Red Lobster to slash more locations after $20 shrimp fiasco sank the chain into bankruptcy
Red Lobster is preparing to shutter more restaurants – less than two years after a $20 all-you-can-eat shrimp deal helped drive the chain into bankruptcy.
The once-mighty seafood giant was swamped by diners who devoured far more shrimp than executives had budgeted for, turning a traffic-boosting promotion into an $11 million nightmare.
It drove the chain – which began as a single restaurant in Lakeland, Florida, in 1968 – to shutter 100 locations and file for Chapter 11 bankruptcy in May 2024.
But two years after emerging from bankruptcy – and its new CEO Damola Adamolekun declaring ‘Red Lobster is now a stronger, more resilient company’ – more cuts are coming.
Speaking to the Wall Street Journal, Adamolekun said further closures haven’t been ruled out as the company trims underperforming locations.
Sales have climbed roughly 10 percent over the past year, but the chain is still operating below pre-bankruptcy levels.
Adamolekun, 35, was appointed CEO in August 2024 by the chain’s new owner, Fortress Investment Group, as Red Lobster cut costs during bankruptcy.
‘There’s a lot of positive signs, but we inherited a very damaged brand,’ he told the Journal. ‘There’s still work to do.’
Seafood restaurant giant Red Lobster is preparing to close additional locations following its ill-fated all-you-can-eat shrimp promotion, a campaign that ultimately contributed to the company’s bankruptcy
Damola Adamolekun was appointed CEO on August 26, 2024
To lure diners back, Red Lobster plans to spruce up aging restaurants, double down on regions where it still performs well – including New England and New York – and expand its franchise and grocery-store business.
Red Lobster’s troubles had been building for years as costs for food, rent and staff climbed and the casual dining market became more cutthroat.
But the $20 ‘Ultimate Endless Shrimp’ deal – made a permanent menu item in May 2023 – is widely viewed as the tipping point.
Initially, it worked. Traffic jumped as much as 40 percent. But so did the losses.
Customers ate far more shrimp than executives expected, kitchens buckled under the strain, and profit margins evaporated.
Thai Union, Red Lobster’s former largest minority shareholder, disclosed it lost more than $11 million in just three months after the deal launched.
The episode echoed a similar misstep two decades earlier. In 2003, Red Lobster introduced an ‘endless crab’ promotion that was so costly it was scrapped after seven weeks, having cost $3.3 million.
‘It wasn’t the second helping on all-you-can-eat, but the third,’ a company executive told analysts at the time, underscoring how quickly margins eroded.
The $20 ‘Ultimate Endless Shrimp’ promotion, made a permanent menu item in May 2023, is widely viewed as the final blow that accelerated Red Lobster’s bankruptcy filing in May 2024
As of late 2024, after completing its restructuring, Red Lobster operates approximately 545 restaurants across 44 US states, in addition to locations in Canada and several international markets
The shrimp promotion proved just as irresistible. Some customers reportedly stayed for hours, testing their limits.
One diner claimed to have eaten 108 shrimp in four hours, bragging: ‘I set a new record at my local Red Lobster – this is my greatest achievement in life.’
Far more customers took advantage of the offer than executives had projected. Yet rather than scale it back, bosses allowed the promotion to continue for six months – deepening the losses and speeding up its bankruptcy filing.
‘We knew the price was cheap, but the idea was to bring more traffic into the restaurants,’ said CFO of Red Lobster’s then minority shareholder, Thai Union, Ludovic Garnier. ‘So we wanted to boost our traffic, and it didn’t work.’
Red Lobster operates around 545 restaurants across 44 US states, in addition to locations in Canada and several international markets.
