Red Lobster Explores Bankruptcy Amid Mounting Debt: Reports

By Trisha Andrada

Apr 18, 2024 04:36 AM EDT

Red Lobster Mulls Possible Bankruptcy Filing Amid Debt And Rising Labor Costs
A sign is posted on the exterior of a Red Lobster restaurant on April 17, 2024 in Rohnert Park, California. Red Lobster is considering filing for Chapter 11 bankruptcy to address rising labor costs and in hopes of renegotiating property leases and long-term contracts.
(Photo : Justin Sullivan/Getty Images)

Red Lobster is reportedly mulling over the possibility of filing for Chapter 11 bankruptcy due to its mounting debt.

One of Red Lobster's most famous offers is their endless shrimp deal. The firm made it a permanent menu item in June and raised the price from $20 to $25.

Red Lobster Engaging Specialists to Plan Cost-Cutting Overhaul

According to Bloomberg's sources, the restaurant is consulting with commercial law firm King & Spalding to strategize a cost-cutting reorganization after struggling to turn a profit due to high labor and leasing expenses.

Sources said Red Lobster has not yet decided to file for bankruptcy. However, if they do, it will let them keep running while they figure out what to do next, which might include renegotiating leases or terminating contracts.

Red Lobster appointed Jonathan Tibus as CEO last month, marking the latest in a series of internal changes at the firm. When it comes to rescuing struggling restaurants from the brink of insolvency, he is renowned.

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Red Lobster Faces Financial Difficulties

This comes at a time when the restaurant is having financial troubles. CNN reported that in the fourth quarter of 2023, the business had an operational deficit of $12.5 million, even though it ran an endless shrimp campaign.

Thai Union, the company's new owners since 2021, later revealed their intention to divest from Red Lobster due to the detrimental impact it had on the corporation and its shareholders.

For a number of months now, Red Lobster has been actively courting the media. In preparation for their annual Lobsterfest, the restaurant announced in February that they would be giving out free meals of unlimited lobster to a select number of customers.

According to People, its first-ever Endless Lobster Experience gave 150 lucky winners from all around the nation the opportunity to win a free two-hour dinner that includes unlimited lobster, two side dishes, and the brand's famous cheddar biscuits.

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