Red Lobster bankruptcy driven by corporate owner forcing it to source its seafood?

[exboyfil]

Last edited Wed May 22, 2024, 10:38 AM - Edit history (1)

"Red Lobster CEO Jonathan Tibus wrote in court documents the Endless Shrimp offer was originally intended to be a limited-time promotion. However, in May 2023, Paul Kenny, Red Lobster’s CEO at the time, made the decision to add the promotion to the chain’s menus permanently, priced at USD 20.00 (EUR 18.41), “despite significant pushback from other members of the company’s management team,” Tibus said.

“This decision created both operational and financial issues for the debtors … saddling the company with burdensome supply obligations, particularly with its equity sponsor: Thai Union,” Tibus said.

Red Lobster is investigating the circumstances around these decisions, including whether Kenny’s decision-making process circumvented the company’s normal supply chain and demand planning processes.

Red Lobster’s supply process was strained by virtue of its relationship with Thai Union, according to Tibus. In addition to being the company’s equity sponsor and 100 percent owner of Red Lobster Master Holdings GP, Thai Union is a primary supplier of seafood to Red Lobster."

Investing story that involves foreign ownership of a traditional American brand (Red Lobster is about the only place you can dine out on seafood in many locations in the midwest). We don't have a comparable restaurant in our area so it is now an hour plus drive to the nearest Red Lobster.

Got to wonder if the bankruptcy will be limited to Red Lobster alone or the debtors will attempt to pierce the corporate veil to Thai Union.


https://www.seafoodsource.com/news/business-finance/red-lobster-files-for-bankruptcy-says-it-s-investigating-thai-union-s-undue-influence-in-shrimp-purchasing-decisions

[jimfields33]

1. Who cares why? It was a horrid place. The food was

awful. So many genuine seafood restaurants.

[getagrip_already]

2. Apparently not in the arid midwest....

Now I'm in the northeast and own my own fishing boat, so I rarely eat in seafood restaraunts, but they are plentiful here.

Even so, there are red lobsters, so somebody must like them. More power to them.

This story is about corporate greed and corruption. Not food quality and eating preferences.

[jimfields33]

11. The reason for closure is not enough people going. They know it's not tasty.

[getagrip_already]

13. Sounds more like they over ran their food budget

With the shrimp deal and couldn't find a way out.

Then the typical cycle of unnecessary debt burden crushed their ability to operate efficiently.

Old story that usually has little to do with operations. Debt kills these companies. Debt that is used to bleed them dry by management.

[jimfields33]

14. Yeah. It definitely would be better if they didn't take on debt.

But they have to build and build. Grrrr.

[ProfessorGAC]

24. Agree Completely

They over expanded. RL has always been on the pricey side. The clientele is limited by finances.
There are 5 within a half-hour drive from our house. They needed five locations in a 40 mile circle?

[debm55]

21. was it shrimp or shrump?

[SWBTATTReg]

28. As being in the Midwest, we did/do love our seafood. But like you said, the diners are few and far between, and

expensive (and it continues to get more expensive too).

We do have the shrimp farms over next door in Illinois, where they raise shrimp, and while not 100% sure, I'm sure that other seafood is farmed too, such as catfish, trout, etc. I seem to recall also, that some seafood comes from off the coast of Chile, and perhaps other places, if China hasn't fished them all out yet. I do recall that their Navy had to chase off Chinese fishing boats from invading their waters.

You are so very lucky, I would love having the ability to walk along the docks, perhaps get to buy some fish etc. for dinner, etc. Of course here, where I'm at, we have the Mississippi and Missouri (and the Meramec) rivers coming together, so the fish of choice is Catfish, perhaps trout, crappy, and maybe some sprinkling of other species. Not exactly the sort of meal one wants, but to give credit, the rivers are cleaned up quite a bit from, eh, 20-30 years ago.

[hunter]

30. The Midwest could have it's own locally grown fish, shrimp, and "lobster."

Grown in ponds, of course, but close enough in taste and texture to the seafood sold in many restaurants.

[atreides1]

4. Well

There are not a lot of genuine seafood restaurants in the Midwest. I found one located in Davenport, Iowa...Miss Mamie's Seafood and Steaks...and another located in Omaha, Nebraska...Plank's Seafood Provisions.

[exboyfil]

8. Yep

2 1/2 hour drive to Davenport for me and four hours to Omaha.

A lot of people look down their noses at Red Lobster, but my family has been enjoying them for three generations. My mom worked at high end seafood places in California and the Mississippi Gulf Coast as a waitress, and she has never been snobbish about going to Red Lobster (actually that is the last restaurant we went to together before she died, and we were planning a trip there when she died).

[RubyRose]

18. I don't know if it is still there but there was a Joe's

Crab Shack outside Des Moines that I really enjoyed occasionally.

[Celerity]

3. Link doesn't work, it goes to a 'change your password' page

[exboyfil]

7. Thanks.

Corrected it.

