Red Lobster's management issues led to bankruptcy

Red Lobster noted, in its recent bankrupty filings, that it faced mismanagement issues over the past decade as the company looks to rebound over the coming weeks, according to the latest reports by Eater.

The revelation comes after the seafood chaint announced it will be closing dozens of locations across the U.S., including five in California in cities like Torrance, San Diego, and Sacramento.

In the last decade, the company has seen five different CEOs and has been sold twice in the last decade, according to the report.

Golden Gate Capital purchased Red Lobster for $2.1 billion in 2014 from Darden Restaurants, a spin off founded by Bill Darden. Darden founded Red Lobster in Lakeland, Florida in 1968, forming Darden Restaurants, Inc.

Golden Gate Capital is a prominent private equity firm, founded in 2000 by David Dominik and Jesse Rogers, with over $17 billion in assets under management like California Pizza Kitchen, Express and Michaels stores.

During Golden Gate Captial’s near five-year ownership, they sold off the land in a tenuous real estate deal, increasing the restaurant’s overhead by adding lease payments and dredged the popular chain into slogging debt.

In 2020, Red Lobster was sold to Thai Union, one of the world’s largest seafood producers, known for brands such as Chicken of the Sea and forced Red Lobster to focus on selling shrimp products, the report said.

Under its latest owner, the chain introduced promotions like the $19.99 all-you-can-eat shrimp scampi deal to attract customers and cut costs by using lesser ingredients.

Meanwhile, Golden Gate Capital likely made a significant return on its initial $2.1 billion investment from 2014, considering the partial stake sold and the remaining ownership they retained.

Red Lobster filed for bankruptcy on May 20, a move that could save the failing chain from shuttering its doors completely. Prior to the filing, the company began selling off assets like kitchen equipment, conducting most of it online. 

In the aftermath of it all, thousands of employees lost jobs with many more set to lose their jobs during the bankruptcy proceedings.

Red Lobster is now seeking bankruptcy protection and aims to rebound over the next several months.