Last week, Red Lobster suddenly closed at least 48 locations nationwide. Now, according to a press release issued on May 19, 2024, the longstanding casual seafood restaurant chain has officially filed for voluntary Chapter 11 bankruptcy. After 2023’s backfire of the iconic Ultimate Endless Shrimp promotion (which was a huge hit with customers, but “ultimately” cost the company more than it profited), Red Lobster lost a whopping $22 million in 2023 alone.
Back in January, Thiraphong Chansiri, CEO of the chain’s parent company, Thai Union Group, explained in a press release that “the combination of [the] COVID-19 pandemic, sustained industry headwinds, higher interest rates, and rising material and labor costs” resulted in devastating “prolonged negative financial contributions” for Thai Union, causing the company to pull out of its financial arrangement with Red Lobster. As the chain steadily accrued more and more unpaid debt, dozens of locations finally closed their doors.
Still, even with the recent mass closure, Red Lobster continues to be the largest seafood restaurant company in the world with roughly 650 remaining locations – all of which will remain open and operating as usual during the Chapter 11 process. As it moves forward toward rebuilding, Red Lobster will also be working with some influx of funds from the $100 million debtor-in-possession (“DIP”) financing from its existing lenders, as well as extra money from auctioning off the kitchen equipment from its nearly 50 shuttered restaurant locations.
Customers can dine-in as usual, but countless Red Lobster employees are left empty-handed
Chapter 11 bankruptcy relief is essentially a court-supervised reorganization, which allows businesses to restructure their finances, repay creditors, and generally get back on track while remaining in operation. Red Lobster CEO Jonathan Tibus remains optimistic about the company’s future. “This restructuring is the best path forward for Red Lobster,” Tibus shared in the press release. “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.”
Chapter 11 bankruptcy may protect Red Lobster on the corporate end of the business — but, ironically, in its closures, the seafood chain famous for its affordability has saddled many of its former employees with income circumstances they cannot afford. In the most recent post on the chain’s Instagram account (which reads “Live, laugh, lobster on Mother’s Day”), many people took to the comments section with backlash.
As one of the top comments notes, “Love how you made thousands of employees work the busiest day of the year without telling them it would be their last.” Other comments from apparent former employees similarly express outrage and question the legality of their Red Lobster location closing “suddenly and without warning and without paying severance despite having a clear plan to close,” as one commenter puts it. Not even Red Lobster’s beloved and fascinating Cheddar Bay Biscuits could put a good taste back in some peoples’ mouths after this unsavory move.
