(Bloomberg) -- Barbs immediately began to fly after Red Lobster filed for bankruptcy last month.Most Read from BloombergWells Fargo Fires Over a Dozen for...
Its new chief executive blamed the owners. The owners blamed prior owners. Covid-19, corporate greed and a now-infamous $20, all-you-can-eat shrimp deal all took their hits.Onlookers also pointed to changing tastes — perhaps American diners simply no longer want to eat Walt’s Favorite Shrimp in a wood-paneled restaurant their grandparents may have frequented.
As Fortress examines Red Lobster’s prospects, it is drilling down on how each restaurant performs and why, some of the people said. The firm is trying to identify the regions and demographics that would best support a comeback. General Mills Inc. acquired the company two years later and embarked on a huge expansion across the US. It introduced seafood to land-locked patrons who usually ate it far less than their coastal peers.
But Darden’s casual-dining chains cannibalized one another’s revenue, and activist investors agitated for change. The company identified Red Lobster as an underperformer and sold the business to private equity firm Golden Gate Capital for $2.1 billion in 2014. At the time, it seemed like an attractive investment. Red Lobster was about two years into a turnaround: sales were up, a loyalty program was taking off and Beyoncé had just released a song with risqué lyrics about rewarding a lover with a meal there.
Yet Red Lobster was still barely keeping its head above water. The ownership group put its faith behind Paul Kenny to figure out a path forward. Those decisions led Red Lobster’s current CEO, Jonathan Tibus, to allege that part of the chain’s perils stemmed from supply-chain decisions made in bad faith.
Fortress is not new to managing struggling restaurants. It also owns Logan’s Roadhouse, Old Chicago and several other brands after taking over their parent company in a 2023 bankruptcy. It just got permission to be part of a lending group that acquired Alamo Drafthouse after helping it survive the pandemic.
Red Lobster is in a particularly tough spot because of its history, including underinvestment in its restaurants, said Aaron Allen, a global restaurant consultant.
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