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Financing

Red Lobster closes multiple locations as owner plots turnaround

The chain said the eight stores were “no longer viable” and were closed as part of a regular review.
Red Lobster sign
Red Lobster had 670 U.S. restaurants at the end of 2021. / Photograph: Shutterstock

At least eight Red Lobster restaurants have closed for good in recent months as the chain's owner works to right the struggling seafood chain.

The restaurants were primarily in the Eastern half of the U.S. Some had been open for decades. 

“We regularly review our restaurant portfolios as part of the normal course of business,” a Red Lobster spokesperson said in an emailed statement. “As a result, we have concluded that these locations are no longer viable for Red Lobster.”

The 670-unit chain has been hurt by high food and labor costs. It lost $15.3 million in the third quarter, well above owner Thai Union Group's forecast of negative $10.4 million, executives said in a November earnings call. 

But the Thailand-based seafood distributor said it's committed to fixing the brand it acquired in 2020. CFO Ludovic Regis Henri Garnier and interim Red Lobster CEO Paul Kenny have been visiting restaurants recently to help get a handle on its challenges. 

I think our understanding of the business is much deeper compared to what we had before,” Garnier said during the earnings call, according to a transcript from financial services site Sentieo. And before, it was really managed by our other partners. But now, since the beginning of the year, we really started up in the management.

He added that the company is working on improving Red Lobster's menu and its operations, which he said could be inconsistent from location to location. 

The situation is difficult, but I think we are on track, Garnier said. We see some positive sign from the operations side. We don't see that yet in the numbers. ... We expect in Q1 '23 to start seeing some improvement in terms of financial performance.

Garnier did not mention anything about closing restaurants on the call.

The closures represent just over 1% of the chain’s approximately 670 domestic units. They are a continuation of a yearslong trend: In 2021, Red Lobster’s U.S. footprint shrunk by five stores; in 2020, it was down by four, according to Technomic data.

The eight shutdowns confirmed by Restaurant Business happened over the past three months. Just last week, Red Lobsters in Syracuse, N.Y., and Albemarle County, Va., were closed, according to local media reports.

Another in St. Louis was reported closed earlier this month, and locations in Beachwood, Ohio; San Angelo, Texas; and Oakhurst, N.J.; apparently shut down in December. 

A Red Lobster in Naples, Fla., closed in November, and another in Danville, Va., closed recently, though the exact timing was unclear.

Total sales at the nation’s largest seafood chain have been fairly stable over the past five years, with the obvious exception of 2020. In 2021, sales rebounded by more than 30% but did not return to their pre-pandemic benchmark, according to Technomic data.

But Red Lobster has also struggled recently with turnover in its executive ranks. In April, CEO Kelli Valade resigned after less than a year to become CEO of Denny’s. CFO David Schmidt followed soon after. And earlier this month, VP of Strategic Sourcing Joe Zhou left after more than eight years to become SVP of supply chain at seafood distributor Slade & Gorton.

Garnier said the chain will start looking for a permanent CEO in the middle of this year, once we stabilize the situation.

Red Lobster was founded in 1968 in Lakeland, Fla., by serial concept creator Bill Darden and would go on to become part of the Darden Restaurants portfolio. In 2014, with same-store sales and traffic declining, Darden sold the chain to private-equity firm Golden Gate Capital for $2.1 billion.

In 2020, Thai Union  and a group of other investors acquired Golden Gate’s controlling stake in the chain. 

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