Struggling Red Lobster Owner Admits the Chain's Future Looks Bleak
When major restaurant chains go up for sale, the price tag to snatch up those brands can total hundreds of millions or even billions of dollars. But after significant financial losses in recent years, Red Lobster's owner says it has low expectations for its forthcoming sale of the seafood chain.
Thai Union Group, a Thailand-based seafood producer, led an investment group that purchased majority control of Red Lobster back in 2020. Thai Union Group President and CEO Thiraphong Chansir said in a statement at the time of purchase that they believed in the "tremendous long-term potential" of Red Lobster. However, the reality doesn't seem to have lived up to the company's initial expectations.
Red Lobster has struggled with high food and labor costs and significant operating losses. It has also shuttered a string of underperforming restaurants ever since Thai Union acquired it.
Last year was particularly rough for Red Lobster and Thai Union. The chain brought back its popular Ultimate Endless Shrimp deal in June 2023, allowing customers to order unlimited helpings of several predetermined shrimp dishes for a set price of $20. Customers ended up ordering Ultimate Endless Shrimp far more than the company anticipated, leading to $11 million in operating losses. Thai Union later raised the price of the deal to $25.
Red Lobster saw an additional $12.5 million in losses in the fourth quarter of 2023, which Thai Union blamed on challenges like higher costs and interest rates.
This all culminated in Thai Union announcing last month that it wants out of the Red Lobster business, citing its "prolonged negative financial contributions." But in a new update this week, the company sought to temper expectations for the planned sale.
"We're not expecting to get anything much from the sale," Chansiri told investors during a Feb. 19 earnings call, according to Restaurant Business Magazine. "So you don't need to expect any one-time gain from Red Lobster."
Chansiri noted that Thai Union is preparing for a bidding process on Red Lobster that could take three or four months. While company executives expressed disappointment over losing Red Lobster, they also seem confident that it's the right path for Thai Union and its shareholders. Moving forward, they plan to focus on Thai Union's core business of producing seafood products.
"We are not happy with this decision [to divest], but I think it shows that we took the right decisions to move away and to exit from the business," CFO Ludovic Garnier said during the earnings call, per Restaurant Business Magazine.
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