Red Lobster is reportedly considering filing for Chapter 11 bankruptcy.
A Bloomberg report on April 17 said that people with knowledge of the matter said the company is mulling the decision as it searches for ways to deal with debt.
The seafood restaurant chain has allegedly been getting advice from law firm King & Spalding, according to the article.
A Chapter 11 bankruptcy does not mean the chain would close down. According to Investopedia, it allows a business to “restructure its obligations.”
The Epoch Times reached out to Red Lobster but did not hear back by publication time.
However, the news comes after the company’s strategic partner, Thai Union Group PCL, announced it was looking to get out of its investment in Red Lobster.
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Thai Union Group has been a minority investor in the restaurant chain since 2016, according to a news release.
“The combination of COVID-19 pandemic, sustained industry headwinds, higher interest rates, and rising material and labor costs have impacted Red Lobster, resulting in prolonged negative financial contributions to Thai Union and its shareholders,” said Thiraphong Chansiri, Thai Union Group’s CEO.
He said his company believes that Red Lobster’s financial requirements “no longer align” with Thai Union’s priorities.
In the first nine months of 2023, Thai Union lost US$19 million from its Red Lobsters investment, the release said.
One of the reasons for the loss could be the all-you-can-eat-shrimp deal that Red Lobster put on its menu to attract more customers. Traffic at the restaurants was up 4 percent year over year, but allowing diners to eat all they wanted for $20 cost the company $11 million in the third quarter of 2023, according to Restaurant Business Online.
In September 2023, the company announced that Horace Dawson would be taking on the role of chief executive officer. He has been with the company since 2014 in various positions, including executive vice president and general counsel.
At the time, Mr. Dawson acknowledged the challenges ahead of him.
“I am looking forward to working with my teams to address the challenges we face in light of industry headwinds and to execute on our plans and deliver results,” he said in a news release.
The first Red Lobster location was opened in Florida in 1968, with the first Canadian restaurant opening in Ontario in 1983, according to the company website. It now boasts over 700 locations around the world.
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