What happened to Red Lobster?

May brought disappointment to seafood enthusiasts as nearly 50 Red Lobster restaurants closed their doors. Unfortunately, the outlook for the chain eatery doesn't seem to be improving any time soon.

On the evening of May 19, Red Lobster released a statement to the press announcing that it had filed for Chapter 11 bankruptcy protection.

As highlighted by CNBC, Chapter 11 bankruptcy is known as "reorganization bankruptcy" and usually allows a business to stay open while reorganizing funds to pay off existing debt over time.

In the statement to the press, Red Lobster said that filing for Chapter 11 bankruptcy was part of the process the chain was undergoing to shrink its footprint and find a buyer.

According to CNBC, Red Lobster recently appointed restructuring expert Jonathan Tibus, a managing partner with advisory firm Alvarez & Marsal, as its CEO. In the court filing for Chapter 11 bankruptcy protection, Tibus said the filing was due to a "difficult macroeconomic environment, a bloated and underperforming restaurant footprint, failed or ill-advised strategic initiatives, and increased competition within the restaurant industry." 

In May CNN reported that TAGeX Brands company founder Neal Sherman told reporters that over the course of the week, TAGeX Brands would hold an online auction to sell the Red Lobster kitchen equipment, furniture, and other contents as the restaurants close.

In a statement to Business Insider, the company said, "TAGeX Brands is conducting the largest restaurant equipment auction event ever, auctioning off the contents of 50+ former Red Lobster locations across the country that were closed as part of Red Lobster's footprint rationalization."

Red Lobster, which has around 650 restaurant locations, announced last week that nearly 50 restaurant locations, from Orlando to Buffalo, would be closing. However, many want to understand what happened to this once hugely popular restaurant.

As CNN highlights, Red Lobster, once an industry pioneer, has declined in popularity over the past several years. 

Former higher-ups in the chain have shared with the media that this shift in fortune can be attributed to corporate mismanagement, marking a significant chapter in the restaurant chain's history.

The real struggles for the restaurant began in 2020 when COVID-19 hit. The restaurant lost billions of dollars in revenue due to the lockdowns. 

According to Business Insider, in 2023, Red Lobster had $11 million in losses in the third quarter. The chain blamed the losses on its all-you-can-eat-shrimp promotion.

Photo: Red Lobster Ad

However, not all of Red Lobster's problems can be blamed on shrimp promotions and COVID-19. Business Insider spoke to retail experts who claim that the company's problems come from allowing the private equity firm Golden Gate Capital to take over the restaurant chains in 2014.

Business Insider reported, "Golden Gate Capital sold Red Lobster's real-estate holdings that same year to a separate company to help finance the deal and later leased those restaurants back, which has cost the brand."

The mess seems to have gotten even bigger when, according to CNN, Thai Union, a Red Lobster supplier, bought an undisclosed financial stake in the company in 2020, making Thai Union a key shareholder. 

This resulted in four different CEOs being cycled through the company and the all-you-can-eat shrimp promotion that has hurt the restaurant's profits. 

Photo: Red Lobster Ad

Earlier in 2024, Thai Union issued a statement to the media stating that it planned to divest from Red Lobster and accept a $530 million investment loss. 

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