After months of dozens of restaurant closings and headlines about “endless shrimp” woes, Red Lobster is poised to emerge from Chapter 11 bankruptcy protection soon.
A US bankruptcy judge on Thursday approved the reorganization plan and eventual sale of the seafood chain to a group of lenders led by asset manager Fortress. The green light comes just four months after Red Lobster filed for bankruptcy protection as it pursued a sale, following years of mounting losses and dwindling customers as it struggled to keep up with competitors.
At the time of the May filing, Red Lobster’s leadership shared plans to “simplify the business” through a reduction in locations. The Orlando, Florida-based chain closed dozens of its North American restaurants in recent months — both before and during the bankruptcy process. That includes more than 50 locations whose facilities were auctioned just days before the Chapter 11 petition, followed by dozens of other closings throughout the bankruptcy process.
Red Lobster said Thursday it expects to operate about 544 locations across the U.S. and Canada after emerging from bankruptcy. That’s down from 578 disclosed since May’s filing.
Under the terms of the acquisition, which is expected to close in late September, the chain will continue to operate as an independent company.
The chain will also have a new CEO – Damola Adamolekun, former chief executive of PF Chang’s.
Adamolekun was named head of RL Investor Holdings, the newly formed entity buying Red Lobster, from Fortress last week. In a statement Thursday, Adamolekun said Red Lobster “has a tremendous future” and thanked Jonathan Tibus, who will leave the company and step down as CEO, for his leadership during the bankruptcy process.
Red Lobster’s buyer is also providing additional funding to help the Orlando, Florida-based chain get back on its feet after the show. Adamolekun said the company’s long-term investment plan includes a commitment of more than $60 million in new financing.
Red Lobster has seen numerous ownership changes during its 56-year history. The chain was founded in 1968 by Bill Darden, who sold Red Lobster to General Mills in 1970. General Mills later went on to form Darden Restaurants, which owns Olive Garden and other chains. Darden Restaurants was spun off from General Mills in 1995.
Darden Restaurants later sold Red Lobster to a private equity firm in 2014. Thai Union Group, one of the world’s largest seafood purveyors, first invested in Red Lobster in 2016 and raised its stake in 2020 — but announced its intention to exit its minority investments earlier this year.
When announcing plans to divest in January, CEO Thiraphong Chansiri said the COVID-19 pandemic, industry headwinds and rising operating costs from Red Lobster had resulted in “prolonged negative financial contributions to Thai Union and its shareholders.” . It reported a $19 million loss from Red Lobster for the first nine months of 2023.
Although it was not the only reason, among the sources of loss were “yes” those infinite shrimps. Last year, Red Lobster significantly expanded its iconic all-you-can-eat special. But customer demand overwhelmed what the chain could handle. Thai Union leadership later noted that the $20 deal price was not making enough money.
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Image Source : nypost.com
