Red Lobster files for bankruptcy with plan to sell itself

In a move that was not unexpected, Red Lobster has filed for bankruptcy protection.

The casual-dining seafood chain — a mainstay for 56 years — filed for Chapter 11 protection in Florida as it looks to “simplify” its business through a reduction in locations and a sale of its assets as a going concern. As part of the filing, Red Lobster has entered into a “stalking horse” agreement from its existing lenders to buy the chain unless it receives a higher bid. In court filings, the company listed assets and liabilities of $1 billion to $10 billion each.

Earlier this month, Red Lobster closed about 90 restaurants, with the equipment auctioned off by a liquidator. The company, which currently operates approximately 551 U.S. locations, is looking to shutter about 100 more sites, according to court documents.

Red Lobster reported a net loss of $76 million in fiscal 2023. System sales fell 8.1% to $2.2 billion.

In the bankruptcy filing, the company cited "the difficult macroeconomic environment, a bloated and underperforming restaurant footprint, failed or ill-advised strategic initiatives, and increased competition within the restaurant industry" for its recent financial failures. A

Part of Red Lobster's troubles was its famous $20 “endless shrimp” deal, which was changed from a weekly to a daily offering in May 2023. The deal proved too good for consumers to pass up, and ultimately cost the company some $11 million.

In March, Red Lobster named restructuring expert Jonathan Tibus, director of management consulting firm Alvarez Marsal in Atlanta, as CEO. 

“This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth” said Tibus. “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." 

Red Lobster restaurants will remain open and operating as usual during the Chapter 11 process. The company has received a $100 million debtor-in-possession financing commitment from its existing lenders.

King & Spalding LLP, Berger Singerman LLP and Blake, Cassel & Graydon, LLC are serving as legal advisors. Alvarez & Marsal is serving as financial advisor and providing corporate leadership as chief executive and chief restructuring officers. 

Hilco Corporate Finance is serving as M&A advisor to Red Lobster. Keen-Summit is serving as real estate advisor.