NEW YORK — Red Lobster says it will soon be coming out of Chapter 11 bankruptcy. This comes after months of dozens of restaurants closing and news stories about “endless shrimp” problems.
A U.S. bankruptcy judge accepted the casual seafood chain’s reorganization plan on Thursday. As part of the plan, the business will be bought by a group of lenders led by asset manager Fortress. The green light comes less than four months after Red Lobster filed for bankruptcy while looking for a buyer. This was after years of losing money and customers as it tried to keep up with competition.
When Red Lobster filed for bankruptcy in May, the company’s leaders said they wanted to “simplify the business” by closing some sites. The company lost $76 million in 2023 and has closed dozens of restaurants in North America in the past few months, both before and during the bankruptcy process. For example, the equipment at more than 50 places was put up for sale just a few days before the Chapter 11 petition. These places had to close again and again during the bankruptcy process.
Red Lobster said Thursday that it plans to have about 544 stores in the U.S. and Canada once it gets out of bankruptcy. That’s less than the 578 that were reported when the bankruptcy was filed in May.
The chain will continue to run as a separate business after the sale, which should be finalized by the end of September.
After the deal is done, Red Lobster will also have a new CEO. His name is Damola Adamolekun, and he used to be the CEO of P.F. Chang’s.
Last week, Fortress named Adamolekun to lead RL Investor Holdings, the new company that is buying Red Lobster. Wednesday, Adamolekun said that Red Lobster “has a tremendous future.” He also thanked Jonathan Tibus, who is leaving the company and stepping down as CEO, for leading the company through bankruptcy.
The company that bought Red Lobster is also giving the Orlando, Fla.-based business more money to help it get back on its feet after the emergence. Adamolekun said that the business has promised to spend more than $60 million over the next few years.
Red Lobster has been around for 56 years and is known for its cheap fish and cheddary biscuits. It has been owned by many different people. Founder Bill Darden started the company in 1968 and sold it to General Mills GIS 1.26% in 1970. After General Mills, Darden Restaurants DRI -0.88% was formed. It owns Olive Garden and other chains. In 1995, Darden Restaurants broke away from General Mills.
After that, in 2014, Darden Restaurants sold Red Lobster to a private equity company. The Thai Union Group TU -0.65%, which is one of the biggest seafood suppliers in the world, first invested in Red Lobster in 2016 and increased its stake in 2020. However, earlier this year, it said it was going to sell its minority share.
CEO Thiraphong Chansiri said that the COVID-19 pandemic, industry headwinds, and rising running costs from Red Lobster had caused “prolonged negative financial contributions to Thai Union and its shareholders.” He also said that the company was planning to sell its shares in January. It said that Red Lobster cost it $19 million in the first nine months of 2023.
Even though they weren’t the only reason for the loss, those endless shrimp were a factor. The famous “all-you-can-eat” deal at Red Lobster got a lot bigger last year. But the chain couldn’t keep up with customer demand. Later, leaders of the Thai Union said that the $20 price tag wasn’t making enough money.
The shrimp mess from last year wasn’t the first time Red Lobster had to deal with the results of making “endless” claims. It is said that the company lost millions of dollars on a “Endless Crab” ad in 2003 when the price of crab went up.
