Red Lobster is putting its worst days behind it as the seafood restaurant chain prepares to emerge from bankruptcy.
A U.S. judge on Thursday approved the company's reorganization plan, clearing the way for the casual dining chain to emerge from Chapter 11 bankruptcy protection.
Red Lobster, known for its all-you-can-eat shrimp and cheddar biscuits, closed dozens of locations and filed for bankruptcy in May after an extended period during which revenue and visits to its restaurants fell precipitously. Like other chains, the company struggled to attract customers during the COVID-19 pandemic as people cut back on restaurant spending and, more recently, amid high inflation that strained budgets.
Under the restructuring plan, a group of investors known as RL Investor Holdings will acquire the chain, the Florida-based company said in a press release. The acquisition is expected to close before the end of September and Red Lobster will remain an independent company.
Red Lobster will also have a new leadership team. Damola Adamolekun, former CEO of Asian restaurant chain PF Chang's, will be Red Lobster's new CEO. He will take the reins from Jonathan Tibus, who served as Red Lobster's CEO during the reorganization.
“This is a great day for Red Lobster,” Adamolekun said in a statement. “With our new sponsors, we have a comprehensive, long-term investment plan, including a commitment of more than $60 million in new funding, that will help revitalize the iconic brand while preserving the best of its history.”
Red Lobster has been losing millions of dollars as it tries to attract more customers. The company reported a net loss of $76 million during the last fiscal year. The company said in a bankruptcy filing that customer traffic had declined by nearly a third since 2019.
The slide into bankruptcy received increased attention because of the company's misguided attempt to boost its bottom line by relaunching its all-you-can-eat shrimp offering.
The $20 offer backfired as bargain-hungry customers took it as a challenge. TikTok To brag about how many shrimp they could eat in one sitting, one The woman boasted He had consumed 108 over the course of a four-hour meal.
Ludovic Garnier, chief financial officer of a seafood conglomerate that had been Red Lobster’s largest shareholder since 2020, cited the never-ending shrimp deal as a key reason for the chain’s troubles.
While the promotion increased customer traffic by a few percentage points, Garnier said, the number of people taking advantage of the offer far exceeded projections. In response, the company adjusted the price to $22 and then to $25.
Red Lobster currently operates 544 restaurants in 44 U.S. states and four Canadian provinces.
