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Red Lobster files for Chapter 11 bankruptcy
Axios reporter Richard Collings joins LiveNOW's Andrew Craft to dissect Red Lobster's decision to file for Chapter 11 bankruptcy.
LOS ANGELES - After months of closing locations and dealing with financial troubles, Red Lobster is preparing to exit Chapter 11 bankruptcy protection. A U.S. bankruptcy judge approved the casual seafood chain’s reorganization plan on Thursday, allowing a lender group led by asset manager Fortress to acquire the business.
Red Lobster filed for bankruptcy in May after struggling with mounting losses and declining customer traffic. At the time of filing, the chain announced plans to simplify its business by closing underperforming locations.
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Since then, Red Lobster has shuttered more than 50 restaurants and sold off their equipment as part of the bankruptcy process. By the time it emerges from bankruptcy, the company expects to operate about 544 restaurants across the U.S. and Canada, down from 578 disclosed during the May filing.
New CEO and funding to lead Red Lobster’s future
As part of the reorganization plan, Red Lobster will continue to operate as an independent company. Damola Adamolekun, former CEO of P.F. Chang’s, will take over as the new CEO once the deal is finalized. Adamolekun, appointed by Fortress, replaces Jonathan Tibus, who led the company through the bankruptcy process.
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Adamolekun expressed optimism for the future of Red Lobster, thanking Tibus for his leadership during a difficult time. Fortress also committed over $60 million in new funding to help the chain stabilize and regain its footing after exiting bankruptcy.
Red Lobster’s history of ownership changes and challenges
Red Lobster, founded in 1968, has experienced several ownership changes throughout its history. It was first sold to General Mills in 1970 before becoming part of Darden Restaurants in 1995. In 2014, Darden sold the chain to a private equity firm, and in 2016, Thai Union Group invested in the brand. Earlier this year, Thai Union announced plans to divest from Red Lobster due to financial losses.
Among the financial setbacks were the company’s expanded "endless shrimp" promotion, which led to higher-than-expected customer demand and unsustainable costs. Red Lobster also experienced losses from previous "endless" promotions, including the infamous "Endless Crab" deal in 2003.
The Source
This article is based on information from the Associated Press and official statements from Red Lobster, Fortress, and Damola Adamolekun regarding the company’s reorganization and leadership changes following its Chapter 11 bankruptcy filing.