Red Lobster, the Orlando-based seafood restaurant chain, has filed for Chapter 11 bankruptcy protection, citing assets and liabilities between $1 billion and $10 billion. This filing allows the company to continue operations while developing a plan to repay its creditors.

The chain plans to transfer control to its lenders, primarily Fortress Investment Group, which has pledged $100 million in financing to support Red Lobster during the bankruptcy process. This financing comes as part of a stalking horse bid, establishing a minimum price for the company’s assets while allowing for potentially higher bids from other interested parties in the future.

Red Lobster has faced significant challenges over the past few years, with a reported 30% decline in diners since 2019. CEO Jonathan Tibus noted in court documents that, despite some recovery post-pandemic, sales have sharply decreased in the last year, leading to a loss of $76 million in the 2023 fiscal year. Factors contributing to this decline include inflation, which has deterred customers from dining out, and rising labor costs that have strained the company’s finances.

Additionally, many of Red Lobster's leases are above market rates, further complicating its financial situation. In a costly decision, the company made its $20 “Ultimate Endless Shrimp” promotion permanent in May 2023, resulting in an $11 million loss as customers took advantage of the offer.

Founded in 1968 in Lakeland, Florida, Red Lobster grew rapidly in the 1970s and 1980s, becoming known for its Cheddar Bay Biscuits. Today, it operates over 550 locations across the U.S. and Canada, serving approximately 64 million customers annually and purchasing a significant portion of North American lobster tails and rock lobsters globally.

Since being acquired by Thai Union Group Plc in 2020, Red Lobster has been in negotiations with lenders for an out-of-court restructuring deal that would have given creditors 80% ownership of the company. However, these discussions fell through, and lenders provided an additional $20 million in loans in February, but were unwilling to invest further without support from Thai Union.

The company is also investigating its shrimp promotion, looking into how it was marketed and whether Thai Union had undue influence over shrimp purchases. Red Lobster employs around 34,000 people in the U.S. and 2,000 in Canada, but recently closed 93 underperforming locations as part of its restructuring efforts.

The bankruptcy case is filed under Red Lobster Management LLC, 24-02486, in the U.S. Bankruptcy Court for the Middle District of Florida.