Yahoo Finance Red Lobster's Unpaid Bills Seem Almost As Endless As Its Shrimp
Red Lobster has seen it's share of struggles since the original Lakeland, Florida, restaurant opened in 1968, and perhaps none have been more imposing than its current situation. After 55+ years in business and more than 700 worldwide locations, the once family-owned enterprise may have reached a tipping point amidst a growing accumulation of unpaid bills. Current owners Thai Union Group are potentially on the road to bankruptcy protection, according to Bloomberg News, with the company receiving debt restructuring advice through the law firm King & Spalding.
Thai Union Group has long been feeling the pinch from economic factors such as labor costs and burdensome leases, but now its creditors are suffering as well. Vendors such as Paint Folks, a commercial painting company who spruced up about 40 Red Lobster locations in 2023, report nonpayment of roughly $500,000 of work, which carried out-of-pocket costs for them personally. They're apparently not the only ones; data from Creditsafe shows an increasing trend of late payments, almost doubling from 26-day delays in January to 48 days behind in March.
It's hardly surprising given Red Lobster's reduced overall sales of 8% in 2023, as reported by Technomic data. By February 2024, Thai Union Group was writing down the equivalent of U.S. $500 million of investment losses tied to its Red Lobster holdings.
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Endless Shrimp, Endless Losses
With a strong focus on seafood, including its namesake lobster, as well as crab, shrimp, and fish, it's a given that Red Lobster's fortunes rise and fall with the currents, figuratively speaking. In reality, it's not just market conditions that affect profits and losses. Retail-level pricing and promotions appear to have played a recent hand in the relatively rapid decline of the restaurant chain's viability.
In summer 2023, Red Lobster extended a highly embraced annual promotion known as Ultimate Endless Shrimp, giving it a permanent place on the restaurant menu. For just $20, diners could choose from an endless meal of favorites such as grilled and coconut shrimp, garlic shrimp scampi, and pasta-style shrimp dishes. Traffic increased considerably compared to the previous quarter, but profits from the promotion didn't follow suit. Its overwhelming popularity led to losses of about $11 million during the third quarter 2023, snowballing even more by year's end.
Prices on the Endless Shrimp deal rose to $22 per person, and finally to $25. But shrimp alone was hardly enough to make or break the woes surrounding one of America's most well-known seafood restaurant chains. Fate has yet to play its final hand in the future of Red Lobster. Meanwhile, perhaps those cult-level cheddar bay biscuits will keep customers happy and returning.
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