Red Lobster is planning to close another 23 restaurants nationwide, according to court documents.
The brand, which declared bankruptcy in May, has been working with a real estate advisor to identify leases that are likely to keep driving losses and therefore should be rejected. The plan is to vacate these restaurants before August 31. These units are based in Minnesota, Virginia, New York, Indiana, Illinois, Arizona, Florida, Georgia, Colorado, North Carolina, Arkansas, Ohio, and Missouri.
The move comes after Red Lobster closed 93 locations on May 13. It had approximately 580 restaurants in the U.S. and Canada at the time of bankruptcy. That has since whittled to roughly 530. The additional rejected leases will bring down the footprint even more. Red Lobster had around 650 stores entering 2024.
HOW WE GOT HERE:
Red Lobster to be Sold to Fortress Investment Group
Inside the Fall of Red Lobster
Red Lobster Goes from Endless Shrimp to Bankruptcy
Red Lobster is Shutting Down At Least 50 Restaurants
Report: Red Lobster Has Struggled to Pay Bills on Time
Red Lobster Considers Filing Bankruptcy
Red Lobster Appoints Restructuring Expert Jonathan Tibus as New CEO
After Poor Sales, Red Lobster Minority Owner Plans Exit
The chain secured a deal to be sold to Fortress Investment Group. The private equity firm is using a credit bid to acquire the chain, which means instead of a traditional sale, it will use the debt it’s owed as a form of currency to gain control of Red Lobster’s assets.
Red Lobster determined the 23 restaurants are not necessary for a sale or reorganization and that continued performance of these stores “would constitute an unnecessary drain upon the financial resources of Debtors’ cash”
CEO Jonathan Tibus cited a tough economic environment, increased competition, and strategic missteps, including an Ultimate Endless Shrimp promotion, as contributing factors. The company’s debt, nearly $300 million, includes $264.7 million owed to Fortress and $29.2 million to Wells Fargo. Negotiations for an out-of-court deal to transfer 80 percent ownership to existing lenders, with Thai Union retaining a minority interest, failed. This left Red Lobster with no fresh capital, forcing it to consider bankruptcy.
The brand experienced a 30 percent decline in annual guest count since 2019 and a 60 percent drop in EBITDA over the past year, resulting in a $76 million net loss in fiscal 2023. Cash reserves plummeted from $100 million in May 2023 to less than $30 million six months later, leading to vendor payment delays. Operational missteps, such as making the Ultimate Endless Shrimp a permanent menu item, cost $11 million and created supply issues. High lease obligations and rising labor costs further strained finances.
Tibus, the fifth CEO since 2021, is overseeing the restructuring process.
