May 20, 2024

A week after abruptly closing dozens of restaurants, Red Lobster has filed for Chapter 11 bankruptcy.

The Florida-based restaurant chain has been in decline for years, according to the filing.

Diners have dropped by about 30 percent in the past five years, it said. The company lost $76 million in its 2023 fiscal year.

In its filing, Red Lobster said it “intends to use the proceedings to drive operational improvements, simplify the business through a reduction in locations and pursue a sale of substantially all of its assets as a going concern.”

The restaurant chain has entered into a “stalking horse” purchase agreement in which it will sell the business to an entity formed and controlled by its existing term lenders.

It’s one of the biggest bankruptcy protection filings in restaurant history, according to the trade magazine Restaurant Business.

The existing restaurants will remain open throughout the bankruptcy proceedings, which includes the one on the campus of The Empire Mall in Sioux Falls.

“This restructuring is the best path forward for Red Lobster,” CEO Jonathan Tibus said in a statement.

“It allows us to address several financial and operational challenges and emerge stronger and refocused on our growth. The support we’ve received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests.”

In addition to inflationary pressures that might be keeping customers from dining out and rising labor costs, analysts also pointed to a number of Red Lobster leases that are above market rate. The company received additional attention last year when it’s $20 “ultimate endless shrimp” deal became a permanent offer and led to operational losses.