♪ Red lobster for the
seafood lover in you ♪ – [Narrator] In the 80s and 90s, America was that seafood lover. Known for its ever evolving deals. – [Announcer] 22 delicious new creations. – [Narrator] In 2000,
Red Lobster was 16th out of the 500 biggest casual dining chains. But by 2023, cracks formed
in the company's shell. Tens of millions of dollars
in losses are piling up. Investors are losing their appetites. (speaking foreign language)
(audience laughs) – [Narrator] And now the company is in distress and up for sale.
So what went wrong? Red Lobster was founded
by Bill Darden in 1968, with a single seafood
restaurant in Lakeland, Florida. – He was really the
inventor of casual dining. So casual dining was meant to be, you know, an affordable meal, but a nice meal, like
nicer than fast food, something you could take a date. Red Lobster was really an innovator there. – [Announcer] Just two years later, Darden sold all of his
restaurants to General Mills, the cereal brand, its goal to expand Red Lobster's locations and menu. – What makes red lobster so popular? – Over 30 delicious seafood reasons right on the Red Lobster menu. – [Narrator] By 1984,
it had 365 restaurants, and by 1997, it had
more than doubled those. – After all that growth, you know, largely in the 70s and the 80s, by the 1990s and 2000s,
Red Lobster was the biggest casual dining seafood
chain in the country. – [Narrator] In 2004, the company debuted what would become a customer favorite.
It's limited time only
endless shrimp deal. (upbeat music) – [Announcer 2] Don't
miss the only time of year to enjoy all the shrimp you can eat. – [Narrator] But Red
Lobster faced a problem. Seafood is expensive. Just look at this chart. Shrimp prices began to spike in 2013. That year Red Lobster's
revenue plummeted in comparison to another Darden brand, Olive Garden. The next year, Darden sold Red Lobster for $2.1 billion to a private equity firm. As part of the deal, all of
Red Lobster's real estate, which it had acquired since
the late 1960s, was sold and leased back to the company
to fund the total price. – Restaurant leasebacks
can be kinda common in restaurants as
something other chains do. The positive is you get a whole chunk of capital way up front. The negative is there can be
consequences down the chain. – [Narrator] In 2020, a
group, including Red Lobster's longtime seafood supplier,
Thai Union Group, took majority ownership. – Thai Union thought that they
were turning things around.
Again, they had sent some
executives to Red Lobster. They were hoping just to, you
know, increase the profile of Red Lobster and get people going there, and make it a valuable
part of their company and not just a drain. – [Narrator] But in the
years that followed, Red Lobster, like many
casual dining restaurants was hit by broader economic factors. Widespread labor shortages
from the pandemic and higher inflation
drove up the cost of labor eating into profits. – It was much more expensive to get these restaurant employees, and that means their cost ballooned. – [Narrator] And interest rates rose, which drove up the price of its leases. – You're not in control of
your destiny in the same way as you are when you own
all the restaurants. You know there's a chance that you're gonna have to amend your terms. You know the prices can fluctuate and suddenly you're paying a lot more for your real estate than you did. – [Narrator] To combat these losses, Red Lobster needed a hit. In June 2023, the
company took a big swing.
– [Announcer 2] Ultimate
endless shrimp is here with a limited time flavor drop. – [Narrator] The dragon shrimp
flavor drop was limited time, but endless shrimp at a low
price was now a year round deal. – [Announcer 2] For just $20
right now, only at Red Lobster. – [Narrator] It was supposed
to be a loss leader, which means the deal
itself wasn't profitable, but it would increase foot
traffic at a time when diners were choosing to order in. Execs were optimistic. (speaking foreign language) – [Narrator] And it seemed to work. The endless shrimp deal
brought in 4% more foot traffic for the third quarter,
a significant increase, but then it started working too well.
– My goal is to eat 65 shrimps tonight. – 25 shrimps tonight. – Eat 45 shrimps tonight. – [Heather] People were
very conscious of it. – There we go. – The brand made sure
that they marketed it both in traditional channels and online, and it got some buzz, but
maybe a bit too much buzz. – [Narrator] The endless
shrimp deal was much more popular than Red Lobster expected. This price was at the heart of the issue. – On this promotion, we don't
earn a lot of money at $20. We don't, okay, and this is
one of the key reason for the losses we generated in in Q3 2023.
– [Narrator] For the third quarter, the company reported an
$11 million operating loss. – They'd had something
like a $2 million loss the quarter before, but 11 million to have that in the quarter following. I mean, that's just a huge leap. – [Narrator] And sales in
2023 were down 8% from 2022. Today, Red Lobster ranks
just 41st on the list of the biggest US restaurant chains. And in January 2024, Thai Union Group announced it would sell Red Lobster.
– CEO of Thai Union also
said he never wanted to eat lobster again. I mean, I think they were just really fed up with this situation. – [Narrator] In March, the company brought on Jonathan Tibus as CEO, an expert who has led restructuring at brands like Krystal and Kona Grill. – I don't know for sure what
that means for Red Lobster, but it certainly does put it
more likely that they'll file for bankruptcy than say
before his announcement. – [Narrator] Red Lobster did not respond to a request for comment. For the time being, Red Lobster is still offering its endless shrimp deal, but it's bumped up the price to $25. (light upbeat music).