Popular seafood restaurant chain Red Lobster is considering filing for Chapter 11 bankruptcy due to financial struggles. The chain has reportedly grappled with high lease and labor costs, significantly impacting its cash flow.
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According to Bloomberg, anonymous sources claimed that Red Lobster is working with the law firm King & Spalding to explore restructuring options. The pending bankruptcy filing aims to alleviate financial pressures by eliminating long-term contracts and renegotiating several leases. While discussions are ongoing, no final decision has been made yet. If Red Lobster proceeds with the Chapter 11 filing, it will continue to operate as it attempts to restructure its debts.
Throughout the years, Red Lobster expanded from its single Florida location to hundreds of restaurants across the United States, Canada, and various international markets. However, the chain has experienced management and ownership shifts that have impacted its financial stability. In 2014, Red Lobster was acquired by Golden Gate Capital after it was purchased through a leveraged buyout from Darden Restaurants. Seven years later, Thai Union Group Plc took over by purchasing Golden Gate’s stake after initially holding a 25 percent interest.
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Thai Union has expressed concerns about the chain’s financial demands and stated they no longer align with capital allocation priorities, leading to a write-down of its investments. Fortress Investment Group, another principal lender of Red Lobster, is also involved in the ongoing discussions about restructuring debt but has not commented on the situation.
Social media users responded to the news about the restaurant chain’s potential bankruptcy filing:
Red Lobster opened its first restaurant in 1968 in Florida with a mission to make delicious seafood accessible to everyone. Founded by Bill Darden, it soon gained attention for its casual atmosphere and quality offerings. General Mills acquired the growing chain in 1970, fueling its national expansion.