Commercial painting company Paint Folks put a fresh coat on about 40 Red Lobster restaurants last year. But as of Thursday, the seafood chain had yet to pay for more than half of the work, leaving the painter holding the bag.
“We’ve already paid our vendors, we’ve already paid for the paint,” Paint Folks SVP Brian Foster told Restaurant Business. “Now we’re sitting here with more than half a million dollars due to us.”
Paint Folks’ outstanding balance has been the norm rather than the exception for the 649-unit chain in recent months. According to data from Creditsafe, Red Lobster paid just 4% of its bills on time in January and 25% in February. It was an average of 26 days behind on payments in January, 47 in February and 48 in March, the credit report site found.
It is the latest sign of trouble for the Orlando-based casual-dining chain, which has struggled to generate traffic and control costs over the past year. While macroeconomic challenges have hurt business industrywide, Red Lobster has had it worse than most: The chain's systemwide sales fell 8% in 2023, and unit count fell by 2%, according to Technomic data.
Red Lobster's mounting financial problems have led it to consider a Chapter 11 bankruptcy filing, Bloomberg reported this week. The publication noted that pricy leases and labor costs have hurt Red Lobster’s cash flow.
Those problems have apparently trickled down to its vendors, several of whom told Restaurant Business that they have been waiting on payment from the chain for months.
Dana Smith, the owner of Lawn Jobs 4 U, has been cutting grass and shoveling snow at the Red Lobster in Peoria, Illinois, location since 2009. Earlier this month, the company finally paid him most of the more than $5,000 it owed for service dating back to last year.
But Smith said he may have to cut off the relationship of more than 15 years. “It’s kind of sad,” he said.
Another vendor complained of 10 outstanding invoices for carpet cleaning that were as much as 100 days past due.
The late payments “show the company may not have done the necessary cash flow forecasting to protect itself from potential losses, revenue declines and challenging market conditions,” Creditsafe spokesperson Ragnin Bhalla wrote.
Under the guidance of minority owner Thai Union Group, Red Lobster spent much of last year working to shore up its margins while also driving traffic by refreshing older restaurants and offering more value-priced options.
Those efforts culminated in an ill-advised $20 all-you-can-eat shrimp promotion that contributed to an $11 million loss in the third quarter of 2023. In January, Bangkok-based Thai Union announced that it was exiting its investment and looking for a buyer.
Thai Union's divestment likely hasn’t helped Red Lobster stay current on its bills, Bhalla of Creditsafe noted.
Red Lobster had not responded to multiple requests for comment as of publication time.
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