National Casual Dining Chain Files For Bankruptcy, Restaurants Remain Open

Red Lobster filed for voluntary Chapter 11 bankruptcy in Florida, but plans to remain open through a reduction in locations, the restaurant chain confirmed in a press release shared late Sunday (May 19) night.

"Red Lobster Management LLC, along with its direct and indirect operating subsidiaries ("Red Lobster" or "the Company"), owner and operator of the Red Lobster® restaurant chain, today announced that the Company has voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida," the press release states. "The Company intends to use the proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern. As part of these filings, Red Lobster has entered into a stalking horse purchase agreement pursuant to which Red Lobster will sell its business to an entity formed and controlled by its existing term lenders."

The bankruptcy petition lists Red Lobster's estimated business assets to be valued between $1 billion and $10 billion. The popular chain had previously announced plans to close 99 locations nationwide, but stressed that remaining restaurants would stay open through the bankruptcy process as it intended to continue "working with vendors to ensure that operations are unaffected."

"This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth," Red Lobster CEO Jonathan Tibus said in a statement shared in the press release.

Red Lobster was founded in 1968 and had grown to nearly 700 nationwide locations as of 2019, but has seen a significant dip since the COVID-19 pandemic, with sales falling 13% on net between 2019 and 2023. The privately held company struggled with debt load issues, as well as payments to vendors during that span, which all coincided with several executive turnover decisions and failed initiatives including all-you-can-eat shrimp leading to major financial losses.

Red Lobster has also seen multiple ownership changes during the past five years, which included seafood conglomerate Thai Union taking over a controlling stake before announcing its intention to sell in January.