Blame private equity and a decade of mismanagement instead
On May 20, after weeks of speculation and dozens of shuttered restaurants across the country, Red Lobster announced that it would file for Chapter 11 bankruptcy in an effort to save the flailing chain. As it closed locations, auctioned off its fryers and ovens, and faced an increasingly uncertain future, one popular theory quickly emerged: Red Lobster’s demise surely must be the result of all those endless shrimp promotions. On Twitter and elsewhere, the jokes were equally endless.
In 2023, the chain brought back its endless shrimp promotion — all-you-can-eat shrimp scampi for $19.99 — as a way to bring diners in and get them to spend on cocktails and appetizers. While foot traffic did increase, that extra spending didn’t pan out: the promo increased traffic by 4 percent but resulted in an $11 million quarterly loss.
At first, “shrimp buffet bankrupting Red Lobster” does seem like a plausible theory. Shrimp is expensive, and selling unlimited amounts of it for under $20 does seem like a decidedly untenable business model, especially when you consider the costs of shrimp at other dining establishments like high-end steakhouses and seafood restaurants — right now, sometimes a single shrimp cocktail costs as much as $30. It’s also just very funny to think that Red Lobster shot itself in the foot by selling too much shrimp at too low a cost — a perfect metaphor for our era of hyper-consumption fueled by an increasingly global economy.
Of course, it’s much more complicated than that. Red Lobster has had a really rough last 10 years, maybe even worse than the rest of us; since 2021, the chain has had five different CEOs. In 2014, its parent company Darden sold Red Lobster to a private equity firm called Golden Gate Capital for $2.1 billion. That sale helped Darden pay off $100 billion in debt and fueled significant growth for its other restaurants, like Olive Garden, in the ensuing years. Even when COVID hit in 2020, the company still managed to maintain positive cash flow as other restaurants floundered. Red Lobster, though, continued to struggle.
But again, it wasn’t because of the shrimp. Following the sale of Red Lobster to Golden Gate, the chain’s real estate assets were also sold off, which meant that the restaurants now had to pay rent on these locations to their parent company. As such, the company was stuck in leases for underperforming restaurants that it couldn’t afford. As with other private equity forays into industries like retail and media, Red Lobster’s new private equity owner saddled it with tons of debt.
In August of 2020, Golden Gate Capital sold Red Lobster to Thai Union, a Thailand-based seafood company that owns a number of seafood brands, including canned tuna brand Chicken of the Sea. Once Thai Union took over, Red Lobster insiders say that the company engaged in extreme cost-cutting measures and did not place enough emphasis on innovation, especially as fast-casual restaurants like Cava and Chipotle took over an increasingly large portion of the casual dining market. Just four years later, in January 2024, Thai Union was ready to get out of the restaurant business, citing “sustained industry headwinds, higher interest rates and rising material and labor costs.”
And so after billions of dollars in losses, too many executive shuffles to count, and three different corporate ownership groups in the past decade, why are we still trying to insist that Red Lobster’s failure is the shrimp’s fault? It’s obviously much funnier, and easier, to believe that something as silly as an endless shrimp promotion could really spell the end of a restaurant that’s been around since 1968.
The reality, though, is much more insidious. While most diners have fond memories of gorging on endless shrimp — my younger brother and his high school football buddies once (temporarily) closed down an East Texas location after eating 377 shrimp — and snacking on Cheddar Bay biscuits, Red Lobster’s ownership doesn’t doesn’t give a whit about your fond memories there. It also doesn’t seem to care much about the hundreds of people who found themselves without a job when the restaurants suddenly closed their doors. The chain’s current ownership cares only about money and stemming the losses caused by its own poor decision-making. Putting the focus on the shrimp quietly absolves those who were actually involved in its downfall.
That the endless shrimp could’ve spelled the end for Red Lobster is certainly novel, but the idea of private equity vultures swooping in to siphon every last drop of value from a beloved institution or brand before it inevitably dies? Well, that’s a tale as old as time.
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