Red Lobster says it will soon emerge from bankruptcy protection after judge approves sale of seafood chain

Wyatte Grantham-Philips
| Associated Press

New York — After months of dozens of restaurant closures and headlines about the woes of “endless shrimp,” Red Lobster is on track to emerge from Chapter 11 bankruptcy protection soon.

A U.S. bankruptcy judge on Thursday approved the casual seafood chain’s reorganization plan and sale to a group of lenders led by asset manager Fortress. The green light comes just four months after Red Lobster filed for bankruptcy protection while seeking a sale, following years of mounting losses and declining customers as it struggled to keep up with competitors.

At the time of the filing in May, Red Lobster management shared plans to “simplify the business” by downsizing its locations. The Orlando, Florida, 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 equipment was put up for auction just days before the Chapter 11 filing, followed by dozens of additional closures throughout the bankruptcy process.

Red Lobster said Thursday it expects to operate about 544 locations in the U.S. and Canada after emerging from bankruptcy. That’s down from the 578 it reported at the time of its bankruptcy filing in May.

Under the terms of the acquisition, which is expected to close by the end of September, the chain will continue to operate as an independent company.

The chain will also have a new chief executive: Damola Adamolekun, former chief executive of PF Chang’s.

Last week, Fortress appointed Adamolekun to lead RL Investor Holdings, the newly formed entity that acquired Red Lobster. 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 financing to help the Orlando, Florida-based chain recover from its resurgence. Adamolekun said the company’s long-term investment plan includes a commitment of more than $60 million in new financing.

Red Lobster has undergone multiple ownership changes over 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 formed Darden Restaurants, which owns Olive Garden and other chains. Darden Restaurants was spun off from General Mills in 1995.

Darden Restaurants subsequently sold Red Lobster to a private equity firm in 2014. Thai Union Group, one of the world’s largest seafood suppliers, first invested in Red Lobster in 2016 and increased its stake in 2020, but announced its intention to exit its minority investment earlier this year.

Announcing its divestment plans in January, Chief Executive Thiraphong Chansiri said the COVID-19 pandemic, industry headwinds and rising operating costs for Red Lobster had resulted in “prolonged negative financial contributions to Thai Union and its shareholders.” He reported a $19 million loss for Red Lobster for the first nine months of 2023.

While it wasn’t the only reason, among the sources of losses were — yes — those endless shrimp. Last year, Red Lobster significantly expanded the iconic all-you-can-eat offering, but customer demand outstripped what the chain could afford. Thai Union management later said the $20 price tag for the offering wasn’t making enough money.

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Red Lobster says it will soon emerge from bankruptcy protection after judge approves sale of seafood chain

ByS. Jacob

By S. Jacob

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