Red Lobster is set to emerge from Chapter 11 bankruptcy after a federal judge on Thursday approved the seafood restaurant chain’s plan to bounce back from the “Endless Shrimp” fiasco, huge debts, dozens of store closures and overall declining customer numbers.
As part of Red Lobster’s Chapter 11 bankruptcy plan, RL Investor Holdings LLC, a new corporation organized and managed by Fortress Investment Group LLC, will acquire the restaurant chain. The acquisition is expected to close by the end of this month, Red Lobster said in a news release.
Red Lobster is the latest acquisition of a bankruptcy-filed company by Fortress, following Fortress’ acquisitions of Vice Media and Alamo Drafthouse, which was subsequently sold to Sony Pictures Entertainment.
Fortress also controls a company called SPB Hospitality, which owns brands such as Logan’s Roadhouse, Crystal, Old Chicago Pizza & Taproom and Twisted Tenders, spokesman Gordon Lante said.
“This is definitely an area where we have a lot of experience,” Lante told USA Today about the acquisition of another struggling restaurant. “Red Lobster is a big operation with over 500 locations, but we’re optimistic about the future of this restaurant.”
“It’s a great day for Red Lobster.”
Once the acquisition is complete, Damola Adamolekun will become CEO of the Red Lobster restaurant chain, replacing Jonathan Tibas, who is stepping down from his role and leaving the company. Adamolekun previously served as CEO of PF Chan’s.
“This is a great day for Red Lobster,” Adamol-Kun said. “Together with our new backers, we have developed a comprehensive, long-term investment plan that includes more than $60 million in new funding that will help reinvigorate our iconic brand while preserving the greatness of its history.”
“We have a great future for Red Lobster and can’t wait to get started on our plans with our more than 30,000 team members across the U.S. and Canada,” he said.
With court approval, Red Lobster will continue to operate as an independent company with 544 restaurants across 44 states and four Canadian provinces, the company said.
“I am proud of what Red Lobster has accomplished in this restructuring. The company will emerge from Chapter 11 bankruptcy as a financially and operationally stronger company, with new backers who are unwaveringly focused on investment and growth,” Jonathan Tibbs said in a statement.
Red Lobster closed 23 stores last week.
Red Lobster recently closed 23 more locations across the country.
The recent restaurant closures bring the total number of closures in the U.S. to at least 129. The latest closures include three locations in Florida, Illinois and Virginia, two locations in Minnesota and New York, and one location each in Arizona, California, Colorado, Georgia, Indiana, Missouri, North Carolina, Ohio and South Carolina.
Why did Red Lobster file for Chapter 11 bankruptcy?
Red Lobster filed for bankruptcy on May 19 after announcing its intention to close dozens of restaurants and streamline its business to “drive operational improvements.” According to documents filed in the Middle District of Florida, the bankruptcy was due to high debt, CEO turnover, the failure of its all-you-can-eat shrimp offer, and a 30% drop in customer numbers since 2019.
“Recently, the Debtors have faced numerous financial and operational challenges, including a difficult macroeconomic environment, a bloated and underperforming restaurant fleet, failed or inappropriate strategic initiatives and increased competition within the restaurant industry,” Tibus said in the bankruptcy filing.
“It was immediately apparent that Red Lobster’s performance was declining and had been for several years,” Tibus, who served as Red Lobster’s chief revenue officer until Jan. 11 before being named CEO, said in the statement.
Contributors: Natalie Neisa Alund and Gabe Haouari/USA TODAY
