One of America’s most iconic restaurant chains has declared bankruptcy and closed dozens of stores, fueling concerns that the chain might be set to close for good.
More Bankruptcies Role In
It feels like US brands are filing for bankruptcy left and right, particularly in the retail sector. But now it appears that restaurants are being hit hard too, as iconic restaurant chain Red Lobster files for bankruptcy.
Red Lobster Files Chapter 11
On Sunday the fast-casual dining chain, which has been in operation since 1968, declared that it would officially file for Chapter 11 bankruptcy after closing almost 100 Red Lobster locations across the country.
Fans Are Concerned
Fans of the restaurant were up in arms across the internet, fearing that this was finally a signal of the end of their favorite seafood restaurant, after years of financial struggle and flagging sales for the chain.
Not Done Yet
Despite mass closures and Chapter 11 filing, the company has stressed that it will not be shutting down its operations.
A Misunderstood Word
On Tuesday, two days after their first announcement, the company released an official public statement via social media in an effort to reassure loyal customers. “Bankruptcy is a word that is often misunderstood,” the statement reads.
“We Are Not Going Out of Business”
“Filing for bankruptcy does not mean we are going out of business. In fact, it means just the opposite,” it continued. “It is a legal process that allows us to make changes to our business and our cost structure so that Red Lobster can continue as a stronger company going forward.”
Protecting Their Future
The statement acknowledged previous store closures and compared it to other companies, such as Hertz and Delta, who had to close outlets in order to “protect their futures.”
99 Stores Now Closed
It’s no surprise that Red Lobster customers are worried. As of Wednesday morning, the chain has declared the closures of 99 stores across the country.
Temporary or Permanent?
Though their official website labels the stores as “temporarily closed” it seems unlikely as several outlets have already begun liquidating sites by selling equipment at auction.
Liquidation Confirmed
TAGeX Brands, the liquidator for the company, has confirmed that it has begun fully auctioning equipment from 48 locations. Auction winners will receive the “entire contents of the Red Lobster location they bid on” according to the website.
Potential 20% Reduction
If the store closures become permanent it will be a staggering blow to Red Lobster. With 551 locations across 44 states, it would point to almost a 20% reduction in size for the company’s US presence.
Years of Struggle
Closures and bankruptcy have come as a shock for some, but industry followers say they have been a long time coming for Red Lobster. The chain has been struggling for years, with the most significant decline in sales coming in the last year.
A Botched Promotion
This was in large part due to a botched promotion that cost the chain millions. In 2023 Red Lobster opted to bring back a $20 all-you-can-eat shrimp promotion. It backfired spectacularly.
Costumers Take Advantage
Stories came out from staff members across the country, who claim customers would eat hundreds of fried shrimps and scampi, ordering dozens of rounds of the normally expensive seafood.
Tip of the Iceberg
Even these factors were just the tip of the iceberg for the company, which has struggled to afford rent on their stores, and has had high executive turnover, as well as less than successful takeovers from other companies.
30% Decline in Foot Traffic
In the 124-page document detailing the Chapter 11 filing, Red Lobster CEO Jonathan Tibus also pointed to a 30% decline in foot traffic since 2019.
Deteriorating Company
Tibus, who was formerly the chief revenue officer for the company, wrote that it “was immediately clear that Red Lobster’s performance was deteriorating and had been doing so for several years.”
Only Marginal Improvements
“Red Lobster’s annual guest count has declined by approximately 30% since 2019 and has only marginally improved from pandemic levels seen during 2020 and 2021,” he continued.
Several Other Factors
He also pointed to “financial and operational challenges, including a difficult macroeconomic environment” as well as increased competition and an outstanding company debt of $294 million.
Will It Survive?
With so many troubles threatening the company, it’s unclear if the iconic seafood chain will make it back on top.
Will Customer Support Be Enough?
While Red Lobster pointed to other companies in their statement that overcame their troubles and had customers who “stood with them and rooted them on,” it’s unclear if customer support will be enough to keep the chain afloat.
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The post Red Lobster Now Vows to Continue Service Despite Bankruptcy Filing first appeared on Liberty & Wealth.
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For transparency, this content was partly developed with AI assistance and carefully curated by an experienced editor to be informative and ensure accuracy.
