The news keeps getting worse for Red Lobster fans. The seafood chain has filed for a voluntary Chapter 11 bankruptcy protection but intends to keep select locations open, the brand confirmed Sunday night.
The news of the bankruptcy filing comes less than a week after the company shuttered over 50 restaurants across the country.
According to their statement, Red Lobster said it would “drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern.”
As part of its reorganization, the restaurant “has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders.”
Founded in 1968, Red Lobster grew to nearly 700 locations by 2019, making it the largest seafood restaurant chain in the U.S. However, the company has been in hot water in recent years, struggling against rising labor costs and competition from other fast casual dining.
According to NBC News, the 56-year-old restaurant chain has lost $76 million in the last year, and saw a 30% drop-off in guests since 2019. But perhaps the most well known hit came from the popularity of the Endless Shrimp Promotion, which ultimately cost the company $11 million.
"This restructuring is the best path forward for Red Lobster,” said CEO Jonathan Tibus. “It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we've received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.
Despite shutting down dozens of locations in the past week, Red Lobster stresses that its remaining restaurants will stay open during the bankruptcy process. The company said that it had received a $100 million debtor-in-possession financing commitment to fund its ongoing operations.
Update: On Tuesday, Red Lobster posted a TikTok explaining what their bankruptcy means. Here is the full text that the company published on TikTok:
"Dear Guests,
You may be aware that Red Lobster filed for Chapter 11 bankruptcy protection. We’d like to take a moment to explain what this means for our company, and for you, our valued guests. For more than five decades Red Lobster has been a part of your family’s life.
We’ve been there for your celebrations, big and small. We may be the place that you first discovered your love of seafood. Or where you met the love of your life on a first date. Birthdays, graduations, anniversaries and yes, weddings. We’ve been here for them all. And Red Lobster is determined to be there for these moments for generations to come. And that’s why we filed for Chapter 11 bankruptcy protection.
Bankruptcy is a word that is often misunderstood. Filing for bankruptcy does not mean we are going out of business. In fact, it means just the opposite. It is a legal process that allows us to make changes to our business and our cost structure so that Red Lobster can continue as a stronger company going forward. As many of you know, we recently made the tough decision to close a number of our restaurants.
The truth is, some of the world’s most beloved brands like Delta and Hertz have used this same process to protect their futures and their customers stood with them and rooted them on. And because of that, they emerged stronger.
Together, we have a lot worth rooting for. We’ve made delicious, high-quality seafood accessible for generations. Many of you tried lobster for the first time at our restaurant. We’ve brought you Lobsterfest and Crabfest over the years.
And, of course, no meal is complete without Cheddar Bay Biscuits. We are here and ready to continue making memories with you."
