Struggling seafood chain Red Lobster is considering filing for Chapter 11 bankruptcy protection to restructure its debt, according to a report Tuesday from Bloomberg, citing people familiar with the matter.
The chain last month installed Jonathan Tibus, a managing director with restructuring firm Alvarez & Marsal, as its new CEO, viewed as a step toward preparing the brand for sale by owner Thai Union Group. He’s the company’s third CEO in the past two years.
Orlando-based Red Lobster is now said to be in talks with law firm King & Spalding to divest itself from long-term contracts and renegotiate leases, Bloomberg reported.
Red Lobster did not immediately respond to a Restaurant Business request to comment on the potential bankruptcy.
The 650-unit legacy chain has been hobbled in recent years by leadership stumbles and strategic missteps, magnified by economic challenges.
In January, Thai Union announced it was cutting ties with Red Lobster and looking for a buyer.
Red Lobster lost $33 million in 2022 as traffic slowed and food and labor costs skyrocketed. The chain shuttered 16 restaurants.
To compound the problems, the chain debuted a $20 all-you-can-eat shrimp deal last summer. The deal was popular but it ended up costing the company more than $11 million in one quarter.
A bankruptcy filing would allow Red Lobster to keep operating while it works to shore up its financial position.
Restructuring talks are ongoing and a final decision has not been reached, Bloomberg noted.
Red Lobster was created by legendary restaurateur Bill Darden in 1968, becoming one of the first seafood chains in the U.S. Darden Restaurants sold the chain to private-equity firm Golden Gate Capital for $2.1 billion in 2014. Thai Union Group acquired a 25% stake in Red Lobster in 2016 before buying the brand in 2020.
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