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exboyfil

(17,893 posts)
Wed May 22, 2024, 09:38 AM May 22

Red Lobster bankruptcy driven by corporate owner forcing it to source its seafood?

Last edited Wed May 22, 2024, 10:38 AM - Edit history (1)

"Red Lobster CEO Jonathan Tibus wrote in court documents the Endless Shrimp offer was originally intended to be a limited-time promotion. However, in May 2023, Paul Kenny, Red Lobster’s CEO at the time, made the decision to add the promotion to the chain’s menus permanently, priced at USD 20.00 (EUR 18.41), “despite significant pushback from other members of the company’s management team,” Tibus said.

“This decision created both operational and financial issues for the debtors … saddling the company with burdensome supply obligations, particularly with its equity sponsor: Thai Union,” Tibus said.

Red Lobster is investigating the circumstances around these decisions, including whether Kenny’s decision-making process circumvented the company’s normal supply chain and demand planning processes.

Red Lobster’s supply process was strained by virtue of its relationship with Thai Union, according to Tibus. In addition to being the company’s equity sponsor and 100 percent owner of Red Lobster Master Holdings GP, Thai Union is a primary supplier of seafood to Red Lobster."

Investing story that involves foreign ownership of a traditional American brand (Red Lobster is about the only place you can dine out on seafood in many locations in the midwest). We don't have a comparable restaurant in our area so it is now an hour plus drive to the nearest Red Lobster.

Got to wonder if the bankruptcy will be limited to Red Lobster alone or the debtors will attempt to pierce the corporate veil to Thai Union.


https://www.seafoodsource.com/news/business-finance/red-lobster-files-for-bankruptcy-says-it-s-investigating-thai-union-s-undue-influence-in-shrimp-purchasing-decisions

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Red Lobster bankruptcy driven by corporate owner forcing it to source its seafood? (Original Post) exboyfil May 22 OP
Who cares why? It was a horrid place. The food was jimfields33 May 22 #1
Apparently not in the arid midwest.... getagrip_already May 22 #2
The reason for closure is not enough people going. They know it's not tasty. jimfields33 May 22 #11
Sounds more like they over ran their food budget getagrip_already May 22 #13
Yeah. It definitely would be better if they didn't take on debt. jimfields33 May 22 #14
Agree Completely ProfessorGAC May 22 #24
was it shrimp or shrump? debm55 May 22 #21
As being in the Midwest, we did/do love our seafood. But like you said, the diners are few and far between, and SWBTATTReg May 22 #28
The Midwest could have it's own locally grown fish, shrimp, and "lobster." hunter May 22 #30
Well atreides1 May 22 #4
Yep exboyfil May 22 #8
I don't know if it is still there but there was a Joe's RubyRose May 22 #18
Link doesn't work, it goes to a 'change your password' page Celerity May 22 #3
Thanks. exboyfil May 22 #7
yw Celerity May 22 #15
Hey Red Lobster, the ocean called... Prairie Gates May 22 #5
There's always Olive Garden Voltaire2 May 22 #6
Vampire private equity firms buy struggling corporations and suck all the life out of them. hunter May 22 #9
Sorry about that exboyfil May 22 #10
Unfortunately, companies often can't get funding elsewhere. They turn to PE like some Silent Type May 22 #26
Paul Kenny, Red Lobster's CEO at the time made the stupid decision to keep "endless shrimp" on the menu... brush May 22 #12
That always burns me up. Bad CEOs get rewarded RubyRose May 22 #19
Yes, the workers always get screwed while the screw up big wigs get rewarded. brush May 22 #22
''Tis no man, 'Tis a remorseless eating machine! Argggg Hassin Bin Sober May 22 #27
At one time baseball was America's past time. Stuffing oneself might have replaced it. brush May 22 #29
They will all... 2naSalit May 22 #16
Red Lobster started dying when it was sold in 2014 to a private equity firm. Bonx May 22 #17
Poor decisions plus private equity vultures "enshittification" EleanorR May 22 #20
Private Equity/Vulture...er ah...Venture Capitalists firms sell off/hollow out the company's assets... brush May 22 #23
You do all know tavernier May 22 #25
Wholesale shrimp is four bucks a pound if you purchase it by the ton jmowreader May 22 #31
Lobster is becoming LESS popular as more people get tired of seeing live animals in the tank... WarGamer May 22 #32

getagrip_already

(15,710 posts)
2. Apparently not in the arid midwest....
Wed May 22, 2024, 10:07 AM
May 22

Now I'm in the northeast and own my own fishing boat, so I rarely eat in seafood restaraunts, but they are plentiful here.

