Red Lobster to file for bankruptcy this month, report says

A filing could come as early as next week, according to the Wall Street Journal. The seafood chain closed dozens of restaurants in recent days.
Red Lobster restaurant
Red Lobster is looking to cut debt and continue operating. | Photo: Shutterstock

Red Lobster could file for bankruptcy as early as next week as it looks to cut its debt and continue operating, according to the Wall Street Journal, which cited people familiar with the matter.

The full-service seafood chain is expected to file a Chapter 11 petition in Orlando before Memorial Day, the Journal reported. It plans to use the bankruptcy process to negotiate new deals with landlords and creditors that would erase hundreds of millions of dollars in debt.

Bloomberg reported last month that the chain was considering a bankruptcy filing. That route began to appear more likely this week as Red Lobster closed nearly 100 locations and began auctioning off the contents of about 50 of them. The company has also been struggling to pay vendors.

The 650-unit chain has been troubled for years amid a challenging environment for casual-dining restaurants. Its problems have been compounded recently by leadership turnover and strategic missteps, including an all-you-can-eat shrimp promotion last summer that led to heavy losses. 

Earlier this year, majority owner Thai Union Group said it was exiting its investment in the chain because it had become too much of a financial burden. The Bangkok-based seafood conglomerate is now working to sell its stake in the company. 

In March, Red Lobster hired a new CEO, Jonathan Tibus, who has experience leading restaurant chains through bankruptcy.

A Red Lobster bankruptcy would be one of nearly a dozen in the restaurant industry this year as companies seek a lifeline in a difficult economy. It would also be the biggest restaurant bankruptcy in recent memory.

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