On the surface, the story of Red Lobster’s bankruptcy is about one of the seven deadly sins: gluttony.

The most eye-catching manifestation of that sin, as my colleague Marisa Gerber reported, was the chain’s experience with its $20 all-you-can eat shrimp promotion, which attracted families that parked themselves in the restaurants for hours at a time, consuming mass quantities.

But that doesn’t account for the gluttony of Red Lobster’s former private equity owners, San Francisco-based Golden Gate Capital, or its subsequent corporate owners, the huge Bangkok-based seafood conglomerate Thai Union.

According to Sunday’s bankruptcy filing by the chain’s new management, the chain was saddled with suffocating leases at “above-market” rents; these were the product of a financing deal entered into by Golden Gate. Thai Union, the filing insinuates, pressured the company into “burdensome supply obligations” that had little to do with the restaurants’ actual needs.

Golden Gate declined to comment. A Thai Union spokesman told me via email that the accusations in the filing are “meritless” and that it intends to continue its 30-year relationship with Red Lobster as a supplier.

That suggests that Thai Union sees more profit from selling shrimp to the chain than it did as a shareholder.

Put all this together, and it becomes clear that a major cause of Red Lobster’s financial collapse was the machinations of its owners.

Indeed, the chain got flipped several times among owners looking for a big payoff; when their expectations were disappointed, they sold it off.

As the bankruptcy filing put it, the chain “has gone from a privately-owned enterprise, to part of a publicly-traded organization, and then back to private again.”

It was founded as a single Orlando restaurant in 1968 by Bill Darden, then acquired by General Mills, which then spun off Red Lobster along with its Olive Garden chain as Darden Restaurants. Darden sold Red Lobster in 2014 to Golden Gate, which sold it in stages to Thai Union and exited ownership entirely in August 2020.

At the end of last year, Thai Union, which had bought a minority stake in the chain for $575 million in 2016 and purchased the rest for an undisclosed sum as a member of an investment consortium in 2020, wrote down its stake in Red Lobster to zero, taking a $527-million charge.

Throughout that period, Red Lobster faced a raft of challenges. Having made its nationwide mark in the 1980s and 1990s as America’s first “casual dining” chain—a step up from fast food but short of premium-priced sit-down fare—it now has about 550 company-owned locations in the U.S.

(The bankruptcy filing says Red Lobster’s “rich history … spans seven decades,” but its arithmetic is off: It’s only been in existence for 56 years.)

As time went on, Americans’ tastes changed and seafood-only restaurants fell out of favor. Then came the pandemic. According to the bankruptcy filing, the restaurants’ guest count is still about 30% below its pre-pandemic level. Over the last year, its operating earnings have fallen by 60%. The chain lost $76 million in fiscal 2023.

As the headwinds gathered, Red Lobster’s management changes were as dizzying as its ownership changes. From 2021 to now, the company had four CEOs, including one who lasted eight months in 2021-22.

After that the company went without a CEO for 17 months; the new incumbent assumed office in last September and was succeeded in March by Jonathan Tibus, a turnaround specialist who is now in charge. Each new CEO arrived with new strategic ideas before giving way to a successor who tried to undo the previous strategy and impose a new one.

If one is looking for the original sin in Red Lobster’s decline, however, a good candidate would be the deal that brought it under Golden Gate Capital’s ownership. The private equity firm bought the chain from Darden for $2.1 billion, financing the sale in part by selling the real estate underlying 500 restaurants to the real estate firm American Realty Capital for $1.5 billion.

This was a sale-leaseback transaction, in which Red Lobster was instantly converted from the owner of its property to a tenant on the same property. The leases were typically long-term — as long as 25 years — with annual rent increases of 2% baked in. They were also triple-net leases, meaning that the restaurants were responsible for paying operating costs, property taxes and insurance.

Red Lobster thus lost a great deal of flexibility for closing underperforming restaurants and cutting costs. The bankruptcy filing says that a material portion of the leases charge above-market rates. Of the company’s lease obligations of $190.5 million last year, more than $64 million was for “underperforming stores.”

This exacerbated the company’s financial problems. “Given the Company’s operational headwinds and financial position,” the filing says, “payment of lease obligations associated with non-performing leases has cause significant strains on the Company’s liquidity.” In other words, the sale-leaseback arrangement was draining the company of cash.

