Troubles on the Horizon: Red Lobster’s Chapter 11 Saga Portends Future Challenges

There was talk of endless shrimp, until the shrimp ran out and caused their downfall.

Last summer, Red Lobster, a staple of American casual dining since 1968, introduced a tempting offer to Americans – $20 endless shrimp as a permanent menu item (rather than a limited-time special).

We donned the bib and indulged, resulting in $11 million in losses for the company, leading it to file for Chapter 11 bankruptcy this week.

Initially, Red Lobster will be closing at least 48 of the 578 restaurants it operates in 44 states – more closures are expected in the future.

Red Lobster suffered significant losses from the popularity of endless shrimp dinners. Red Lobster/Facebook

To those on the coasts with access to a variety of seafood restaurants, this shrimp incident was a source of amusement.

“Red Lobster Waiter: Sir, are you done? You’ve had 561 scampi and 20lbs of popcorn shrimp.
Me: We’re done when I say we’re done,” podcaster and writer Trung Phan memed on X with a still from “Breaking Bad” and the text, “Red Lobster’s bankruptcy explained.”

The jokes continued on Reddit, comparing Red Lobster customers to Homer Simpson during his gluttonous visit to the Frying Dutchman’s all-you-can-eat seafood buffet.

For many landlocked Americans, the closure of Red Lobster poses a threat to their access to seafood.

Back during the Jim Crow-era, Red Lobster-founder Bill Darden defied segregation and welcomed diners of all colors. findagrave.com

I grew up in Nashville, Tenn., before the foodie revolution, where fried river and lake fish were the only seafood options on the menu.

My first experience with shellfish was at a special lunch with my late grandfather at a Red Lobster.

As a child, pulling lobster meat out of the red shell, dipping it in melted butter, felt incredibly luxurious. Dining at Red Lobster holds a special place in my memories with my grandfather.

While there were likely other seafood restaurants in Nashville in the mid-1990s, they were probably out of our family’s dinner budget at the time.

Although dining options have expanded over the past few decades, affordability has become more challenging.

In 2022, US consumers spent an average of 11.3% of their disposable personal income on food, the highest since the 1980s, according to the most recent data from the USDA.

Red Lobster is particularly important for African-Americans – even Beyonce mentioned it in her song ‘Formation.’ REUTERS

The rising cost of food is one of many challenges contributing to the cost of living pressures faced by Americans. It’s no wonder Red Lobster’s 64 million annual customers enjoyed so much shrimp.

As more Red Lobster locations close, the impact will be felt most by middle and working class African Americans, who have been loyal to the restaurant group mentioned in Beyoncé’s lyrics.

Red Lobster founder Bill Darden opened his first restaurants in the Jim Crow south of the 1930s, defying local segregation laws to welcome everyone. While this was decades ago, it remains a significant part of the restaurant’s history.

“Sure, we like fish and a good deal – but we like being treated equally even more,” wrote Robyn Autry, a sociology professor at Wesleyan University, in response to Red Lobster’s situation.

One of the many social media memes following Red Lobster’s Chapter 11 announcement. @TrungTPhan/Instagram

If you’re seeking to blame someone for Red Lobster’s downfall, look beyond America’s eating habits.

The true culprit is a familiar one, the private equity firms that have driven many American businesses to bankruptcy.

In 2014, Red Lobster founder Bill Darden sold the chain to Golden Gate Capital, a private equity firm, for $2.1 billion.

Today, its largest shareholder is seafood distributor and Chicken of the Sea owner Thai Union Group.

The meal deal that sank the brand. Red Lobster/Facebook

Together, Golden Gate and Thai Union led Red Lobster to accumulate $1 billion in debt, according to its bankruptcy filing.

The restaurant has had five CEOs since 2021. Additionally, Thai Union used Red Lobster to sell its own shrimp supply.

While executives like to blame their customers, in this case, it was not the fault of the consumers but rather the greed of big business that led to Red Lobster’s downfall.

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