Red Lobster approved to exit bankruptcy protection after judge approves sale of seafood chain

After enduring a series of challenges that included numerous restaurant closures and financial struggles, Red Lobster is on track to emerge from Chapter 11 bankruptcy. A U.S. bankruptcy judge recently gave the green light to the seafood chain’s reorganization plan and sale to a lender group led by asset manager Fortress. Just four months after filing for bankruptcy protection, Red Lobster is now moving forward with its restructuring plan.

At the time of filing in May, Red Lobster revealed intentions to streamline its operations by trimming the number of its locations. Over the past few months, the chain based in Orlando, Florida, has shut down multiple restaurants in North America, with over 50 locations closing prior to and during the bankruptcy proceedings. As a result, the company expects to operate approximately 544 locations in the U.S. and Canada once it exits bankruptcy, down from the 578 locations reported in May.

Upon finalizing the acquisition at the end of September, Red Lobster will continue to function as an independent entity with a new CEO, Damola Adamolekun, who previously served as the chief executive of P.F. Chang’s. Adamolekun will lead RL Investor Holdings, the new entity acquiring Red Lobster, and expressed optimism about the chain’s future while acknowledging the efforts of the outgoing CEO, Jonathan Tibus.

Red Lobster’s buyer, Fortress, is injecting additional funding into the company to support its post-bankruptcy recovery, pledging over $60 million as part of a long-term investment plan. The seafood chain, established in 1968 by Bill Darden, has changed ownership multiple times over the years, with its most recent acquisition by a private equity firm in 2014 and subsequent investments by Thai Union Group in 2016 and 2020, before the decision to exit the investment earlier this year.

One of the contributing factors to Red Lobster’s financial struggles, including a reported $19 million loss in the first nine months of 2023, was the popular “endless shrimp” promotion. The chain’s decision to expand the all-you-can-eat offer at a fixed price led to overwhelming customer demand that wasn’t sustainable for the company. Thai Union Group cited the promotion’s pricing as a factor in the chain’s financial downturn.