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According to Bloomberg, this could be the end of the line for the Red Lobster seafood chain.
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The restaurant is considering bankruptcy and has sought legal advice, Bloomberg reports.
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Red Lobster had an operating loss of $11 million in the third quarter of 2023 and $12.5 million in the fourth quarter.
Seafood chain Red Lobster is considering filing for bankruptcy, Bloomberg reported on Wednesday.
The bankruptcy would allow Red Lobster to keep its business afloat while it trims its debt and expenses, people familiar with the matter told Bloomberg. According to the outlet, Red Lobster is being advised by law firm King & Spalding.
Red Lobster and King & Spalding did not respond to Bloomberg’s requests for comment.
The news comes after Red Lobster’s attempts to attract more customers with its signature all-you-can-eat deals failed.
The seafood restaurant is best known for its ‘Ultimate Endless Shrimp’ deal, which has been running for more than 18 years. For $20, customers could gorge themselves on as many shrimp as they wanted.
Last summer, Red Lobster decided to offer the promotion every day instead of once a week.
But while the promotion attracted a large crowd, Red Lobster said it vastly underestimated the overwhelming response to this “very cheap” deal. The resulting business losses would eventually cause Red Lobster to raise prices to $22 and then to $25.
Ludovic Garnier, chief financial officer of Thai Union Group — an investor in Red Lobster — said in an earnings call in November that the promotion was “one of the main reasons for the losses we generated in the third quarter of 2023.”
Red Lobster suffered an operating loss of $11 million that quarter. It then reported an operating loss of $12.5 million in the fourth quarter of 2023.
To be fair, restaurants like Red Lobster risk losing money on their all-you-can-eat deals if their customers are intent on getting their money’s worth.
In August, a woman went viral on TikTok after posting a video of herself dining at Golden Corral for 12 hours straight. The TikTok user said she paid $12 for a breakfast set, but also stayed for lunch and dinner.
But the losses from the shrimp feast couldn’t deter Red Lobster. The company launched another all-you-can-eat deal in February: the ‘Endless Lobster Experience’.
This time, Red Lobster has made sure to include several caveats in the promotion.
For example, the free deal was only available to 150 winning customers nationwide. In addition, customers were allowed to eat up to 12 live 1¼-pound Maine lobsters, followed by servings of Maine lobster tails or Caribbean Rock lobster tails. And they had to cut them off from the restaurant within the two-hour time limit.
Red Lobster’s troubles underscore the challenges the food and beverage industry faces in attracting customers amid rampant inflation.
In July, McDonald’s CFO Ian Borden told investors that their customers were ordering less and switching to value menu items to save money.
Borden said the decline in consumer spending was due to a “challenging macro environment, including rising interest rates and higher costs.”
Representatives for Red Lobster and King & Spalding did not immediately respond to Business Insider requests for comment sent outside regular business hours.
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