Was Red Lobster The Cause of Its Own Downfall?

Once a sought-after seafood eatery because of its affordable seafood, the American restaurant Red Lobster faced enormous challenges. But were the challenges of its own making? 

Once Upon a Lobster

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The renowned Red Lobster restaurant opened its doors in 1968 in Florida. The founder, William Bristor Darden, was a successful businessman who is said to have opened his first restaurant, “The Green Frog,” at only age 19.

Going Against the Former Law

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Darden was popular and liberal in many ways. Some people described him as “tough and personable” and as someone who positively touched many people’s lives. He was also known as a business owner who never segregated his customers despite the law.

Red Lobster Before Fame

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Red Lobster was very popular amongst the black community because of the founder’s liberal stance. Popular personalities like Nikki Minaj and Chris Rock worked at the company before they became famous.

More Stakeholders

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In later years, after a business deal between Darden and General Mills, Darden became an important executive of General Mills, and General Mills bought into The Red Lobster Franchise.

Booming Business

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At the end of the 1970s, there were over 705 restaurant branches across the United States and later through Canada and the rest of the world. These expanding branches happened quickly after General Mills, now the parent company, joined.

On Shakey Ground

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2008 Marked some of the first periods that Red Lobster started to show signs of struggling. In an attempt to rescue the company, the parent company left Red Lobster without injecting the funds needed to lift it. The parent company wanted to focus on more profitable stores like Olive Garden.

Golden Gate Capital Joining the Crew

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In 2014, the Darden restaurant group sold The Red Lobster to Golden Gate Capital, a private equity company, for $2.1 billion in an effort to save the restaurant.

More Harmful Deals

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Golden Gate Capital then funded part of the purchase of Red Lobster by selling the Red Lobster properties to a real estate company called American Reality Capital Properties. In this way, Red Lobster would have to pay monthly rentals to operate in their former properties.

Selling Off Some More

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In 2016, Golden Gate Capital sold 25% off Red Lobster to Thai Union, one of Thailand’s largest manufacturers of seafood-based consumables.

The Balance Sold

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In 2020, Thai Union gained almost 50% of Red Lobster as Golden Gate Capital sold more shares. Thai Union would let the company continue without making drastic changes in management and operations. The talking points in a CNN report noted that the Thai Union said, “We intend to maintain all relationships with current seafood suppliers.”

Thai Union Forcing Changes

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By 2023, while deeper under the leadership of Thai Union, more and more long-standing managers and vital staff members were losing their jobs.

Careless Choices by Former CEO

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Paul Kenny was appointed acting CEO, while Thai Union took over as many operations and management processes as possible.

Cutting Workers

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Red Lobster wait staff were also cut in favor of having fewer servers tend to more tables. The new rules included one server to manage 10 tables. The new server process was unlike before when each waiter had three tables to tend to provide a more refined customer experience. A former Red Lobster employee said that “it was miserable working there” and he was fired after 20 years of service to the company.

Enforced Changes Taking a Toll on Staff

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The changes, in addition to waiters going from managing three tables at a time to having to do 10 at a time included axing the hostess. Some former staff described it as a toxic workplace and taxing on the waiters and kitchen staff.

Losing Millions

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In 2023, the company decided to offer the notorious “endless shrimp” deal as a promotion, but it became a menu staple. Customers flocked in for the deal, which cost only $20. However, while this decision might have been suitable for Thai Union, which supplied the shrimp, it wasn’t good for Red Lobster.

Customers Flocking in For Shrimp on the Cheap

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Because Red Lobster offered such affordable seafood and “endless shrimp deals,” the company’s earning potential was damaged. In essence, keeping up with shrimp demand at the low resale price was becoming harder.

Customers Become Miserable

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“Endless shrimp” caused dining customers to occupy tables for longer and left potential customers waiting long before a table became available. Service was slow as cooks were also axed, and there were fewer waiters on shifts to run all the tables. Fewer customers supported Red Lobster for the inconvenience it quickly spiraled into.

New CEO Appointed

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Johnathan Tibus succeeded Red Lobster’s former CEO, Paul Kenny, who implemented the “endless shrimp” deal as a permanent menu option.

Renting Causing More Expenses

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Having to rent was costing the company. According to Red Lobster’s CEO Johnathan Tibus, who was assigned to “save” the company, branches that were not making turnover spent $64 million on rent. That was just a portion of the $190 million the company spent that same year.

Filing For Bankruptcy Might Save The Company

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When the company filed for bankruptcy, some of the expenses showed that it owed an estimated $1 billion to $10 billion.

Thai Union Abandoning Red Lobster

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Thai Union is reportedly saying that it will “leave Red Lobster” after mismanagement has already cost the company an estimated $5 million in losses. Thai  Union’s CEO Thiraphong Chansiri said “Red Lobster is done and overwith.” He also said he would never eat lobster again after divesting from the company.

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The postWas Red Lobster The Cause of Its Own Downfall? first appeared on Liberty & Wealth.

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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.

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