Red Lobster expects to come out of Chapter 11 with a substantially slimmed-down restaurant footprint, but will still keep over 500 locations open for business.
The Orlando, Florida-based seafood chain said Thursday it had received U.S. bankruptcy court approval for its reorganization plan and acquisition by RL Investor Holdings, an entity backed by Fortress Investment Group, one of its creditors, along with co-investors TCW Private Credit and Blue Torch. The sale is expected to close before the end of the month, and Red Lobster said it is nearing its exit from bankruptcy.
Red Lobster will continue to operate as an independent company, albeit with less of a brick-and-mortar presence. It said it will have 544 locations across 44 U.S. states and four Canadian provinces. Last year, it was operating about 650 restaurants.
There has been a surge in restaurant Chapter 11 filings and location closings this year. The list includes Rubio's, Buca di Beppo, World of Beer, Roti and Tijuana Flats. In addition. BurgerFi — operator of its namesake chain and Anthony’s Coal Fired Pizza & Wings — has warned it may have to file for bankruptcy or cease operations.
Many of those chains have cited ongoing woes from COVID-19 pandemic closings, consumers cutting back on discretionary spending, as well as soaring costs for labor and other operational expenses, for their financial difficulties.
Red Lobster had another challenge: Its all-you-can-eat "endless shrimp" promotion proved to be a money-losing disaster.
When Red Lobster filed for Chapter 11 in May, it said it had 578 restaurants. A week or so before it went to bankruptcy court, the chain abruptly closed roughly 100 restaurants across the nation.
Damola Adamolekun, a former P.F. Chang's CEO, will become the CEO of Red Lobster once Fortress completes its acquisition of the chain. Jonathan Tibus, who has served as Red Lobster's CEO during the reorganization, will step down and leave the company.
“With our new backers, we have a comprehensive and long-term investment plan — including a commitment of more than $60 million in new funding — that will help to reinvigorate the iconic brand while keeping the best of its history," Adamolekun said in a statement. "Red Lobster has a tremendous future, and I cannot wait to get started on our plan with the company’s more than 30,000 team members across the U.S.A. and Canada.”
Red Lobster's new backers are "resolutely focused on investment and growth," according to Tibus, who also thanked the chain's landlords and vendors for their support.
Red Lobster is still touting itself as "the world's largest and most-loved seafood restaurant company."