Orlando, Florida – Red Lobster’s recent Chapter 11 bankruptcy filing and subsequent closure of multiple locations across the country can be attributed to a combination of factors, including significant debt, changes in leadership, a controversial all-you-can-eat shrimp promotion, and a decline in customer traffic.

According to bankruptcy documents filed in the Middle District of Florida, Red Lobster has faced numerous challenges leading up to its bankruptcy filing, including a 30% decrease in guest traffic since 2019. CEO Jonathan Tibus, in a detailed 124-page document, revealed the struggles the seafood chain has faced and the rationale behind the decision to file for bankruptcy.

Tibus noted that a challenging economic environment, an overextended restaurant footprint, unsuccessful strategic initiatives, and increased competition within the industry all contributed to the chain’s financial woes. Upon taking on the role of CEO, Tibus observed a deteriorating performance trend that had been ongoing for several years, with annual guest counts declining significantly.

The company’s liquidity took a severe hit, with a reported $76 million net loss in fiscal year 2023. Cash losses during specific periods in 2023 further compounded Red Lobster’s financial challenges, leading to a rapid decline in liquidity that was not offset by the expected revenue recovery.

One notable mismanagement issue cited by Tibus involved the addition of an unlimited endless shrimp option to the menu by former CEO Paul Kenny. The decision, despite opposition from other company executives, resulted in substantial financial losses and supply chain complications, particularly with Red Lobster’s investor, Thai Union.

To address these mounting challenges, Tibus outlined a strategic plan aimed at restructuring the company’s operations. This plan includes a focus on employee morale and retention, maintaining a high standard of customer service, and streamlining operational costs without compromising quality.

Following the closure of 93 underperforming stores, Red Lobster is now working to identify and eliminate unnecessary expenses across all departments. The company is also working on restructuring its management team and relocating employees from closed locations to nearby establishments.

In a statement, Tibus emphasized that the restructuring efforts are essential for Red Lobster to overcome its financial and operational obstacles and position itself for future growth. The support from lenders and vendors is expected to facilitate a smooth sale process while prioritizing the well-being of employees and customers.