Seafood Joint With 27 Illinois Locations Considers Bankruptcy

We've all heard about and seen restaurants fall on hard times because...well...no one went there to eat, and if they did, it was only one time. Maybe the food was bad, the staff rude, the atmosphere loud and dirty, whatever. They closed because they couldn't find and keep customers.

Conversely, it's pretty rare to hear about a restaurant, particularly a big chain restaurant, finding themselves in deep financial difficulty because something they were doing went well, or in this particular case, way too well.

The problems this chain of seafood restaurants (probably the best-known seafood restaurants by far) has can be traced to the smallest things on their menu: shrimp.

Red Lobster, With 649 Restaurants In 554 Cities (44 States And Territories), Including 27 Illinois Locations, Is Said To Be Considering Filing For Bankruptcy Protection

According to multiple published reports, Red Lobster is looking to find ways to restructure their debt because their Endless Shrimp promotion basically torpedoed Red Lobster's bottom line.

According to ABCNews, Red Lobster "is considering filing for Chapter 11 on the advice of law firm King & Spalding, which would allow the chain to stay open while dealing with its debt and help reevaluate long-term contracts and leases."

The problem got started last year, in June of 2023, when Red Lobster made their formally "limited-time" offer of all you can eat shrimp for $20 a permanent part of their menus.

It Would Appear That Red Lobster Had No Idea That People Would Eat That Many Shrimp, Then Red Lobster Realized To Their Horror That They'd Underpriced The Shrimp, Too

A big advertising campaign that touted two shrimp dishes, unlimited, with a side of those magnificent Cheddar Bay biscuits all for $20 really worked well in bringing people into Red Lobster joints, but it worked way too well.

What's too well?

An $11 million operating loss for Red Lobster all directly related to their shrimp promotion, even though they tried to save the day by raising the price to $25 when they realized what was happening. For the 4th quarter of 2023, Red Lobster announced a loss of $12.5 million.

What Does All This Mean For Red Lobster's 27 Illinois Locations?

At this point, it doesn't look like anything will be changing quickly. All of the published reports on Red Lobster's current financial difficulties seem to agree that Red Lobster is exploring Chapter 11 bankruptcy protection to reorganize, but there's been nothing released about potential closure locations.

Bloomberg reports that "At the very least, Red Lobster wants to explore shedding leases at some of its 650 restaurants and getting out of long-term contracts. While companies can do that and remain solvent, those steps are much easier to take under the protection of a bankruptcy court."