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Red Lobster has filed for Chapter 11 bankruptcy days after it unexpectedly closed dozens of restaurants.
The restaurant chain, which is the largest seafood chain in the world, has more than $1 billion in debt and plans to sell the business to its lenders, CNN reported.
It has more than 100,000 creditors, The New York Times reported.
Analysts said the reason for financial issues could be attributed to recent mismanagement, competition and inflation, CNN reported. The Associated Press cited rising leases and labor costs as challenges for the restaurant.
A recent all-you-can-eat shrimp promotion, a deal that the company was known for, recently overwhelmed locations and, according to the AP, caused the company to suffer millions in losses.
CNN reported that the company took the typically limited-time promotion and made it a permanent part of the menu in 2023. It contributed to an $11 million quarterly loss, the Times reported.
Red Lobster was created by Bill Darden in 1968. It was bought by General Mills before becoming part of Darden Restaurants. The company also owned Olive Garden, LongHorn Steakhouse, Yard House and Seasons 52, among other chains.
It was founded in Orlando, Florida, but had a look inspired by Bar Harbor, Maine, The New York Times reported.
Darden sold Red Lobster to Golden Gate Capital in 2014 for $2.1 billion. Thai Union Group, a seafood distributor, is Red Lobster’s largest shareholder, owning 49% of the company, CNN reported.
The company said it would divest from Red Lobster earlier this year, losing $530 million.
Former employees blame Thai Union’s cost-cutting for hurting the company.
“Thai Union forced huge cost reductions, including many that were penny wise and pound foolish because they hurt sales,” a former Red Lobster executive told CNN. He spoke with the cable news network under a condition of anonymity due to a non-disclosure agreement earlier this month.
Thai Union did not respond to a request by CNN for comment on the executive’s allegations.
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