Red Lobster is nearing the end of its worst days as the struggling seafood restaurant chain prepares to emerge from bankruptcy.
A U.S. judge on Thursday approved the company's restructuring plan, clearing the way for the casual dining chain to emerge from Chapter 11 bankruptcy protection.
Red Lobster, known for its unlimited shrimp dishes and cheddar biscuits, closed dozens of locations and filed for bankruptcy in May after a long run in which traffic and sales plummeted. Like other chains, the company struggled to attract customers as people cut back on spending at restaurants during the COVID-19 pandemic and then again more recently as rising inflation strained budgets.
The Florida-based company announced that a group of investors known as RL Investor Holdings LLC will acquire the chain under a reorganization plan. News ReleaseThe acquisition is expected to close by the end of September, and Red Lobster will remain an independent company.
Red Lobster is also getting new management. Damola Adamolekun, former CEO of Asian restaurant chain PF Chang's, will lead the chain as its new CEO. He will succeed Jonathan Tivas, who served as CEO of Red Lobster during the chain's restructuring.
“This is an exciting day for Red Lobster,” Adamol-Kun said in a statement. “Together with our new backers, we have developed a comprehensive, long-term investment plan that includes more than $60 million in new funding that will help reinvigorate our iconic brand while preserving the greatness of its history.”
Red Lobster is losing millions of dollars as it struggles to attract more customers. The company reported a net loss of $76 million last fiscal year. In its bankruptcy filing, the company said customer traffic has fallen by nearly a third since 2019.
The company's descent into bankruptcy drew attention because of a misguided attempt to boost profits by relaunching its all-you-can-eat shrimp service.
The $20 sale backfired because customers who were eager for a sale took the offer as a challenge. TikTok Bragging about how many shrimp you can eat in one sitting The woman boasted She consumed 108 pieces over a four-hour period.
Ludovic Garnier, chief financial officer of the seafood conglomerate that has been Red Lobster's largest shareholder since 2020, cited the never-ending shrimp trade as a major cause of the chain's woes.
Garnier said the promotion boosted foot traffic by a few percent, but the number of people taking advantage of the offer was far greater than the company had expected, so it adjusted the price to $22, then to $25.
Red Lobster currently operates 544 restaurants in 44 US states and four Canadian provinces.
