Purchase by Investor Groups Will End Seafood Restaurant Brand’s Bankruptcy
Following months of Red Lobster restaurant closures, the seafood chain is soon expected to emerge from Chapter 11 bankruptcy. On Thursday a bankruptcy judge approved Red Lobster’s reorganization plan, which includes acquisition by a Fortress Investment Group-led coalition. Red Lobster had filed for bankruptcy in May and should exit by the end of this month, according to an Associated Press report.
Red Lobster had posted a $76 million net loss in 2023 and blamed its Chapter 11 bankruptcy on high inflation, unsustainable rents, and poor management decisions such as an endless shrimp promotion that led to $11 million in losses, Reuters reported. Chapter 11 commercial bankruptcy filings, which allow a company to reorganize and restructure its debts to pay them off over time, increased 70% in June 2024 over June 2023 in the United States, the American Bankruptcy Institute recently reported. The institute’s raw numbers show 987 filings in June of this year and 582 the previous June.
Red Lobster had closed more than 50 locations shortly before filing for Chapter 11 bankruptcy on May 19. With that filing, leaders of the restaurant chain disclosed plans to close more locations en route to a revival. A statement released Thursday by Red Lobster said that the chain will have a total of 544 locations in 44 states and four Canadian provinces; it employs approximately 30,000 workers. When Red Lobster filed for bankruptcy, the chain had 578 restaurants in operation.
Red Lobster’s New CEO
Now 56 years old, Orlando-based Red Lobster will continue to operate as an independent company after the acquisition is finalized. The chain will welcome a new CEO, Damola Adamolekun, former chief executive of the P.F. Chang’s restaurant franchise. Fortress chose Adamolekun to head RL Investor Holdings, the entity that was created for the Red Lobster acquisition.
“With our new backers, we have a comprehensive and long-term investment plan — including a commitment of more than $60 million in new funding — that will help to reinvigorate the iconic brand while keeping the best of its history,” The Wall Street Journal quoted Adamolekun as saying. “This is a great day for Red Lobster.”
Known for its reasonably priced seafood entrees and rich, cheese-infused biscuits, Red Lobster has seen multiple ownership changes throughout its history. Perhaps in a preview of its rapidly escalating financial problems, however, minority owner Thai Union Group announced plans to divest in January of this year, according to the AP report. Thai Union initially invested in the brand in 2016 and increased its stake in 2020. But Thai Union stockholders and leadership became skittish after losing $19 million with the seafood restaurant brand during the first three quarters of 2023, AP stated.
Fortress to the Rescue… Again
The Fortress-led acquisition group, which includes TCW Private Credit and Blue Torch Capital, earlier had loaned Red Lobster $300 million, The Wall Street Journal reported. Fortress also controls SPB Hospitality, which owns Krystal Restaurants, Logan’s Roadhouse, Old Chicago Pizza & Taproom and Twisted Tenders.
Fortress previously has guided other restaurant brands — including Krystal Restaurants and Logan’s Roadhouse — out of bankruptcy, The Journal account pointed out. A USA Today article noted that Fortress also had purchased bankrupt companies Vice Media and Alamo Drafthouse, which later was sold to Sony Pictures Entertainment.
Acquiring a struggling restaurant is “definitely an area where we have a lot of experience,” Fortress spokesman Gordon Runté told USA Today. “Red Lobster is a big undertaking. It is 500-plus locations, but we’re excited about the prospects for the restaurant.”
