt to boost sales with all-you-can-eat specials, like the “Endless Shrimp” promotion, contributed to its financial woes. The increased demand from such promotions often outstripped the chain's capacity to generate profit, a pattern that has historically led to losses, as seen with previous promotions like “Endless Crab.”
