Red Lobster blames top shareholder for all-you-can-eat shrimp fiasco in bankruptcy filing
Red Lobster’s top executive claimed there was something fishy about the involvement of its largest shareholder in the ill-fated all-you-can-eat shrimp promotion as the nation’s largest seafood chain filed for bankruptcy.
The Orlando, Fla.-based chain filed for Chapter 11 protection late Sunday after unexpectedly shuttering nearly 100 locations last week.
Red Lobster, which had 650 locations before the closures, was partly pushed to the brink by its $20 unlimited shrimp promotion last summer, which caused largest shareholder Thai Union to write off $530 million in the fourth quarter.
CEO Jonathan Tibus disclosed that the company is investigating Thai Union’s role in the shrimp fiasco, alleging the Thailand-based seafood company — which owns a 49% stake in Red Lobster — “exercised an outsized influence on the [company’s] shrimp purchasing,” according to the filing.
Tibus pinned blame on a previous CEO, Paul Kenny, who made the decision in May 2023 to implement the $20 unlimited shrimp promotion as a permanent menu item “despite significant pushback from other members of the company’s management team,” the filing said.
Red Lobster suffered major shrimp shortages after Thai Union and Kenny “encouraged excessive merchandising” of the promotion in the stores, “often going days or weeks without a certain type of shrimp,” the filing said.
The company is investigating whether Kenny’s “decision-making process circumvented the company’s normal supply chain and demand planning processes,” according to the filing.
Bankruptcy attorney Patrick Collins of Farrell Fritz told The Post on Monday that “the insinuation is that the price the company paid Thai Union was above market.”
Red Lobster has had five CEOs since 2021. Thai Union, which first invested in Red Lobster in 2016, increased its stake to 49% in 2020.
Employees also blamed Thai Union’s penny-pinching for the company’s downfall.
The company “forced huge cost reductions, including many that were pennywise and pound-foolish because they hurt sales,” a former Red Lobster executive told CNN.
Red Lobster has 36,000 employees and owes them $16.7 million in unpaid wages, according to the filing.
Red Lobster said its remaining restaurants — including the only one in Manhattan, in Times Square — will be open and operate as usual during the bankruptcy proceedings.
However, it plans to reduce its locations as well as pursue a sale of substantially all its assets.
The bankruptcy will allow Red Lobster to stave off evictions from landlords and other bills from vendors it hasn’t paid in recent months.
The company secured $100 million in financing commitments from its existing lenders but has liabilities of more than $1 billion, the filing said.
The restaurant chain also said it has entered into a “stalking horse” purchase agreement to sell its business to an entity formed and controlled by its existing term lenders.
“This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and refocused on our growth,” Tibus said.
Many employees whose stores closed suddenly last week learned about the closures when they showed up for work and were informed by signs posted on the front door.
The company auctioned off furniture and supplies at 52 auctions held last week.
At least one restaurant in Denver brought in $34,601 by selling all the furniture and most of the kitchen equipment, according to auction site TAGeX, which does not disclose the final bids but posts them online temporarily before the bids close.
