Red Lobster, which filed for Chapter 11 bankruptcy in Florida on Sunday, is probing the involvement of its primary stakeholder, Thai Union, in the “endless shrimp” promotion that led to a financial loss of $11 million, according to court documents.
The restaurant chain attributed the debacle to a series of poor management decisions by Thai Union, the global seafood corporation that holds a majority of its shares and supplies its shrimp.
Red Lobster operates approximately 550 casual dining establishments across the US and initially introduced a $20 “endless shrimp” meal as a temporary special.
Despite considerable opposition from other executives, former CEO Paul Kenny made this offering a permanent feature in May 2023, the court papers reveal.
Following this decision, some Red Lobster locations experienced severe shrimp shortages.
Concurrently, the chain discontinued partnerships with two breaded shrimp suppliers, granting Thai Union an exclusive contract that resulted in increased costs, current CEO Jonathan Tibus stated in the court documents.
Jonathan Tibus noted in his court declaration, “Thai Union had a disproportionate influence over our shrimp buying decisions. We are currently investigating the decisions made during this period.”
Facing $294 million in debt, Red Lobster plans to shut down several low-performing locations and sell the remainder to a consortium of its creditors, including Fortress Investment Group.
Based in Orlando, Florida, Red Lobster is among the largest seafood restaurant chains globally, with 54 branches abroad and a workforce of approximately 36,000.
The company accounts for 20% of all North American lobster tail sales and 16% of the global rock lobster market, as indicated in the filings.
Red Lobster has acknowledged that its business challenges stem from inadequate management decisions, rising inflation, unmanageable rent expenses, and growing competition.
The company reported a net loss of $76 million in 2023 and has recently closed 93 outlets to reduce expenditures.
