Red Lobster, the well-known seafood restaurant chain famous for its cheesy biscuits, is thinking about filing for Chapter 11 bankruptcy to help deal with its debt problems, according to a report from the New York Post.
People close to the situation say the company has been working with the law firm King & Spalding to look at ways to restructure its finances.
By filing for bankruptcy, Red Lobster would have a chance to rework its leases and get out of some long-term contracts that are costing the company too much money.
Insiders say the chain has been struggling with high lease costs and increasing labor expenses, which have put a strain on its cash flow.
Red Lobster started with just one restaurant in Lakeland, Florida back in 1968. Since then, it has grown to have hundreds of locations in the United States and Canada, as well as some international franchises.
The company’s cheese biscuits, which were first offered in 1992, have become a fan favorite.
In recent years, Red Lobster has gone through several changes in ownership and management.
🚨Report: Red Lobster is considering filling for Chapter 11 Bankruptcy in order to deal with Leases and Labor Costs. pic.twitter.com/ZX0pdlj61l
— The Calvin Coolidge Project (@TheCalvinCooli1) April 16, 2024
Thai Union Group Plc, which took over the company in 2021, recently wrote down the value of its stake in Red Lobster.
Thai Union said that the restaurant chain’s “ongoing financial requirements no longer align with Thai Union’s capital allocation priorities.”
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Fortress Investment Group, one of Red Lobster’s main lenders, is involved in the current talks about the company’s debt.
This shows just how complicated the financial situation is for the seafood chain.
Golden Gate Capital bought Red Lobster from Darden Restaurants in a leveraged buyout in 2014.
Thai Union initially owned 25% of the chain before buying Golden Gate’s share in 2021.
As discussions continue about whether Red Lobster will file for bankruptcy, no final decision has been made yet.
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The company’s stakeholders are carefully considering their options to figure out the best way forward for the popular seafood restaurant chain.
