The EVIL Reason Behind Red Lobster's Bankruptcy (It's NOT Endless Shrimp!)

Red Lobster was bankrupted by something much more sinister and disastrous than 'Endless Shrimp' like everyone claims.

Red Lobster was founded in 1968 by Bill Darden. In 2014, Darden sold it to Golden Gate Capital for $2.1 billion. Thai Union bought a minority stake in 2016 and later took full control in 2020. This marked the beginning of events that ultimately ruined the restaurant chain.

One key mistake was the "Endless Shrimp" promotion. Many businesses have loss leaders—items offered at low prices to draw in customers, like Costco’s hot dog combo. However, Red Lobster’s $20 all-you-can-eat shrimp deal backfired. Customers would eat 60-70 shrimp in one sitting, leading to significant losses. The promotion cost the company $11 million, and despite warnings that the price was too low, Red Lobster made this a permanent menu item in June 2023, further exacerbating losses.

However, this wasn’t the sole cause of bankruptcy. The company’s real estate portfolio became a significant issue. When Darden sold Red Lobster in 2014, a $1.5 billion sale-leaseback agreement was part of the deal. Red Lobster no longer owned its locations and had to pay rent, increasing costs over time. Owning real estate can make or break a chain, and Red Lobster’s inability to control this asset hurt it financially.

By 2020, Thai Union owned 49% of Red Lobster and promised not to interfere in operations. Yet, in 2022, Thai Union executives began managing the restaurant chain, leading to significant turnover. Dozens of veteran employees with deep experience left or were fired, and the company saw five different CEOs in five years. This created instability and chaos.

One of the most damaging executives was Paul Kenny, an Australian-born former CEO of Minor Food. Under his leadership, key personnel were fired, and inexperienced Thai Union managers were appointed. Operational changes, such as charging for side salads and removing shrimp tails in pasta, upset customers. Kenny also made offensive remarks about employees, further harming morale.

Additionally, under Kenny’s leadership, Red Lobster cut ties with longtime shrimp suppliers to buy more expensive shrimp from Thai Union, increasing costs. Thai Union executives also interfered with supply chain and finance decisions, putting pressure on Red Lobster to purchase more seafood from their own company. Shrimp dishes dominated the menu, alienating customers.
By January 2024, after years of mismanagement, Red Lobster couldn’t sustain its losses. Thai Union announced a $530 million loss on its investment and began divesting from the chain. The company soon filed for bankruptcy, blaming the pandemic, rising costs, and higher interest rates.

Red Lobster’s decline was accelerated by Thai Union’s poor management, overpriced supplies, and staffing cuts. The restaurant chain’s beloved status could not save it from financial ruin caused by years of bad decisions.