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CNN
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Crimson Lobster, which introduced reasonably priced shrimp and lobster to middle-class America and grew to grow to be the most important seafood restaurant chain on this planet, has filed for chapter.
The corporate stated it had greater than $1 billion in debt and fewer than $30 million in money available. It plans to promote its enterprise to its lenders, and in flip, it’ll obtain financing to remain afloat. It expects to proceed to shut eating places within the meantime.
Crimson Lobster, identified for its cheddar bay biscuits, crab legs and shrimp dishes, unfold across the nation in the course of the Eighties and Nineteen Nineties. In 2016, Beyoncé talked about Crimson Lobster in her track “Formation,” describing bringing a romantic accomplice to Crimson Lobster, inflicting sales to surge.
With 578 eating places throughout 44 states and Canada, Crimson Lobster serves 64 million clients a yr, and it brings in $2 billion in annual gross sales, the corporate stated in its chapter submitting. One in 5 lobster tails bought in North America is purchased by Crimson Lobster.
However latest mismanagement, competitors, inflation and different elements introduced down Crimson Lobster, analysts and former Crimson Lobster staff say.
Years of underinvestment in Crimson Lobster’s advertising, meals high quality, service and restaurant upgrades harm the chain’s skill to compete with rising fast-casual and quick-service chains.
Crimson Lobster started in 1968 by Invoice Darden, an architect of the informal eating revolution in America, and Common Mills quickly purchased the restaurant. Crimson Lobster later turned a part of Darden Eating places, the proprietor of Olive Backyard and different chains.
In 2014, Darden bought off Crimson Lobster to Golden Gate Capital, a non-public fairness agency, for $2.1 billion. Since 2020, seafood distributor Thai Union Group, based mostly in Thailand, has been the most important Crimson Lobster shareholder. Thai Union owns 49% of the corporate.
However Crimson Lobster has struggled underneath Thai Union.
The variety of clients coming to Crimson Lobster tumbled 30% since 2019 and has solely barely improved because the pandemic. Earlier this yr, Thai Union stated it might divest from Crimson Lobster and take a $530 million loss on its funding.
Former Crimson Lobster staff say Thai Union’s cost-cutting efforts and technique errors harm the chain.
“Thai Union compelled enormous price reductions, together with many who have been penny clever and pound silly as a result of they harm gross sales,” a former Crimson Lobster government who spoke underneath the situation of anonymity due to a non-disclosure settlement with the corporate instructed CNN earlier this month. Thai Union didn’t reply to requests for touch upon that article.
Crimson Lobster executives started to run for the doorways underneath Thai Union’s administration, leading to an enormous quantity of C-suite churn. Crimson Lobster has had 5 CEOs since 2021. In 2021 and 2022, Crimson Lobster introduced on a brand new CEO, chief advertising officer, chief monetary officer and chief info officer. All have been gone inside two years.
Final summer time, underneath Thai Union, Crimson Lobster turned $20 countless shrimp right into a everlasting merchandise on the menu for the primary time, as an alternative of its conventional limited-time supply deal. The change price the corporate $11 million and cut into Thai Union profit. In its chapter submitting, Crimson Lobster stated it’s investigating the circumstances of that promotion, which the corporate’s administration opposed.
“We have to be way more cautious,” Thai Union CFO Ludovic Garnier stated on an earnings name in November 2023.
However the firm in its chapter submitting blamed Thai Union for the losses. Noting that underneath the guise of a “high quality evaluate,” Crimson Lobster eradicated two of its breaded shrimp suppliers, leaving Thai Union with an unique deal. That led to greater prices for the restaurant chain, and didn’t adjust to the corporate’s typical decision-making course of for choosing suppliers based mostly on projected demand.
The explosive progress and recognition of fast-casual chains like Chipotle and quick-service chains like Chick-fil-A over the previous 20 years additionally squeezed Crimson Lobster.
Informal eating has slipped from 36% of whole restaurant trade gross sales in 2013 to 31% in 2023, based on Technomic, a restaurant analysis agency.
In its chapter submitting, Crimson Lobster conceded it had “a bloated and underperforming restaurant footprint” and cited a troublesome financial atmosphere and elevated competitors for its latest monetary failures.
Crimson Lobster has been telegraphing its chapter for months.
In January, the corporate employed Jonathan Tibus, a restructuring veteran, to evaluate its enterprise. It named Tibus as CEO in March. Final week, the corporate started shutting down 93 restaurants in preparation for its chapter.
Because it ran out of money, the corporate stopped paying its distributors final yr.
The corporate plans to remain afloat with a $100 million financing settlement, it stated in its chapter petition.
This story has been up to date with extra developments and context.