[Celerity]

15. yw

[Prairie Gates]

5. Hey Red Lobster, the ocean called...

[Voltaire2]

6. There's always Olive Garden

[hunter]

9. Vampire private equity firms buy struggling corporations and suck all the life out of them.

Then they sell the corpse.

Buyer beware.

This has little to do with "Endless Shrimp."

Nobody should ever click on a link like the one you originally posted. Thanks for fixing it.

[exboyfil]

10. Sorry about that

I corrected it. I wasn't paying attention to the link.

I apologize.

[Silent Type]

26. Unfortunately, companies often can't get funding elsewhere. They turn to PE like some

people resort to loan sharks, payday loans, etc.

[brush]

12. Paul Kenny, Red Lobster's CEO at the time made the stupid decision to keep "endless shrimp" on the menu...

permanently instead of on the intended "limited time" basis. No company could sustain that policy in a nation where so many people over eat for sport.

Seems a stupid CEO is the blame for Red Lobster's bankruptcy. IMO they should rake back whatever golden parachute package he got when he left the company he destroyed with his stupidity.

[RubyRose]

19. That always burns me up. Bad CEOs get rewarded

For their bad decisions while the workers lose their jobs. No parachutes for the workers that are laid off.

[brush]

22. Yes, the workers always get screwed while the screw up big wigs get rewarded.

[Hassin Bin Sober]

27. ''Tis no man, 'Tis a remorseless eating machine! Argggg

?si=E5u8dVvujtEGcKCn

[brush]

29. At one time baseball was America's past time. Stuffing oneself might have replaced it.

[2naSalit]

16. They will all...

Be going away before long anyway and has little to do with one person's bad management decisions.

[Bonx]

17. Red Lobster started dying when it was sold in 2014 to a private equity firm.

[EleanorR]

20. Poor decisions plus private equity vultures "enshittification"

Worth reading the whole article as it also discusses changes in the structure of the fishing industry over the past few decades that have lead to changes in fish and seafood prices.

The company’s current management and CEO are eager to pin its demise on Endless Shrimp, which totaled $11 million in losses. Upon filing for bankruptcy, they also launched an internal investigation into whether their majority shareholder Thai Union Group, which is also their main seafood supplier, might have pushed the shrimp promotion in order to boost their own sales at the cost of the retailer’s finances. This ownership structure between parties that are supposed to be on opposite sides of restaurant transactions does appear to be a clear conflict of interest.

But the arc of Red Lobster’s collapse extends much further back than Thai Union, and bends toward what writer Cory Doctorow has vividly described as “enshittification.”

The Endless Shrimp fiasco was a minor speed bump amid a series of poor business decisions by the company’s numerous owners. Many of those mishaps look less like miscalculations and more like self-sabotage, intended to hollow out the restaurant chain to enrich the chain’s previous private equity owners, Golden Gate Capital.

Golden Gate crippled Red Lobster by selling off one of its most valuable assets, the real estate it owned, in what’s known as a sale-leaseback, for $1.5 billion. With that sale, Golden Gate nearly made back its $2.1 billion purchase of Red Lobster, while turning the chain into a permanent leaser, adding a massive additional cost in the form of rent that was orders of magnitude bigger than the cost of Endless Shrimp. When commercial leases started going up, Red Lobster was highly exposed, but by then Golden Gate had already sold off its shares to Thai Union, which inherited all the debts Golden Gate stacked on the company.

https://prospect.org/economy/2024-05-22-raiding-red-lobster/

[brush]

23. Private Equity/Vulture...er ah...Venture Capitalists firms sell off/hollow out the company's assets...

and make their money then sell off the hollowed out company loaded with debt (rent plus), but the stupid "endless shrimp" policy sure didn't help. I mean we live in a nation where many are overweight and over eating is done for sport. That dumb CEO who made that policy permanent instead of for a limited time should have his golden parachute clawed back.

[tavernier]

25. You do all know

that shrimp is one of tbe easiest and most versatile foods to prepare, and readily available in supermarkets all over the country? I net it right off the back of my boat and toss it in a boiling pot in my galley, so don’t expect it it to taste quite like that, but some lemon and melted butter (and dill in the boil) will perk up a pot of frozen critters.
And you can tip yourself.

[jmowreader]

31. Wholesale shrimp is four bucks a pound if you purchase it by the ton

Very, very few people can eat a whole pound of shrimp in one sitting, so I don't think the Endless Shrimp is the problem here.

What I DO think is the problem, as it is with most LBOs, is the Endless Fees those guys charge the companies they've taken over. That's what killed Toys R Us, the endless fees. (That, and TRU is really a seasonal venture - most of their sales are made around Christmastime. I think what I woulda done if I was running TRU is set up a system like Spirit Halloween does - they only do brick-and-mortar for a couple months before the holiday and run an e-commerce site year-round. Maybe do store-within-a-store in, say, Target or Kohl's, like Sephora does.) It is extremely rare that a post-LBO company is successful.

[WarGamer]

32. Lobster is becoming LESS popular as more people get tired of seeing live animals in the tank...

Awaiting their fate.

If all the lobster tails were frozen in a box... it's less of a turn off for some people.