More than 100 Red Lobster locations are facing closure unless the company can negotiate for cheaper rents from landlords.
The fast-food chain had already closed 93 of its restaurants on May 13 and the following week filed for Chapter 11 bankruptcy in the hope of restructuring its debts.
Over 100 Locations in Danger
According to court documents, 135 locations in the franchise are under threat of closing due to high costs.
If leases stay at their current rates the restaurants will continue to lose money with the options being either negotiate lower rents or close them.
Iconic Restaurants
The locations that are facing closure include the iconic Times Square restaurant although the company claims they are doing their best to keep it open.
The 22-year lease on the New York establishment is facing double the rent, upping the cost to $2.2 million a year.
Limited Window
There’s only a couple of weeks that Red Lobster will be able to negotiate a deal with the new landlord as the lease is due to begin on June 30.
Publicizing the list of leases that are under threat and including the high-profile location may be a tactic to aid in their negotiation.
Bankruptcy Attorney Weighs In
According to the bankruptcy attorney Patrick Collins in a comment to The Post, the strategy “could be a way to exert pressure on the landlord.”
Collins continued to say: “It’s a way for the company to signal to the landlord that unless something changes it’s prepared to close that store.”
More Than 200 Leases Causing Losses
As per bankruptcy court documents, there are 228 leases that are causing losses for the company and will continue to do so unless rents are slashed.
This includes the previously closed 93 locations which leaves the 135 other restaurants at risk of closing.
Well-Established Brand
Red Lobster was established back in 1968 with the first location opening in Lakeland, Florida highlighting the storied history of the brand.
On May 19 the restaurant chain filed for Chapter 11 bankruptcy, partly due to the endless shrimp promotion losses.
Liquidator Auctioning Off Assets
Before the bankruptcy filing was announced, the restaurant liquidator TAGeX Brands was employed to auction off equipment from 48 shuttered Red Lobster locations.
The issues with the fast-casual brand can be traced back to increased rents and labor costs as the country looks towards higher minimum wages for service workers.
Making The Same Mistakes
The endless shrimp promotion that has plagued Red Lobster has echoes of a 2003 promotion the restaurant had involving endless crab.
The offer for seafood lovers two decades ago was a hit with customers but ended up costing the company $3.3 million.
Setting a Challenge
The endless shrimp promotion inspired people to challenge themselves to see how much they could stomach.
Some customers were reported to have stayed in restaurants for hours on end to see how many they could eat, with one customer allegedly managing 108 in just four hours.
Majority Owner Losses
The never-ending shrimp debacle has caused more losses than the endless crab offer of the past.
Thai Union, the majority owner of Red Lobster, posted $11 million in losses only three months after the deal launched.
CFO Speaks Out
Ludovic Garnier, the chief financial officer explained their rationale in a statement: “We knew the price was cheap, but the idea was to bring more traffic in the restaurants.”
He went on to say: “So we wanted to boost our traffic, and it didn’t work”, lamenting the failure of the promotion.
As troubles continue for Red Lobster, the casual dining franchise is trying its best to stay afloat amidst rising operational costs.
