On May 20, after weeks of speculation and the closure of dozens of restaurants across the United States, Red Lobster announced it would file for Chapter 11 bankruptcy protection to save the struggling chain. . As it closes stores, auctions off fryers and ovens, and faces an increasingly uncertain future, one public figure is certain that Red Lobster’s demise must be the result of those never-ending shrimp promotions. A theory quickly emerged. On Twitter etc. joke was equally Unlimited.
In 2023, the chain brought back its Endless Shrimp promotion (all-you-can-eat shrimp scampi for $19.99) as a way to draw in customers and get them to spend money on cocktails and appetizers. Though foot traffic increased, the extra spending didn’t pay off: The promotion boosted foot traffic by 4%, but it still led to an $11 million loss for the quarter.
At first glance, the shrimp buffet will bankrupt Red Lobster seems like a plausible theory. Shrimp is expensive, and selling it unlimitedly for less than $20 clearly seems like an unsustainable business model, especially considering the cost of shrimp in other food establishments such as high-end steakhouses and seafood restaurants. It seems to me. A shrimp cocktail costs about $30.. Also, it’s pretty funny to think that Red Lobster self-destructed by selling so much shrimp at such a low price. This is a perfect metaphor for the era of overconsumption fueled by an increasingly globalized economy.
Of course, it’s much more complicated than that. Red Lobster has been in a very tough spot for 10 years. It was probably even worse than the others. The chain has had five different CEOs since 2021. In 2014, parent company Darden Red Lobster sold to a private equity firm called Golden Gate Capital for $2.1 billion.. With this sale, Darden paid off his $100 million in debt and fueled significant growth of other restaurants such as Olive and His Garden in the years that followed. The company managed to stay open even during the coronavirus outbreak in 2020. maintain positive cash flow Just like other restaurants are struggling. However, Red Lobster continued to struggle.
But again, it wasn’t the shrimp’s fault. Following the sale of Red Lobster to Golden Gate, the chain’s real estate assets were also sold, meaning the restaurants would have to pay rent for those locations to the parent company. like that, The company was stuck with a contract with an underperforming restaurant. As with other private equity forays into industries like retail and media, Red Lobster’s new private equity owners took on a large amount of debt.
August 2020, Golden Gate Capital Red Lobster sold to Thai Unionis a Thailand-based seafood company that owns numerous seafood brands, including the canned tuna brand Chicken of the Sea. After Thai Union took over, Red Lobster insiders said the company: Engaging in extreme cost-cutting measures There wasn’t enough emphasis on innovation, especially as fast-casual restaurants like Cava and Chipotle became a large part of the casual dining market. Just four years later, in January 2024, he Thai Union was ready to exit the restaurant businesscited “sustained industry headwinds, rising interest rates, and rising material and labor costs.”
And why, despite billions of dollars in losses over the past decade, countless executive changes, and three different corporate ownership groups, we still think Red Lobster’s failure is a shrimp It’s much more fun and easier to believe that something as ridiculous as endless shrimp promotions could really spell the end for a restaurant that’s been around since 1968. is clear.
But the reality is even more insidious. While most diners have fond memories of gobbling endless shrimp (my brother and his high school football buddies once (temporarily) closed an East Texas location after eating 377 shrimp) and snacking on Cheddar Bay Biscuits, Red Lobster’s owners don’t. They don’t talk about the good memories there, nor do they seem to care much about the hundreds of people who lost their jobs when the restaurants suddenly closed. The chain’s current ownership only cares about money and about staving off losses caused by its own poor decision-making. The focus on shrimp quietly absolves the people who actually played a part in its demise.
It’s certainly novel that endless shrimp could have spelled the end for Red Lobster, but it’s important to note that private equity vultures can swoop in and value a beloved institution and brand before it inevitably disappears. What about the idea of trying to suck it up to the last drop? good, it is be story as old as time.
