New York (CNN) — Red Lobster, which brought affordable shrimp and lobster to middle-class America and grew to become the largest seafood restaurant chain in the world, has filed for bankruptcy.
WATCH: 2 Red Lobsters in Hampton Roads are temporarily closed
The company said it had more than $1 billion in debt, and it plans to sell its business to its lenders. In turn, it will receive financing to stay afloat. It expects to continue to close restaurants in the meantime.
Red Lobster, known for its cheddar bay biscuits, crab legs and shrimp dishes, spread around the country during the 1980s and 1990s. In 2016, Beyoncé mentioned Red Lobster in her song “Formation,” describing bringing a romantic partner to Red Lobster, causing sales to surge.
But recent mismanagement, competition, inflation and other factors brought down Red Lobster, analysts and former Red Lobster employees say.
Years of underinvestment in Red Lobster’s marketing, food quality, service and restaurant upgrades hurt the chain’s ability to compete with growing fast-casual and quick-service chains.
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2 Red Lobsters in Hampton Roads abruptly close
Pioneering chain
Red Lobster started in 1968 by Bill Darden, an architect of the casual dining revolution in America, and General Mills soon bought the restaurant. Red Lobster later became part of Darden Restaurants, the owner of Olive Garden and other chains.
In 2014, Darden sold off Red Lobster to Golden Gate Capital, a private equity firm, for $2.1 billion. Since 2020, seafood distributor Thai Union Group, based in Thailand, has been the largest Red Lobster shareholder. Thai Union owns 49% of the company.
But Red Lobster has struggled under Thai Union.
Earlier this year, Thai Union said it would divest from Red Lobster and take a $530 million loss on its investment.
Former Red Lobster employees say Thai Union’s cost-cutting efforts and strategy mistakes hurt the chain.
“Thai Union forced huge cost reductions, including many that were penny wise and pound foolish because they hurt sales,” a former Red Lobster executive who spoke under the condition of anonymity because of a non-disclosure agreement with the company told CNN earlier this month. Thai Union did not respond to requests for comment on that article.
Red Lobster executives began to run for the doors under Thai Union’s management, resulting in a huge amount of C-suite churn. Red Lobster has had five CEOs since 2021. In 2021 and 2022, Red Lobster brought on a new CEO, chief marketing officer, chief financial officer and chief information officer. All were gone within two years.
Last summer, under Thai Union, Red Lobster turned endless shrimp into a permanent item on the menu for the first time, instead of its traditional limited-time offer deal. The change cut into Thai Union profits.
“We need to be much more careful,” Thai Union CFO Ludovic Garnier said on an earnings call in November 2023.
The explosive growth and popularity of fast-casual chains like Chipotle and quick-service chains like Chick-fil-A over the past two decades also squeezed Red Lobster.
Casual dining has slipped from 36% of total restaurant industry sales in 2013 to 31% in 2023, according to Technomic, a restaurant research firm.
This is a developing story. It will be updated.
