Red Lobster, the popular seafood chain, filed for Chapter 11 bankruptcy protection on Monday after weeks of speculation about its financial future. It is now seeking relief from mounting debt, according to a court filing.
In the filing, Red Lobster said it has less than $30 million in cash on hand and estimated its assets and liabilities between $1 billion and $10 billion. Filing for Chapter 11 bankruptcy allows companies to restructure their debt.
The bankruptcy filing comes on the heels of the closure of nearly 50 Red Lobster restaurants across the nation. The closings affected restaurants in 21 states from California to New York.
Massachusetts does not have any Red Lobster restaurants. The seafood chain used to operate locations in Springfield and Dartmouth, but both have been closed for several years. The nearest establishments are now located in Wethersfield and North Haven, Connecticut.
The company’s CEO, Jonathan Tibus, said the proposed restructuring under Chapter 11 is the “best path forward” for Red Lobster.
“[Chapter 11 bankruptcy] allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth,” he said in a statement. “The support we’ve 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.”
In the statement, Red Lobster said it had entered into a “stalking horse” agreement where it will sell its business to an entity “formed and controlled” by its lenders. The company is working with vendors to ensure its operations are not interrupted, it said.
Red Lobster has seen its annual guest count decrease by 30% since 2019, the company said. Additionally, its net sales have begun to show “material decline” over the past year, and it lost $76 million in Fiscal Year 2023.
Late last year, CNN reported that Red Lobster’s “endless shrimp” deal, which allowed customers to pay just $20 for an unlimited amount of shrimp, was the key reason for its $11 million loss in the third quarter of 2023.
Red Lobster restaurants will remain open during bankruptcy, according to the statement.
