After months of closing dozens of restaurants and making headlines in regards to the “endless shrimp” problem, Red Lobster is on the verge of exiting Chapter 11 bankruptcy proceedings.
A U.S. bankruptcy judge on Thursday approved the seafood restaurant chain’s restructuring plan and sale to a lender group led by asset manager Fortress. The green light comes lower than 4 months after Red Lobster filed for bankruptcy to hunt a sale after years of mounting losses, dwindling customer numbers and struggling to maintain up with competitors.
When it filed for bankruptcy in May, Red Lobster management shared plans to “simplify” the business by reducing the variety of locations. The Orlando, Florida-based chain has closed dozens of its North American restaurants in recent months – each before and through the bankruptcy proceedings. These include greater than 50 locations whose equipment was auctioned off just days before the Chapter 11 bankruptcy filing, followed by dozens more closures throughout the bankruptcy process.
Red Lobster said Thursday it expects to operate about 544 stores within the U.S. and Canada after bankruptcy, down from the 578 it reported in May.
Under the terms of the acquisition, which is anticipated to shut in late September, the chain will proceed to operate as an independent company.
The chain can even get a brand new CEO – Damola Adamolekun, the previous managing director of PF Chang’s.
Adamolekun was appointed by Fortress last week to move RL Investor Holdings, the newly formed company acquiring Red Lobster. In an announcement Thursday, Adamolekun said Red Lobster has “a great future” and thanked Jonathan Tibus, who will leave the corporate and step down as CEO, for his leadership through the bankruptcy proceedings.
Red Lobster’s buyer can be providing additional funds to assist the Orlando, Florida-based chain get back on its feet after the crisis. Adamolekun said the corporate’s long-term investment plan features a commitment of greater than $60 million in latest funds.
Red Lobster has passed through several ownership changes over its 56-year history. The chain was founded in 1968 by Bill Darden, who sold Red Lobster to General Mills in 1970. General Mills later created Darden Restaurants, which owns Olive Garden and other chains. Darden Restaurants was spun off from General Mills in 1995.
Darden Restaurants sold Red Lobster to a non-public equity firm in 2014. Thai Union Groupconsidered one of the world’s largest seafood suppliers, invested in Red Lobster in 2016 and increased its stake in 2020 – but announced its intention to exit its minority stake earlier this yr.
When CEO Thiraphong Chansiri announced his divestment plans in January, he said the COVID-19 pandemic, industry headwinds and rising operating costs at Red Lobster had resulted in “sustained negative financial contributions to Thai Union and its shareholders.” For the primary nine months of 2023, the corporate reported a $19 million loss at Red Lobster.
Although this was not the one reason, the infinite shrimp was considered one of the sources of losses. Last yr, Red Lobster significantly expanded its iconic all-you-can-eat offering. But customer demand exceeded the chain’s capabilities. Thai Union management later noted that the $20 price tag didn’t usher in enough money.
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