Red Lobster officially entered a Chapter 11 bankruptcy filing on Monday, 20 May.
The beleaguered restaurant chain filed for bankruptcy protection in U.S. Bankruptcy Court in Orlando, Florida, U.S.A., where it is based. Red Lobster said it intends to use the process to drive operational improvements, simplify the business through a reduction in locations, and “pursue a sale of substantially all of its assets as a going concern.”
That sale process is already underway, as Red Lobster has entered into a stalking horse purchase agreement with an entity formed and controlled by its existing term lenders, it said.
Red Lobster closed nearly 100 restaurants in May, but it said remaining restaurants will remain open and operate on normal schedules during the Chapter 11 process.
Red Lobster said it is also investigating Thai Union’s involvement in the failure of its Ultimate Endless Shrimp promotion, which cost the company USD 11 million (EUR 10 million), saying it exerted an “undue influence” on its shrimp purchasing.
Samut Sakhon, Thailand-based Thai Union invested millions into the chain in 2016 and then was part of a consortium that acquired it outright in 2020, aiming to find synergies on supply and marketing.
Red Lobster CEO Jonathan Tibus wrote in court documents the Endless Shrimp offer was originally intended to be a limited-time promotion. However, in May 2023, Paul Kenny, Red Lobster’s CEO at the time, made the decision to add the promotion to the chain’s menus permanently, priced at USD 20.00 (EUR 18.41), “despite significant pushback from other members of the company’s management team,” Tibus said.
“This decision created both operational and financial issues for the debtors … saddling the company with burdensome supply obligations, particularly with its equity sponsor: Thai Union,” Tibus said.
Red Lobster is investigating the circumstances around these decisions, including whether Kenny’s decision-making process circumvented the company’s normal supply chain and demand planning processes.
Red Lobster’s supply process was strained by virtue of its relationship with Thai Union, according to Tibus. In addition to being the company’s equity sponsor and 100 percent owner of Red Lobster Master Holdings GP, Thai Union is a primary supplier of seafood to Red Lobster.
At the direction of Thai Union, Kenny became acting interim CEO following the resignation of then-CEO Delli Valade in April 2022.
Thai Union exerted “outsized influence on the company’s shrimp purchasing,” including Kenny’s April 2023 purported direction to Thai Union to continue producing shrimp for Red Lobster that “did not flow through the traditional supply process or bid cycle or adhere to the company’s demand projections,” Tibus said.
Additionally, in “apparent coordination with Thai Union and under the guise of a ‘quality review,’ Kenny made a series of decisions that eliminated two of the company’s breaded shrimp suppliers, leaving Thai Union with an exclusive deal that led to higher costs to Red Lobster,” Tibus said.
Red Lobster is also investigating whether Thai Union and Kenny encouraged ...
