Red Lobster, the once-dominant seafood restaurant chain, is preparing to close more of its locations, marking a continued struggle for survival less than two years after a disastrous $20 all-you-can-eat shrimp promotion plunged the company into bankruptcy. The ill-fated marketing campaign, intended to boost customer traffic, instead devoured profits and accelerated a financial crisis from which the brand is still recovering.
The $11 Million Shrimp Catastrophe
In May 2023, Red Lobster made its "Ultimate Endless Shrimp" deal a permanent menu item, pricing it at just $20. Initially, the promotion succeeded in drawing crowds, with restaurant traffic surging by as much as 40 percent. However, executives had severely underestimated customer appetites, leading to catastrophic losses.
Patrons consumed far more shrimp than anticipated, with some diners reportedly staying for hours to maximise the offer. One customer even boasted of eating 108 shrimp in a single four-hour sitting. The chain's kitchens struggled under the unprecedented demand, and profit margins evaporated completely.
Thai Union, Red Lobster's former majority owner, disclosed losses exceeding $11 million in just three months following the promotion's launch. Rather than scaling back the offer, management allowed it to continue for six months, deepening the financial hole and hastening the company's bankruptcy filing in May 2024.
A History of Costly Promotions
This was not the first time Red Lobster had been burned by an all-you-can-eat promotion. Two decades earlier, in 2003, the chain introduced an "endless crab" deal that proved so financially damaging it was scrapped after just seven weeks, having cost $3.3 million. A company executive at the time noted that it wasn't the second helping that hurt margins, but the third, highlighting how quickly such promotions can become unsustainable.
Bankruptcy and Restructuring
The shrimp promotion debacle drove Red Lobster to file for Chapter 11 bankruptcy protection in May 2024, forcing the closure of approximately 100 restaurants. The chain emerged from bankruptcy with new ownership under Fortress Investment Group, which appointed 35-year-old Damola Adamolekun as CEO in August 2024.
Adamolekun initially declared that "Red Lobster is now a stronger, more resilient company," but recent developments suggest ongoing challenges. In an interview with the Wall Street Journal, he acknowledged that further restaurant closures haven't been ruled out as the company continues to trim underperforming locations.
"There's a lot of positive signs, but we inherited a very damaged brand," Adamolekun told the Journal. "There's still work to do."
Current Operations and Recovery Strategy
As of late 2024, following its restructuring, Red Lobster operates approximately 545 restaurants across 44 U.S. states, plus additional locations in Canada and several international markets. While sales have increased by roughly 10 percent over the past year, the chain continues to operate below pre-bankruptcy levels.
To attract customers back, Red Lobster plans to renovate aging restaurants, focus expansion efforts in stronger-performing regions like New England and New York, and grow its franchise and grocery-store business segments. These moves come amid broader challenges in the casual dining sector, where rising costs for food, rent, and labor have created an increasingly competitive environment.
The company's troubles had been building for years before the shrimp promotion became the tipping point. What began as a single restaurant in Lakeland, Florida, in 1968 grew into a seafood giant that ultimately found itself swamped by a promotion that customers embraced far more enthusiastically than executives had anticipated.
