Red Lobster made shrimp endless, sold its buildings, and filed Chapter 11

Red Lobster was a US seafood restaurant chain with over 700 locations. In 2014, private equity owner Golden Gate Capital sold and leased back the real estate for 500 restaurants in a $1.5 billion transaction. The chain no longer owned its buildings; it rented them, at a cost that reached approximately $200 million per year by 2023.

The sale-leaseback extracted value for the owner but left the operating company with a fixed cost that did not flex with revenue. When traffic declined, the rent did not. In June 2023, new management made the 'Ultimate Endless Shrimp' promotion permanent at $20 per person. The promotion drew customers but lost money on every one of them — an estimated $3 per head in some markets — and cost the chain $11 million in a single quarter.

Prices were raised to $22 and then $25, but the damage was done. Combined with rising labour costs, underperforming leases and supply-chain pressures, the chain ran out of runway. On 20 May 2024, Red Lobster filed for Chapter 11 bankruptcy with approximately $1 billion in debt. At least 99 restaurants closed immediately, with up to 129 more announced.

A court approved the bankruptcy plan on 5 September 2024. Red Lobster was acquired by RL Investor Holdings — a group including TCW Private Credit, Blue Torch and Fortress Investment Group — and exited Chapter 11 on 16 September 2024 with roughly 514 locations remaining.