The exterior of a Red Lobster restaurant on May 20, 2024 in Austin, Texas. Red Lobster filed for Chapter 11 bankruptcy protection after a failed lease deal and an “endless shrimp” promotion dented the company’s bottom line.
Brandon Bell | Getty Images
Red Lobster’s “Everyday $20 Ultimate Endless Shrimp” restaurant offering has been described as a “car accident” as creditors sue former controlling shareholder Thai Union.
In a lawsuit filed in Orange County, Fla., in May, creditors say Thai Union — a seafood producer whose shares are traded on Thailand’s stock exchange — knew in 2023 that the chain was facing difficult financial conditions and was at risk of bankruptcy. The lawsuit, filed by the trust on behalf of Red Lobster’s creditors, is asking a jury to determine damages.
Instead of looking out for the restaurant’s interests, “Thai Union doubled down on the campaign to squeeze every drop of value it could out of uneconomic contracts that benefited Thai Union and made no economic sense with Red Lobster.”
Thai Union and Red Lobster did not immediately respond when contacted for comment by CNBC.
Red Lobster filed for bankruptcy in May 2024, closing restaurants in the US and filing for Chapter 11 protection as it faces increased competition, expensive rents, a broader decline in consumer spending, and a slump in shrimp advertising.
The company had defaulted on a $275 million long-term loan from Fortress Investment Group due in September 2023.
The company emerged from Chapter 11 in September 2024 after being acquired by private equity investor RL Holdings, reportedly led by Fortress. RL Holdings still owns Red Lobster.
The lawsuit alleged that Thai Union pressured Red Lobster to buy inflated quantities of its shrimp at above-market prices and prevented a competitor from serving the restaurant.
Thai Union and interim CEO Paul Kenny “created and implemented” a permanent shrimp promotion over the objection of Red Lobster employees not affiliated with Thai Union, and this resulted in restaurants nationwide being “immobilized” as they ran out of shrimp and could not turn tables, the lawsuit said.
“When it became clear that the daily $20 Ultimate Endless Shrimp offering was wreaking havoc on Red Lobster and its balance sheet, Kenny doubled down. He responded by continuing the offering—and generating tens of millions of dollars more in Thai Union’s ultra-cheap shrimp orders—and ultimately left Red Lobster with a huge surplus,” the filing reads.
Red Lobster brought back the unlimited shrimp promotion in April, according to its website, although it said the promotion was for a limited time and did not provide a cost.
Thai Union had bought a small stake in Red Lobster in 2016, then effectively controlled the company after meeting with another related shareholder in 2020 to acquire a majority stake and three-fifths of Red Lobster’s board seats.
It later rescinded its stake in May 2024, and the lawsuit said it did not put any money into the Chapter 11 process.
“Thai Union treated the company as part of its distribution business, milking any value it could have from Red Lobster, especially since the company was bankrupt,” the lawsuit said.