The sale-leaseback deal raised eyebrows among restaurant analysts at the time. “Let’s get this straight,” wrote Jonathan Maze of Restaurant Finance Monitor: “We’re taking a brand with badly falling sales and earnings, and will then load it up with rent costs?”

At the outset, Red Lobster would be paying $118.5 million in cash rent, about half the chain’s annual operating earnings, he wrote. “Red Lobster’s real estate sale gives its new owners little room for error,” he added presciently. Golden Gate declined to comment.

It’s proper to note that this sort of transaction resembles private equity deals that have been blamed for the deterioration of consumer businesses in other industries. Private equity takeovers often result in large-scale worker layoffs and the imposition of heavy debt on companies that can hasten their decline, as well as bringing higher costs to consumers.

The pattern was for private equity funds to “purchase controlling interests in companies for a short time, then load them up with debt, strip them of their asset, extract exorbitant fees, and sell them at a profit — implementing drastic cost-cutting measures at the expense of workers, consumers, communities, and taxpayers,” Democratic lawmakers wrote in 2019.

Buyouts of private for-profit colleges, for example, resulted in jacked-up tuition charges and higher student loan balances among students, according to a 2019 study of several such deals; these were accompanied by “sharp declines in student graduation rates, loan repayment rates, and labor market earnings.”

And local newsrooms across the country have been gutted by the private equity firm Alden Global Capital, which has become famous for aggressive cost-cutting and uninterest in the quality of the resulting products; by early this decade Alden was the owner of some 200 newspapers, including the Chicago Tribune, Baltimore Sun and San Diego Union-Tribune.

When Golden Gate sold off its stake in the chain, the restaurants were carrying a heavy debt load; some $375 million in debt was added to the chain’s balance sheet in May 2014 to help fund Golden Gate’s acquisition, Moody’s reported. The debt came due in 2021.

That brings us to Thai Union. One of the world’s largest seafood companies, Thai Union owns Chicken of the Sea tuna, among other holdings. Its involvement in the canned-tuna business brought it grief in 2018, when the federal government alleged a price-fixing conspiracy involving Chicken of the Sea, Bumble Bee and StarKist.

The government discovered the deal when it subjected a proposed merger between Chicken of the Sea and Bumble Bee to antitrust scrutiny. As I wrote at the time, Thai Union “promptly bailed out of the merger and fessed up to the Justice Department in return for amnesty from prosecution.”

Thai Union originally bought into Red Lobster as a strategic foray into retail dining. According to the bankruptcy filing, Thai Union eventually pressured the restaurant chain to increase its demand for shrimp, a Thai Union product.

One result was the conversion of the chain’s “Ultimate Endless Shrimp” offer, which had been an occasional limited-time promotion, into a permanent menu item. The filing says that was done, despite “significant pushback” from members of the management team, at the behest of Paul Kenny, who had been named acting interim CEO in April 2022 “at the direction of Thai Union.”

The current management says that Thai Union “exercised an outsized influence on the Company’s shrimp purchasing,” circumventing the chain’s “traditional supply process” and ignoring its demand projections. It says that Kenny took steps to eliminate two suppliers of breaded shrimp, giving Thai Union “an exclusive deal that led to higher costs to Red Lobster.”

The current management says it’s “investigating the circumstances around these decisions.”

The bottom line is that it’s not unreasonable to blame some of Red Lobster’s problems on its endless shrimp promotion, but that it’s more important to examine how that promotion came about in the first place.

The answer, according to the management team tasked with extricating the company from its financial mire, is that it was forced on the company by self-interested owners.

One had no experience running a restaurant chain, didn’t notice the signs that it was heading toward a fiasco and may not have cared as long as it could keep pumping shrimp into the chain’s pipeline. The other collected a healthy subsidy for its multibillion-dollar acquisition, and perhaps didn’t notice or care that it was tying one hand behind the back of the chain’s management as it faced a sea change in consumer habits.

Red Lobster became a plaything for financial engineers, a condition that almost never — if ever — leads to an improved consumer experience and greater profits in the long term. It’s one thing to blame Red Lobster’s problems on consumers pigging out on shrimp, but who were the real pigs in this saga?