Red Lobster’s endless-shrimp promotion was a ‘car crash,’ lawsuit says
The exterior of a Red Lobster restaurant in Austin, Texas, on May 20, 2024. Red Lobster filed for Chapter 11 bankruptcy protection after a failed leaseback deal and “infinite shrimp” promotion backfired on company revenue.
Brandon Bell | Getty Images
Restaurant chain Red Lobster’s “Ultimate $20 Daily Shrimp” offer has been described as a “car crash” as the chain’s creditors sue former controlling shareholder Thai Union.
In a lawsuit filed in Orange County, Fla., in May, creditors said Thai Union, a seafood producer whose shares are traded on the Thai stock exchange, knew the chain faced significant financial problems and was at risk of bankruptcy in 2023. A lawsuit filed by a foundation on behalf of Red Lobster creditors requests a jury trial to determine compensation.
“Instead of considering the restaurant chain’s best interests, Thai Union has doubled down on a campaign to squeeze every drop of value it can through uneconomic contracts that benefit Thai Union and make no economic sense for Red Lobster.”
Thai Union and Red Lobster did not immediately respond when contacted by CNBC for comment.
Red Lobster filed for bankruptcy in May 2024, shuttering restaurants across the U.S. and filing for Chapter 11 protection as it faces increased competition, expensive leases, a broader pullback in consumer spending and the effects of a shrimp promotion.
The company defaulted on the $275 million term loan it received from Fortress Investment Group in September 2023.
The company emerged from Chapter 11 in September 2024 after being acquired by private investor group RL Holdings. reportedly led by Fortress. RL Holdings still owns Red Lobster.
The lawsuit alleged that Thai Union pressured Red Lobster to purchase increasing quantities of its shrimp at above-market prices and prohibited a competitor from supplying the restaurant chain.
The lawsuit alleged that Thai Union and then-interim CEO Paul Kenny “designed and implemented” the endless shrimp promotion over the objections of Red Lobster employees unaffiliated with Thai Union, which led to restaurants across the country “standing still” because they ran out of shrimp and were unable to turn tables.
“When it became clear that the $20 per day Ultimate Infinite Shrimp offer was causing damage to Red Lobster and its bottom line, Kenny doubled down. He responded by continuing the offer and producing tens of millions of dollars more in overpriced shrimp orders for Thai Union, ultimately leaving Red Lobster facing a massive oversupply,” the filing said.
Red Lobster brought back its endless shrimp promotion in April. According to their websiteHowever, the promotion was said to be for a limited time and the cost was not specified.
Thai Union bought a minority stake in Red Lobster in 2016, then effectively controlled the company in 2020 after teaming up with another interested shareholder for a majority stake and three out of five of Red Lobster’s board seats.
He later divested his shares in May 2024, and the lawsuit alleged that he did not contribute any capital to the Chapter 11 process.
“Thai Union treated the company as little more than a distribution arm for its own products, milking whatever value it could get from Red Lobster, especially now that the company was bankrupt,” the lawsuit said. The statement was included.
