Red Lobster Faces Potential Bankruptcy Filing Amid Financial Struggles

Red Lobster, a well-known restaurant chain, is reportedly on the verge of filing for Chapter 11 bankruptcy protection, according to sources cited by The Wall Street Journal. The company, burdened with a significant amount of debt, recently made the decision to close 52 of its stores. One factor cited for the chain's financial woes is an unsuccessful all-you-can-eat shrimp promotion.

Impending Bankruptcy Filing

Reports indicate that Red Lobster is preparing to file for bankruptcy protection in the coming week, with The Wall Street Journal suggesting that the filing could occur as early as next week. Sources familiar with the situation have revealed that the company, facing a debt load in the hundreds of millions, intends to submit a Chapter 11 bankruptcy petition in Orlando before Memorial Day. This development follows earlier reports from Bloomberg in April, which hinted at Red Lobster's contemplation of seeking Chapter 11 protection.

Store Closures and Financial Struggles

The news of the potential bankruptcy filing comes after Red Lobster, which currently operates approximately 650 locations, decided to close more than 50 stores across the United States. The closure details were confirmed by restaurant liquidator TAGeX Brands to Business Insider, with affected states including California, Colorado, Florida, New York, and Texas. The seafood chain has faced financial difficulties in recent years, attributed to factors such as high leasing costs, reduced foot traffic during COVID-19 lockdowns, and the fallout from an unsuccessful all-you-can-eat shrimp promotion.

Impact of Financial Challenges

Red Lobster's financial struggles have led to repercussions for Thai Union Group, which acquired a majority stake in the company in 2020. Following the chain's continued financial losses, Thai Union Group made the decision to withdraw its investments. Thai Union's Chief Executive, Thiraphong Chansiri, highlighted various factors contributing to Red Lobster's financial challenges, including the effects of the COVID-19 pandemic, ongoing industry difficulties, increased interest rates, and rising costs of materials and labor. Chansiri emphasized that these factors had resulted in sustained negative financial outcomes for both Thai Union and its shareholders.

Despite these developments, Red Lobster and Thai Union Group have not issued official comments in response to inquiries from Business Insider.

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By: hgetahun@insider.com (Hannah Getahun)
Title: Red Lobster Faces Potential Bankruptcy Filing Amid Financial Struggles
Sourced From: www.businessinsider.com/red-lobster-chapter-11-bankruptcy-filing-closed-stores-wsj-2024-5
Published Date: Wed, 15 May 2024 00:04:54 +0000