After news of a massive auction last week, Red Lobster has officially filed for bankruptcy, Nathaniel Meyersohn reports for CNN.
The seafood chain is reportedly 1 billion dollars in debt and has less than $30 million in cash on hand. According to Meyersohn, Red Lobster's plan forward is two-pronged: It plans to sell its business to its lenders and receive financing to stay afloat, while also closing additional locations permanently. Currently, the chain has nearly 600 restaurants throughout the US and Canada, and employs 36,000 people, most in part-time roles.
The official statement from Red Lobster Management LLC on PRNewswire also adds "The Company intends to use the proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern," noting that the restaurants will continue to "remain open and [operate] as usual during the Chapter 11 process, continuing to be the world's largest and most-love seafood restaurant company."
While one in five lobster tails purchased in the United States is still bought by the chain, according to Meyersohn, the number of customers visiting Red Lobster has dropped 30% since 2019 and has only slightly improved (though it's worth noting that casual dining as an overall sector has seen a 5% drop in the past decade).
Richard Collings writes for Axios that "The company will also receive $100 million in debtor-in-possession financing from its existing lenders," adding a quote from CEO Jonathan Tibus, who said in a statement: "The support we've received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests."
Tibus notes in the statement that "this restructuring is the best path forward for Red Lobster."
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