Even so, there are red lobsters, so somebody must like them. More power to them.

This story is about corporate greed and corruption. Not food quality and eating preferences.

getagrip_already

(15,710 posts)
13. Sounds more like they over ran their food budget
Wed May 22, 2024, 10:55 AM
May 22

With the shrimp deal and couldn't find a way out.

Then the typical cycle of unnecessary debt burden crushed their ability to operate efficiently.

Old story that usually has little to do with operations. Debt kills these companies. Debt that is used to bleed them dry by management.

ProfessorGAC

(66,659 posts)
24. Agree Completely
Wed May 22, 2024, 01:20 PM
May 22

They over expanded. RL has always been on the pricey side. The clientele is limited by finances.
There are 5 within a half-hour drive from our house. They needed five locations in a 40 mile circle?

SWBTATTReg

(22,700 posts)
28. As being in the Midwest, we did/do love our seafood. But like you said, the diners are few and far between, and
Wed May 22, 2024, 02:05 PM
May 22

expensive (and it continues to get more expensive too).

We do have the shrimp farms over next door in Illinois, where they raise shrimp, and while not 100% sure, I'm sure that other seafood is farmed too, such as catfish, trout, etc. I seem to recall also, that some seafood comes from off the coast of Chile, and perhaps other places, if China hasn't fished them all out yet. I do recall that their Navy had to chase off Chinese fishing boats from invading their waters.

You are so very lucky, I would love having the ability to walk along the docks, perhaps get to buy some fish etc. for dinner, etc. Of course here, where I'm at, we have the Mississippi and Missouri (and the Meramec) rivers coming together, so the fish of choice is Catfish, perhaps trout, crappy, and maybe some sprinkling of other species. Not exactly the sort of meal one wants, but to give credit, the rivers are cleaned up quite a bit from, eh, 20-30 years ago.

hunter

(38,564 posts)
30. The Midwest could have it's own locally grown fish, shrimp, and "lobster."
Wed May 22, 2024, 04:07 PM
May 22

Grown in ponds, of course, but close enough in taste and texture to the seafood sold in many restaurants.

atreides1

(16,189 posts)
4. Well
Wed May 22, 2024, 10:12 AM
May 22

There are not a lot of genuine seafood restaurants in the Midwest. I found one located in Davenport, Iowa...Miss Mamie's Seafood and Steaks...and another located in Omaha, Nebraska...Plank's Seafood Provisions.

exboyfil

(17,893 posts)
8. Yep
Wed May 22, 2024, 10:42 AM
May 22

2 1/2 hour drive to Davenport for me and four hours to Omaha.

A lot of people look down their noses at Red Lobster, but my family has been enjoying them for three generations. My mom worked at high end seafood places in California and the Mississippi Gulf Coast as a waitress, and she has never been snobbish about going to Red Lobster (actually that is the last restaurant we went to together before she died, and we were planning a trip there when she died).

RubyRose

(185 posts)
18. I don't know if it is still there but there was a Joe's
Wed May 22, 2024, 12:16 PM
May 22

Crab Shack outside Des Moines that I really enjoyed occasionally.

hunter

(38,564 posts)
9. Vampire private equity firms buy struggling corporations and suck all the life out of them.
Wed May 22, 2024, 10:44 AM
May 22

Then they sell the corpse.

Buyer beware.

This has little to do with "Endless Shrimp."

Nobody should ever click on a link like the one you originally posted. Thanks for fixing it.

Silent Type

(4,545 posts)
26. Unfortunately, companies often can't get funding elsewhere. They turn to PE like some
Wed May 22, 2024, 01:49 PM
May 22

people resort to loan sharks, payday loans, etc.

brush

(55,083 posts)
12. Paul Kenny, Red Lobster's CEO at the time made the stupid decision to keep "endless shrimp" on the menu...
Wed May 22, 2024, 10:54 AM
May 22

permanently instead of on the intended "limited time" basis. No company could sustain that policy in a nation where so many people over eat for sport.

