Red Lobster considering Chapter 11 bankruptcy after blaming $11 MILLION loss on its 'endless shrimp' promotion

Struggling restaurant chain Red Lobster is considering filing for bankruptcy as high costs and low sales ground the business.

The brand is reportedly eyeing up a possible Chapter 11 filing to restructure its debt, allowing it to discard long-term contracts and renegotiate new leases.

Red Lobster's cash flows have been hit by expensive leases and high labor costs.

It comes after the company last year reported record losses of $11 million, which its CFO partly blamed on its unlimited shrimp deal.

The chain, which started as a single restaurant in Lakeland, Florida, in 1968 has around 650 locations across almost all states. It's famous for its cheese-flavored biscuits.

Red Lobster is considering filing for bankruptcy as high costs and low sales ground the business

News of the bankruptcy was first reported by Bloomberg, which said the restaurant chain is taking advice from the law firm King & Spalding.

Those familiar with the matter told the outlet the decision was yet to be finalized, but that bankruptcy would allow the company to continue operating.

Red Lobster's famous shrimp promotion came as it wanted to lure in more customers after significant losses of $5.4 million in the second quarter of 2023.

But those plans backfired since the 'all you can eat' promotion was too generous.

For just $20, diners could indulge in as much of the shellfish as they could stomach.

The 'Endless Shrimp' offer was initially a special but in June it claimed a permanent spot on the Red Lobster menu. Foot traffic reportedly increased by 4 percent as a result.

More people were ordering the Endless Shrimp than the company anticipated - likely because the deal went viral on social media platforms like TikTok, where people showed off how much they ate to get their money's worth.

'For those who have been in the US recently, $20 was very cheap. And the rationale for this promotion was to say we knew the price was cheap, but the idea was to bring more traffic in the restaurants,' said CFO Ludovic Garnier in November.

For just $20, diners could indulge in as much of the shellfish as they could stomach, but the price was later bumped to $25 

While the promotion increased traffic to the restaurants the deal was not profitable 

'But something which was different from our expectation is the proportion of the people selecting these promotions was much higher compared to expectation,' he added.

Eventually, the company bumped the price of their Endless Shrimp up to $25 in a bid to reclaim some of the losses.

Red Lobster has had multiple owners in recent years. It was previously owned by the Darden restaurant group, which also owned Olive Garden, but was taken over by Golden Gate Capital in 2014.

In 2020 it was purchased by Thai Union, which this year said its 'ongoing financial requirements no longer align with Thai Union's capital allocation priorities.'