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Red Lobster files for bankruptcy after missteps, including all-you-can-eat shrimp

AILSA CHANG, HOST:

Red Lobster has filed for bankruptcy. It's not the end of the seafood chain, but Red Lobster is in hot water after a series of missteps, including an ill-fated promotion for all-you-can-eat shrimp. NPR's Alina Selyukh reports.

ALINA SELYUKH, BYLINE: On a busy corner in a Maryland suburb, a Red Lobster restaurant sits like an empty shell - closed abruptly, virtually overnight, one of dozens.

And this Red Lobster was opened just a week ago, and now all the shades are drawn all the way down, and the lights are all the way down. And today everything inside belongs to someone else. Someone won an auction to buy the entire contents.

Just several thousand dollars for all the freezers, ovens, tables and the lobster tanks. The fire sale was prep work for the bankruptcy filing after a series of bad choices by a parade of executives. But Red Lobster did not get cooked just recently. It has struggled for a decade as diners have pulled away from big casual dining chains. In that world, Red Lobster is actually one of the originals, dating back to 1968.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MUSICAL GROUP: Red Lobster is where America goes for seafood.

SELYUKH: Generations of Americans cracked their very first lobster here. The chain exploded in the '80s and '90s. People from all walks of life came for celebrations and dates, munching on famous Cheddar Bay biscuits and the Valentine's Day special Lobsterfest.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MUSICAL ARTIST: (Singing) Red Lobster - for the seafood lover in you.

SELYUKH: The original owner was Bill Darden, whose company still owns other casual dining giants - Olive Garden and LongHorn Steakhouse. Red Lobster has lagged behind, losing out on both ends to fresher, nicer, more local restaurants and to the rising tide of cheaper, quicker fast casual spots like Shake Shack and Surfside Taco.

JOE LEMA: And this is where they got caught in the middle. This casual dining is just so competitive, and it's competing with the fast casual.

SELYUKH: Joe Lema is a professor of hospitality at the University of Nevada Las Vegas. During this cultural shift, Red Lobster's finances floundered. Ten years ago, Darden Restaurants sold Red Lobster to a private equity firm. And the firm sold the chain's real estate. Instead of owning its property, Red Lobster now had to pay rent to someone else.

LEMA: You know, they want quick returns. And often in the restaurant business, it just doesn't always work that way.

SELYUKH: Enter a new owner, Thai Union Group, which is the company behind the Chicken of the Sea brand. It's a seafood supplier, not a restaurant firm. It faced massive pandemic losses, plus inflation. There was cost-cutting, a conveyor belt of executives and no CEO for a year. Then came a reboot idea that turned into a jumbo disaster.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON #1: Ultimate endless shrimp is here, with a limited time...

SELYUKH: All-you-can eat-shrimp, a classic promotion made permanent. Thai Union later blamed it for $11 million in losses that quarter. Here's a taste of some TikTok videos.

(SOUNDBITE OF MONTAGE)

UNIDENTIFIED PERSON #2: I'm going to eat 64 shrimp tonight.

UNIDENTIFIED PERSON #3: I had 74 shrimp.

UNIDENTIFIED PERSON #4: Round five - 61 shrimps total.

UNIDENTIFIED PERSON #5: Seventy shrimp is a light snack. How is that the record?

SELYUKH: The goal was to get more people in the door, which definitely happened. What the company underestimated was how long those people would stay - for hours, buying not much else - oh, and the price, which Thai Union's finance chief, Ludovic Garnier, had to explain to investors.

(SOUNDBITE OF ARCHIVED RECORDING)

LUDOVIC GARNIER: The price point was $20, and you can eat as much as you want, OK? For those who have been in the U.S. recently, $20 was very cheap.

SELYUKH: It was very cheap. The price did increase over time, but Thai Union's CEO later said the Red Lobster ordeal left him scarred, wanting to never eat lobster again. Now his firm is washing its hands of Red Lobster, abandoning its stake deep in the red. The chain plans to keep hundreds of restaurants open through the bankruptcy process, hoping its lenders or someone else will buy it and give it another crack. Alina Selyukh, NPR News.

(SOUNDBITE OF BADBADNOTGOOD AND GHOSTFACE KILLAH SONG, "GUNSHOWERS") Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Alina Selyukh is a business correspondent at NPR, where she follows the path of the retail and tech industries, tracking how America's biggest companies are influencing the way we spend our time, money, and energy.