Seems a stupid CEO is the blame for Red Lobster's bankruptcy. IMO they should rake back whatever golden parachute package he got when he left the company he destroyed with his stupidity.

RubyRose

(185 posts)
19. That always burns me up. Bad CEOs get rewarded
Wed May 22, 2024, 12:18 PM
May 22

For their bad decisions while the workers lose their jobs. No parachutes for the workers that are laid off.

2naSalit

(88,800 posts)
16. They will all...
Wed May 22, 2024, 12:04 PM
May 22

Be going away before long anyway and has little to do with one person's bad management decisions.

EleanorR

(2,425 posts)
20. Poor decisions plus private equity vultures "enshittification"
Wed May 22, 2024, 12:23 PM
May 22

Worth reading the whole article as it also discusses changes in the structure of the fishing industry over the past few decades that have lead to changes in fish and seafood prices.

The company’s current management and CEO are eager to pin its demise on Endless Shrimp, which totaled $11 million in losses. Upon filing for bankruptcy, they also launched an internal investigation into whether their majority shareholder Thai Union Group, which is also their main seafood supplier, might have pushed the shrimp promotion in order to boost their own sales at the cost of the retailer’s finances. This ownership structure between parties that are supposed to be on opposite sides of restaurant transactions does appear to be a clear conflict of interest.

But the arc of Red Lobster’s collapse extends much further back than Thai Union, and bends toward what writer Cory Doctorow has vividly described as “enshittification.”

The Endless Shrimp fiasco was a minor speed bump amid a series of poor business decisions by the company’s numerous owners. Many of those mishaps look less like miscalculations and more like self-sabotage, intended to hollow out the restaurant chain to enrich the chain’s previous private equity owners, Golden Gate Capital.

Golden Gate crippled Red Lobster by selling off one of its most valuable assets, the real estate it owned, in what’s known as a sale-leaseback, for $1.5 billion. With that sale, Golden Gate nearly made back its $2.1 billion purchase of Red Lobster, while turning the chain into a permanent leaser, adding a massive additional cost in the form of rent that was orders of magnitude bigger than the cost of Endless Shrimp. When commercial leases started going up, Red Lobster was highly exposed, but by then Golden Gate had already sold off its shares to Thai Union, which inherited all the debts Golden Gate stacked on the company.


https://prospect.org/economy/2024-05-22-raiding-red-lobster/

brush

(55,083 posts)
23. Private Equity/Vulture...er ah...Venture Capitalists firms sell off/hollow out the company's assets...
Wed May 22, 2024, 01:16 PM
May 22

and make their money then sell off the hollowed out company loaded with debt (rent plus), but the stupid "endless shrimp" policy sure didn't help. I mean we live in a nation where many are overweight and over eating is done for sport. That dumb CEO who made that policy permanent instead of for a limited time should have his golden parachute clawed back.

tavernier

(12,585 posts)
25. You do all know
Wed May 22, 2024, 01:40 PM
May 22

that shrimp is one of tbe easiest and most versatile foods to prepare, and readily available in supermarkets all over the country? I net it right off the back of my boat and toss it in a boiling pot in my galley, so don’t expect it it to taste quite like that, but some lemon and melted butter (and dill in the boil) will perk up a pot of frozen critters.
And you can tip yourself.

jmowreader

(50,806 posts)
31. Wholesale shrimp is four bucks a pound if you purchase it by the ton
Wed May 22, 2024, 05:20 PM
May 22

Very, very few people can eat a whole pound of shrimp in one sitting, so I don't think the Endless Shrimp is the problem here.

What I DO think is the problem, as it is with most LBOs, is the Endless Fees those guys charge the companies they've taken over. That's what killed Toys R Us, the endless fees. (That, and TRU is really a seasonal venture - most of their sales are made around Christmastime. I think what I woulda done if I was running TRU is set up a system like Spirit Halloween does - they only do brick-and-mortar for a couple months before the holiday and run an e-commerce site year-round. Maybe do store-within-a-store in, say, Target or Kohl's, like Sephora does.) It is extremely rare that a post-LBO company is successful.

WarGamer

(13,199 posts)
32. Lobster is becoming LESS popular as more people get tired of seeing live animals in the tank...
Wed May 22, 2024, 05:23 PM
May 22

Awaiting their fate.

If all the lobster tails were frozen in a box... it's less of a turn off for some people.

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