Will Red Lobster be lost at sea forever?

“Red Lobster near me” has been a popular search term over the last couple weeks. Whether you lived in Manhattan or a Midwestern suburb, it seemed there’d always be a Red Lobster close by — a place where anybody from middle-class families to Jay-Z and Beyoncé could gorge on Cheddar Bay Biscuits.

Not anymore. Dozens of locations closed last week. This week, the chain filed for bankruptcy.

But that’s hardly the end of this fish story. What really led to Red Lobster’s downfall? And can it recover?

An endless headache

Many analysts (and internet cognoscenti) have pointed to Red Lobster’s endless shrimp giveaway as a fatal blow, and the chain did lose $11m on the promotion last year.

But, as Eater and CNN recount, the chain’s struggles likely have more to do with unstable leadership over the last decade.

• Founded by Bill Darden in 1968, Red Lobster was purchased by General Mills in 1970, spun off into the company Darden Restaurants in 1995, and sold to private equity firm Golden Gate Capital in 2014 after falling in popularity.
• As often happens under private equity, Red Lobster sold off its real estate — i.e., physical restaurant locations — then leased it back, saddling the chain with expensive rental payments.

Seafood producer Thai Union took control in 2020. Since 2021, Red Lobster has been run by five CEOs.

Red Lobster has also faced the same problems as many restaurants: declining sales since covid and inflationary pressures. It claimed to have $1B-$10B in liabilities in its bankruptcy filing.

The problems were endless — not just the shrimp.

In need of a better captain

Few restaurants find their way back to land after bankruptcy, but there are some success stories.

• Friendly’s, another private equity casualty, was purchased from bankruptcy by a restaurant franchising company that has overhauled its decor and introduced modern menu items, albeit with much fewer locations.
• Sbarro filed for bankruptcy in 2011 and 2014 but has rebounded over the last few years by emphasizing quality ingredients and introducing third-party delivery.

Bottom line: Red Lobster will need a trustworthy captain to navigate its vessel out of bankruptcy. And it might shed more locations and adjust its dine-in-centric format no matter what.

The entire lobster industry will be waiting anxiously — per the chain’s bankruptcy filing, it buys 20% of all North American lobster tails.

Meanwhile: If the Red Lobster near you was one of the dozens that shuttered, you can at least still buy Cheddar Bay Biscuit mix at grocery stores.