Restaurant chain Red Lobster announced plans to close 23 more locations as part of its ongoing bankruptcy proceedings.
Additionally, the chain has appointed a new CEO to take over operations after a U.S. bankruptcy judge officially approves its sale.
Orlando, Florida, U.S.A.-based Red Lobster, which filed for Chapter 11 bankruptcy protection in May, is rejecting the leases of 23 additional locations by 31 August, CNN reported. The company will have around 544 locations left across the U.S. and Canada after the bankruptcy proceedings, its new owner, Fortress Investment Group, said. Red Lobster operated around 650 restaurants before the proceedings.
“The pattern of the earthquake [of units closing] is diminishing,” Pacific Management Consulting Group Founder and CEO John Gordon told SeafoodSource.
Nevertheless, Gordon said the company could close a few more restaurants as final lease negotiations take place. The closures are a positive move that will help “take a lot of the negative cash flow and improve the overall brand total – both sales and EBITDA,” he said.
Soon after taking ownership of Red Lobster, Fortress announced on 26 August it has appointed Damola Adamolekun, former CEO of restaurant chain P.F. Chang’s, as CEO of RL Investor Holdings LLC – a new entity seeking bankruptcy court approval to acquire Red Lobster. RL Investor Holdings LLC was created by funds managed by affiliates of Fortress, along with co-investors TCW Private Credit and Blue Torch.
“Fortress has a strong track record of operating and improving iconic American restaurants,” Fortress Managing Director Morgan McClure said. “Damola’s energy, leadership, and experience will be key to restoring Red Lobster’s status as an iconic and admired American brand.”
For his part, Adamolekun called Red Lobster “an iconic brand with a tremendous future.”
“I’m looking forward to working with our team members across North America to reinvigorate the brand by making it the best place to work for our employees and improving the experience for our guests. I want to thank all of my future colleagues at Red Lobster who have demonstrated extraordinary resilience and dedication to the franchise during the bankruptcy process,” Adamolekun said. “Red Lobster’s future is brighter now than ever before; I cannot wait to get started on our investment plan and to get out and meet diners across the U.S. and Canada.”
Prior to serving as CEO of P.F. Chang’s, Adamolekun served as chief strategy officer at the company and as a partner at Paulson & Co., a New York-based investment firm.
Gordon said for the new Red Lobster to be successful, Adamolekun needs to have “strong restaurant people around him” and needs to pick the right people for two key executive positions: marketing/concept product development and supply chain initiatives.
Marketing/concept development is “a very key role, especially for a brand that is down right now,” according to Gordon. After staying with the same restaurant model and formula for many years, Red Lobster could develop a new prototype – such as a restaurant with a more substantial bar presence – that could elevate the quality of customer, rather than focusing on discounting, Gordon said.
Discounting is part of what contributed to Red Lobster’s financial woes.
The company’s “Ultimate Endless Shrimp” sales promotion resulted in a significant financial hit after the company decided to make the promotion a permanent part of its menu. The shrimp special also led to conflict between Red Lobster and its former minority owner Thai Union, which divested from the restaurant chain in January and took a USD 530 million (EUR 474 million) impairment charge in the process.
Red Lobster claimed Thai Union exerted undue influence on the chain’s shrimp purchasing, while Thai Union claimed Red Lobster owes it USD 3.7 million (EUR 3.3 million) due to demand forecast discrepancies.
