Did Endless Shrimp Really Bankrupt Red Lobster?

The word of Red Lobster's downfall has been front page news lately — while the chain isn't out of business, it has announced the closure of what now amounts to nearly 100 restaurants. What's more, it has now filed for bankruptcy and yes, one of the contributing factors seems to have been the disastrous Ultimate Endless Shrimp Deal that became part of the permanent menu in June of 2023, even though the chain itself hasn't come out and cited it as having caused the current situation.

As the name implies, this promotion meant that for one price, originally just $20, a diner could gorge on as much as they wanted of their choice of two different shrimp entrees, plus they still got a few Cheddar Bay biscuits into the bargain. Even when the restaurant raised the price of the meal to $25, it still didn't make any money off the shrimp sales. In fact, by the end of 2023 it looked as if the chain was set to lose $20 million in annual profits due to this deal. The shrimp sales alone, however, weren't what tanked Red Lobster, since the bankruptcy filing documents reveal that the chain is now over a billion dollars in debt.

Other factors contributed to the chain's financial woes

Yes, 2023's Ultimate Shrimp Fiasco was a blunder of epic proportions, especially since the chain made a similar mistake 20 years ago when a $22.99 all-you-can eat endless snow crab offer led to over $3 million in losses. Still, it may have been willing to gamble in light of the fact that it's been losing foot traffic since the 20-tweens. Although the chain has changed hands several times over the past decade, none of the new owners have really succeeded in rebooting the struggling brand.

One of the challenges faced by Red Lobster was the pandemic, as this impacted most of the restaurant industry, but the post-pandemic labor shortage didn't help the chain bounce back as hard as it needed to. Skyrocketing food prices, too, led to restaurant price increases in 2022, and Red Lobster was not immune from these. Between the higher prices and the association with lobster, some consumers may have started to see Red Lobster as a luxury brand, which could have also impacted sales since it it lacks the kind of upscale vibe that appeals to more affluent diners. Perhaps the post-bankruptcy restructuring will see the chain leaning more towards a casual dining presentation focused on affordable seafood entrees while de-emphasizing pricier types of shellfish. It probably won't go so far as to change its name to Red Mullet, although that would certainly make for some hilarious mascot possibilities. (A fish with a Ziggy Stardust wig!)