Red Lobster has filed for Chapter 11 bankruptcy protection days after shuttering dozens of restaurants.
The US seafood restaurant chain has been struggling for some time with lease and labor costs piling up in recent years and also promotions such as its signature all-you-can-eat shrimp deal.
Customer demand overwhelmed what the chain could afford, which also reportedly contributed to the millions in losses.
Red Lobster said in a court filing that it had more than 100,000 creditors and estimated assets between $1bn and $10bn. The company’s estimated liabilities are between $1bn and $10bn.
The document is signed by the CEO, Jonathan Tibus, a corporate restructuring specialist who took the top post at Red Lobster in March.
Last week Restaurant liquidator TAGeX Brands announced that it would be auctioning off the equipment of over 50 Red Lobster locations that were recently closed as part of the seafood chain’s “footprint rationalization”.
The locations span more than 20 states – cutting back on Red Lobster’s presence in cities like Denver, San Antonio, Indianapolis and Sacramento, California.
The Orlando, Florida-based chain was founded by Bill Darden, who wanted to make seafood restaurants more accessible and affordable for families. Darden sold Red Lobster to General Mills in 1970. General Mills later went on to form Darden Restaurants, which owns Olive Garden and other chains, and spun the company off in 1995.
In recent years, Red Lobster has been struggling with increasing competition from fast casual chains such as Chipotle as well as rising lease and labor costs. Its all-you-can-eat deals for shrimp and lobster also became increasingly expensive.
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Last fall, Red Lobster lost millions of dollars on its Ultimate Endless Shrimp promotion, which charged $20 for an all-you-can-eat shrimp deal.
“We knew the price was cheap, but the idea was to bring more traffic in the restaurants,” Ludovic Garnier, the chief financial officer of Thai Union Group, Red Lobster‘s former co-owner, said in an earnings call with investors.
