Red Lobster has reportedly been fishing for a potential buyer as it considers debt restructuring options that include possible Chapter 11 bankruptcy.
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The struggling seafood chain sought a buyer in recent months, people familiar with the matter told CNBC. A potential buyer was lined up but the deal fell through, the outlet reported.
Red Lobster has been trying to break some contracts and long-term leases. Even if it finds a buyer, the chain could still file for bankruptcy to ease the process of breaking contracts, according to CNBC.
Last month, restructuring expert Jonathan Tibus, a managing partner with advisory firm Alvarez & Marsal, took over as chief executive when Red Lobster's owner, Thai Union Group PCL, sought to offload the chain from its portfolio.
Red Lobster has about 700 locations, although it has closed a handful in the last few years. It has also worked with restructuring specialist Hilco to renegotiate leases to reduce its cost burdens.
An endless shrimp promotion appears to have backfired for the chain, bringing customers in the door but eating into profits as inflation pushed up food costs. Traffic increased 4% while operating losses reached $11M by the end of the third quarter of 2023. Operating losses totaled $12.5M in the fourth quarter.
The Orlando, Florida-based seafood giant has also traded hands several times in the last 10 years. Its longtime parent company Darden Restaurants sold it a decade ago, with Golden Gate Capital taking over via a leveraged buyout.
Thai Union Group took over Red Lobster in 2021. However, the firm said by this January that it planned to sell the chain. The group said its “capital allocation priorities” no longer aligned with the chain's “ongoing financial requirements,” Bisnow reported.
Leadership has changed several times since Thai Union took over. Longtime Red Lobster CEO Kim Lopdrup retired from Red Lobster in 2021. Kelli Valade stepped in but moved on a year later to become the chief executive at Denny’s. Horace Dawson stepped in a year after that exit, but he left about six months later.
