Red Lobster found itself in financial trouble after running an “Endless Crab” promotion in 2003 which resulted in a loss of $3.3 million. Fast forward to 20 years later, they made a similar mistake with shrimp, offering a $20 endless shrimp deal that proved to be too popular and unprepared for customers’ demand. Red Lobster’s major shareholder, Thai Union, suffered a loss of $11 million, leading to concerns about the company’s management.
The decline of Red Lobster can be attributed to a variety of factors, including changes in ownership and mismanagement by Thai Union. The rise of fast-casual and quick-service chains also impacted Red Lobster’s ability to attract customers, as they struggled with marketing, food quality, service, and upgrades. The chain’s failure to appeal to millennials and relying heavily on its Baby Boomer customer base further contributed to its downfall.
Red Lobster’s roots trace back to 1968 when it was founded by Bill Darden and Charley Woodsby, offering affordable seafood to middle America. General Mills acquired the brand in the early 1970s, leading to rapid growth and national advertising. By 1995, General Mills spun off its restaurant division into Darden Restaurants, which included Red Lobster and Olive Garden.
Under Darden Restaurants, Red Lobster fell behind its sister brand Olive Garden, leading to declining sales and a decision to sell the chain in 2014 to Golden Gate Capital. The sale leaseback agreement and increased competition from fast-casual and quick-service restaurants further strained Red Lobster’s financial health. Thai Union’s involvement as a shareholder also contributed to the chain’s challenges.
Thai Union’s mismanagement, including cost-cutting measures and menu decisions driven by executives rather than customer preferences, further harmed Red Lobster’s reputation. The decision to make the endless shrimp deal permanent backfired, leading to increased customer traffic but also longer wait times and slower service. Thai Union ultimately decided to divest from Red Lobster and incur a $530 million loss on its investment, citing industry headwinds and rising costs as reasons for the decision.
