♪ Red lobster for the seafood lover in you ♪
- [Narrator] In the 80s and 90s,
America was that seafood lover.
Known for its ever evolving deals.
- [Announcer] 22 delicious new creations.
- [Narrator] In 2000, Red Lobster was 16th out
of the 500 biggest casual dining chains.
But by 2023, cracks formed in the company's shell.
Tens of millions of dollars in losses are piling up.
Investors are losing their appetites.
(speaking foreign language) (audience laughs)
- [Narrator] And now the company
is in distress and up for sale.
So what went wrong?
Red Lobster was founded by Bill Darden in 1968,
with a single seafood restaurant in Lakeland, Florida.
- He was really the inventor of casual dining.
So casual dining was meant to be,
you know, an affordable meal,
but a nice meal, like nicer than fast food,
something you could take a date.
Red Lobster was really an innovator there.
- [Announcer] Just two years later,
Darden sold all of his restaurants to General Mills,
the cereal brand, its goal to expand
Red Lobster's locations and menu.
- What makes red lobster so popular?
- Over 30 delicious seafood reasons
right on the Red Lobster menu.
- [Narrator] By 1984, it had 365 restaurants,
and by 1997, it had more than doubled those.
- After all that growth, you know,
largely in the 70s and the 80s,
by the 1990s and 2000s, Red Lobster was the biggest
casual dining seafood chain in the country.
- [Narrator] In 2004, the company debuted
what would become a customer favorite.
It's limited time only endless shrimp deal.
(upbeat music)
- [Announcer 2] Don't miss the only time of year
to enjoy all the shrimp you can eat.
- [Narrator] But Red Lobster faced a problem.
Seafood is expensive.
Just look at this chart.
Shrimp prices began to spike in 2013.
That year Red Lobster's revenue plummeted in comparison
to another Darden brand, Olive Garden.
The next year, Darden sold Red Lobster
for $2.1 billion to a private equity firm.
As part of the deal, all of Red Lobster's real estate,
which it had acquired since the late 1960s, was sold
and leased back to the company to fund the total price.
- Restaurant leasebacks can be kinda common
in restaurants as something other chains do.
The positive is you get a whole chunk
of capital way up front.
The negative is there can be consequences down the chain.
- [Narrator] In 2020, a group, including Red Lobster's
longtime seafood supplier, Thai Union Group,
took majority ownership.
- Thai Union thought that they were turning things around.
Again, they had sent some executives to Red Lobster.
They were hoping just to, you know, increase the profile
of Red Lobster and get people going there,
and make it a valuable part of their company
and not just a drain.
- [Narrator] But in the years that followed,
Red Lobster, like many casual dining restaurants
was hit by broader economic factors.
Widespread labor shortages from the pandemic
and higher inflation drove up the cost of labor
eating into profits.
- It was much more expensive
to get these restaurant employees,
and that means their cost ballooned.
- [Narrator] And interest rates rose,
which drove up the price of its leases.
- You're not in control of your destiny in the same way
as you are when you own all the restaurants.
You know there's a chance that you're
gonna have to amend your terms.
You know the prices can fluctuate
and suddenly you're paying a lot more
for your real estate than you did.
- [Narrator] To combat these losses,
Red Lobster needed a hit.
In June 2023, the company took a big swing.
- [Announcer 2] Ultimate endless shrimp is here
with a limited time flavor drop.
- [Narrator] The dragon shrimp flavor drop was limited time,
but endless shrimp at a low price was now a year round deal.
- [Announcer 2] For just $20 right now, only at Red Lobster.
- [Narrator] It was supposed to be a loss leader,
which means the deal itself wasn't profitable,
but it would increase foot traffic at a time when diners
were choosing to order in.
Execs were optimistic.
(speaking foreign language)
- [Narrator] And it seemed to work.
The endless shrimp deal brought in 4% more foot traffic
for the third quarter, a significant increase,
but then it started working too well.
- My goal is to eat 65 shrimps tonight.
- 25 shrimps tonight.
- Eat 45 shrimps tonight.
- [Heather] People were very conscious of it.
- There we go.
- The brand made sure that they marketed it both
in traditional channels and online,
and it got some buzz, but maybe a bit too much buzz.
- [Narrator] The endless shrimp deal was much
more popular than Red Lobster expected.
This price was at the heart of the issue.
- On this promotion, we don't earn a lot of money at $20.
We don't, okay, and this is one of the key reason for
the losses we generated in in Q3 2023.
- [Narrator] For the third quarter,
the company reported an $11 million operating loss.
- They'd had something like a $2 million loss
the quarter before, but 11 million to have
that in the quarter following.
I mean, that's just a huge leap.
- [Narrator] And sales in 2023 were down 8% from 2022.
Today, Red Lobster ranks just 41st on the list
of the biggest US restaurant chains.
And in January 2024, Thai Union Group
announced it would sell Red Lobster.
- CEO of Thai Union also said he never wanted
to eat lobster again.
I mean, I think they were just really
fed up with this situation.
- [Narrator] In March, the company
brought on Jonathan Tibus as CEO,
an expert who has led restructuring
at brands like Krystal and Kona Grill.
- I don't know for sure what that means for Red Lobster,
but it certainly does put it more likely that they'll file
for bankruptcy than say before his announcement.
- [Narrator] Red Lobster did not
respond to a request for comment.
For the time being, Red Lobster is still
offering its endless shrimp deal,
but it's bumped up the price to $25.
(light upbeat music)