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Red Lobster: over 1 billion dollars in debt and bankruptcy around the corner

The inexorable decline of the US chain began with the acquisition by Thai Union Group

It had become the largest seafood restaurant chain in the world, bringing affordable shrimp and lobster. Now, however, the time has come for bankruptcy. The company said it has more than $1 billion in debt and less than $30 million in cash. The company's intention is to sell the business to its financiers: in exchange, it will receive the funds to stay afloat. In the meantime, numerous restaurants are expected to continue to close.

A brand known for its Cheddar Bay biscuits, crab legs and numerous shrimp dishes, the brand spread throughout the USA in the 1980s and 1990s. With 578 restaurants in 44 US states and Canada, it serves 64 million customers a year and generates $2 billion in annual sales. One in five lobster tails in North America is purchased from Red Lobster. This was not enough to avoid filing for bankruptcy.

Among the reasons for the decline indicated by analysts and former employees, there are poor management, competition, inflation, little investment in marketing, the decline in the quality of food and service. Founded in 1968 by Bill Darden , one of the pioneers of casual dining in the US, the company later became part of Darden Restaurants, owner of Olive Garden and other chains. In 2014, Darden sold the company to Golden Gate Capital, a private equity firm, for $2.1 billion. As of 2020, Thailand-based seafood distributor Thai Union Group is the largest shareholder in the chain on the path to bankruptcy. Thai Union owns 49% of the company.

Under Thai management, the US seafood restaurant chain is headed for its inexorable decline. Since 2019, the number of customers has fallen by 30%, with a timid recovery only after the pandemic. The company has had five CEOs since 2021. A large number of executives have resigned over the past three years, while since the beginning of the year, the company has announced its bankruptcy several times.

Last week, Red Lobster began closing 93 restaurants, but the company stopped paying its suppliers last year. The company plans to stay afloat with a $100 million financing deal, a prelude to formalizing bankruptcy.

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EFA News - European Food Agency