Nostalgic seafood restaurant chain emerges from Chapter 11 bankruptcy

The American delicacy of endless shrimp and cheddar crackers will not be banished after all.

Tears were streaming down Americans’ faces after a nostalgic seafood restaurant faced multiple closures while drowning in unpaid bills.

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For over five and a half decades, this restaurant has been creating memories and blessing American families with an affordable yet comfortable dining experience.

But the industry has seen a decline in recent years.

According to a study by Black Box Intelligence, same-store traffic for casual dining restaurants is down 4.7 percent this year through mid-August compared to the same period last year.

Image source: Shutterstock.

Seafood chain files for Chapter 11 protection

The seafood restaurant chain filed for bankruptcy protection in May with nearly $300 million in total debt.

Unfortunately, the restaurant wasn’t the only one to suffer this fate, with nine other top US chains going bankrupt this year.

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In the restaurant’s announcement of the filing, the chain said it would remain open and continue to operate during the Chapter 11 process.

The company also disclosed that it has received a $100 million Debtor in Possession (DIP) financing commitment from its existing lenders to ensure smooth running.

“It allows us to address more financial and operational challenges and become stronger and re-focused on our growth. The support we have received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests,” said Jonathan Tibus, the company’s CEO.

Endless shrimp business that has come to an end

Due to cautious spending by customers amid a struggling economy, the seafood restaurant faced a sharp drop in foot traffic, prompting the company to develop an out-of-control business that helped hasten its demise.

The restaurant started offering $20 worth of shrimp to get more loyal customers and hopefully increase daily traffic.

However, the low price did not match the desired result, as it contributed to a quarterly loss of $11 million last November.

The deal was too good to be true and it was destined to fail. Massive quantities of premium seafood were served at a price so low that even the increase in traffic could not repay it.

Since 2015, restaurant prices have increased by 11% due to today’s inflation, making it nearly impossible to keep food prices low if you want to turn a profit.

The restaurant comes out of chapter 11

On Thursday, Red Lobster announced it had received court approval for its restructuring plan to effectively exit Chapter 11.

Under the plan, investment group RL Investor Holdings LLC will acquire Red Lobster by the end of this month.

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However, this is not the only big change for the company; there will also be a leadership transition where current Red Lobster CEO Jonathan Tibus will be replaced by former PF Chang CEO Damola Adamolekun.

“With our new backers, we have a comprehensive, long-term investment plan – including a commitment of more than $60 million in new funding – that will help reinvigorate the iconic brand while preserving the best of its history. Red Lobster has a great future and I can’t wait to get started on our plan,” said Adamolekun.

Loyal customers react

Americans saw the sad news coming as the restaurant slowly began reducing its footprint to 544 locations.

Although devastated, many Red Lobster fans took to social media to express their feelings about the bankruptcy filing, making light of the situation.

A user on X ( (TWTR) ) posted: “Only in America could we eat bankrupt Red Lobster.”

Another posted: “Red Lobster is considering a Chapter 11 bankruptcy filing. I guess you could say the company is in hot water.”

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