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Red Lobster Files for Chapter 11 Bankruptcy

The company has confirmed that it's restaurants will continue to operate normally during the Chapter 11 proceedings.

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Justin Sullivan | Getty Images

Red Lobster has announced its bankruptcy as a result of mounting debt.

As reported by the Associated Press court documents, on May 19 revealed that the known seafood chain Red Lobster, renowned for its shrimp deal has filed for Chapter 11 bankruptcy in Florida. The filing disclosed that Red Lobster has over 100,000 creditors and assets valued between $1 billion and $10 billion.

The companys liabilities are estimated to be in the range according to reports. This news came after the closure of Red Lobster locations across more than 20 states.

In response the restaurant chain shared plans to “drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern.”

It was mentioned the chain “has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.”

The statement also assured that the chain “will remain open and operating as usual during the Chapter 11 process, continuing to be the world’s largest and most-loved seafood restaurant company,”

Jonathan Tibus, the appointed CEO of the company, in March expressed his thoughts on the developments stating, “This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth.” 

“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,” Tibus added.

This announcement comes after reports indicating that the restaurant chain, which opened its location in Lakeland, Florida in 1968 was considering bankruptcy. Bloomberg was the source to disclose this information month.

As per the report Red Lobster has been struggling to maintain profitability due to existing leases and labor costs prompting them to seek advice from commercial law firm King & Spalding.

CNN reported that the restaurant franchise saw a $12.5 million drop in profits in the quarter of 2023 despite raising prices, for its shrimp special from $20 to $25.

In February it was reported by the news that Thai Union Group Plc, which has been the owner of Red Lobster since 2020, with a 49% stake announced in January its plan to sell its shares. This decision was attributed to the effects on the company’s finances and shareholders according to Thiraphong Chansiri, CEO of Thai Union Group.

CNN mentioned that the company experienced a $19 million loss from Red Lobster during the nine months of 2023 due to factors, like the impact of the Covid 19 pandemic rising interest rates and increasing expenses. This loss grew to $22 million by the end of 2023.