(WJET/WFXP) — Less than one week after Red Lobster announced the closure of dozens of restaurants across the nation, the company has officially filed for Chapter 11 bankruptcy.
The seafood chain has been struggling with rising lease and labor costs in recent years. Operational missteps and underperforming locations also contributed to the decision to file for bankruptcy.
Still, the chain plans to remain open, albeit with a smaller footprint.
“Red Lobster’s restaurants will remain open and operating as usual during the Chapter 11 process, continuing to be the world’s largest and most-loved seafood restaurant company,” reads a Red Lobster press release issued Sunday night.
Multiple factors lead to Red Lobster’s bankruptcy filing. Inflationary pressure had caused menu prices to rise — leaving customers less inclined to eat out — and many states’ recent increases in the minimum wage had put an extra strain on finances. The company was also spending tens of millions on leases at underperforming locations.
In June 2023, Red Lobster also began offering “Ultimate Endless Shrimp,” typically a limited-time offer, as a regular menu item. This decision, reportedly made by former CEO Paul Kenny, was a “key factor” that contributed to $11 million in losses for Q3 in 2023, according to Thai Union Group, a co-owner of Red Lobster.
Thai Union Group, one of the world’s largest seafood suppliers, announced its intention to exit its minority investment in the dining chain earlier this year.
In Sunday’s bankruptcy filings, Red Lobster estimated $1 billion to $10 billion in liabilities owed to over 100,000 creditors. The bankruptcy petition was signed by CEO Jonathan Tibus, a corporate restructuring specialist who took the top post at Red Lobster in March.
“This restructuring is the best path forward for Red Lobster,” said Tibus, in a statement included with Sunday’s press release. “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.”
In an attempt to cut losses, Red Lobster had previously indicated that nearly 100 restaurants nationwide would be closing. Moving forward, the company also plans to implement a more sensible promotional calendar with fewer limited-time offers.
The Associated Press contributed to this report.