Struggling restaurant chain Red Lobster is considering filing for bankruptcy as high costs and low sales ground the business.
The brand is reportedly eyeing up a possible Chapter 11 filing to restructure its debt, allowing it to discard long-term contracts and renegotiate new leases.
Red Lobster’s cash flows have been hit by expensive leases and high labor costs. It comes after the company last year reported record losses of $11 million, which its CFO partly blamed on its unlimited shrimp deal.
The chain, which started as a single restaurant in Lakeland, Florida, in 1968 has around 650 locations across almost all states. It’s famous for its cheese-flavored biscuits.
News of the bankruptcy was first reported by Bloomberg, which said the restaurant chain is taking advice from the law firm King & Spalding.
Those familiar with the matter told the outlet the decision was yet to be finalized, but that bankruptcy would allow the company to continue operating.
Red Lobster’s famous shrimp promotion came as it wanted to lure in more customers after significant losses of $5.4 million in the second quarter of 2023.
But those plans backfired since the ‘all you can eat’ promotion was too generous. For just $20, diners could indulge in as much of the shellfish as they could stomach.
The ‘Endless Shrimp’ offer was initially a special but in June it claimed a permanent spot on the Red Lobster menu. Foot traffic reportedly increased by 4 percent as a result.
