Red Lobster Is Likely Going Bankrupt: What to Know

The chain has hopes to restructure mounting debt.

Admiral's Feast lovers better rush to get their favorite meal from Red Lobster, because according to a report from Bloomberg, the seafood restaurant chain will be filing Chapter 11 bankruptcy. The company looks to restructure its debt related to restaurant leases and labor costs. The company began as a single restaurant in Lakeland, Florida in 1968. It's famed cheddar biscuits were introduced in 1992. There are hundreds of locations across the US and Canada, along with international franchises. Some major locations have already closed its doors. 

The King & Spalding firm has been advising the company on the matter as its cash flows have been impacted due to leases, labor costs, and other issues. While a final decision hasn't been made, ongoing discussions on the matter continue. Under a Chapter 11 bankruptcy, Red Lobster could continue its operations as they restructure. 

According to the United States Courts, "a case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a "reorganization" bankruptcy. Usually, the debtor remains "in possession," has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money. A plan of reorganization is proposed, creditors whose rights are affected may vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements."

Thai Union Group Plc took control of the company in 2021. Still, amid its current issues, the company notes the chain's "ongoing financial requirements no longer align with Thai Union's capital allocation priorities." Restaurant Business reported in 2023 that at least eight locations closed that year, most of which were on the Eastern Shore. 

"We regularly review our restaurant portfolios as part of the normal course of business," a Red Lobster spokesperson said in an emailed statement at the time. "As a result, we have concluded that these locations are no longer viable for Red Lobster."

The eight shutdowns included Red Lobsters in Syracuse, N.Y., and Albemarle County, Va., St. Louis, MO, Beachwood, Ohio, San Angelo, Texas, Naples, FL, Daneville, VA, and Oakhurst, N.J. The COVID-19 pandemic impacted dine-in sales tremendously. In 2021, sales rebounded by more than 30% but did not return to their pre-pandemic numbers.