According to recent news reports, the Red Lobster network of seafood restaurants is reportedly filing for Chapter 11 bankruptcy.
A company may keep operating under Chapter 11 as it restructures to handle costs like debt impacting profitability.
Red Lobster is reportedly collaborating with the legal firm of King & Spalding with the intention of renegotiating some leases and exiting certain long-term contracts. They have also been struggling with labor expenses.
The chain’s principal owner is Thai Union Group PLC. On its website in January, Thai Union declared that it was withdrawing its stake from Red Lobster.
According to Thai Union Group CEO Thiraphong Chansiri, Red Lobster has had a negative effect on Thai Union and its stockholders due to a mix of factors such as the COVID-19 epidemic, ongoing industry challenges, increased interest rates, and rising material and labor expenses.
Red Lobster’s losses in 2023 resulted in a share loss of $19 million.
In its earnings report for the fourth quarter of 2023, the business will take a once-only non-cash impairment charge of $530 million for its investment.
Chansiri claimed in February that Red Lobster is done for. He said that they are only anticipating the deal’s completion and do not anticipate obtaining any substantial benefit.
According to Restaurant Business, the earnings were also affected by an all-you-can-eat shrimp promotion. Ultimate Endless Shrimp was added to the Red Lobster daily menu in June 2023. The consumer could select two varieties of shrimp and consume as much as they like for $20. Red Lobster recorded an operational loss of almost $11 million in the third quarter.
In California, ongoing skyrocketing minimum wage rates made labor costs a huge issue for the restaurant sector.
Starting on April 1, fast food employees in California who work for chains with 60 or more sites were required to be paid twenty dollars per hour. A $16 per hour minimum wage applies to other businesses.
What started as a small, family-run eatery in Lakeland, Florida, grew to more than 700 sites worldwide.
