Official: Red Lobster files Chapter 11

[ClownLoach]

It has nothing to do with the shrimp. Ridiculous media interpretation trying to distract from the real issue the private equity rape of the chain. Must have assigned the politics reporters to this story.

Tying up contracts has a lot to do with these things, in this case, Red Lobster's majority owner, Thai Shrimp.

About a $20M one time loss when they were saddled with $160M+ in rents above market rate for 25 years on top of triple-net terms where 100% of repairs and maintenance are tenant responsibility. That could be $20M a month in repairs and maintenance or more. Impossible to get out of a lease on a underperforming restaurant because the deal was structured to enrich Golden Gate Capital and their real estate partner even if it bankrupted Red Lobster. The endless shrimp loss is a drop in the bucket, the incompetence of the owner (the shrimp vendor) is the real problem. The shrimp is pennies and the problem is dollars. And the shrimp vendor is still going to be selling product to Red Lobster after effectively abandoning their ownership, so it must not have really been losing a fortune for them as alleged.

[buckguy]

It has nothing to do with the shrimp. Ridiculous media interpretation trying to distract from the real issue the private equity rape of the chain. Must have assigned the politics reporters to this story.

Tying up contracts has a lot to do with these things, in this case, Red Lobster's majority owner, Thai Shrimp.

Thai Union Group is the name of the company. They were an equity partner when Golden Gate owned them and became the sole supplier of shrimp.

Their influence on management decisions is being investigated as part of the bankruptcy but if you look at the bigger picture, the private equity ownership was a much bigger the problem than how they was doing their shrimp promotions. The sale of real estate with unfavorable leasebacks was a much bigger problem. The subsequent increase in costs as RL was coming out of a period of high inflation pretty much guaranteed they would have trouble surviving. Their sales had been declining for years and the interruptions during COVID didn't help either. Darden's "efficiencies" weakened their business model and even without the real estate manipulation they would be in trouble. I don't know why it's a surprise when some chain that has limped along for ages finally seems like it might bite the dust.

[storewanderer]

It has nothing to do with the shrimp. Ridiculous media interpretation trying to distract from the real issue the private equity rape of the chain. Must have assigned the politics reporters to this story.

Tying up contracts has a lot to do with these things, in this case, Red Lobster's majority owner, Thai Shrimp.

Thai Union Group is the name of the company. They were an equity partner when Golden Gate owned them and became the sole supplier of shrimp.

Their influence on management decisions is being investigated as part of the bankruptcy but if you look at the bigger picture, the private equity ownership was a much bigger the problem than how they was doing their shrimp promotions. The sale of real estate with unfavorable leasebacks was a much bigger problem. The subsequent increase in costs as RL was coming out of a period of high inflation pretty much guaranteed they would have trouble surviving. Their sales had been declining for years and the interruptions during COVID didn't help either. Darden's "efficiencies" weakened their business model and even without the real estate manipulation they would be in trouble. I don't know why it's a surprise when some chain that has limped along for ages finally seems like it might bite the dust.

Are all of these corporate owned or are some of them franchise locations?

I wasn't impressed with cleanliness or service on my last visit to one, back around 2021. Food was fine for what it was... for what I ordered... fried fish... and a salad... everything was... fine. As I recall there was some kind of promotion and the meal including the salad wasn't much over $12 which seemed like a bargain.

[ClownLoach]

It has nothing to do with the shrimp. Ridiculous media interpretation trying to distract from the real issue the private equity rape of the chain. Must have assigned the politics reporters to this story.

Tying up contracts has a lot to do with these things, in this case, Red Lobster's majority owner, Thai Shrimp.

Thai Union Group is the name of the company. They were an equity partner when Golden Gate owned them and became the sole supplier of shrimp.

Their influence on management decisions is being investigated as part of the bankruptcy but if you look at the bigger picture, the private equity ownership was a much bigger the problem than how they was doing their shrimp promotions. The sale of real estate with unfavorable leasebacks was a much bigger problem. The subsequent increase in costs as RL was coming out of a period of high inflation pretty much guaranteed they would have trouble surviving. Their sales had been declining for years and the interruptions during COVID didn't help either. Darden's "efficiencies" weakened their business model and even without the real estate manipulation they would be in trouble. I don't know why it's a surprise when some chain that has limped along for ages finally seems like it might bite the dust.

I do not believe Darden "efficiencies" have caused as much damage to the brand as Thai Union removing them because of their ineptitude. Remember Darden WAS Red Lobster, it's not like they bought it and screwed it up. And Darden has taken over other operations and done just fine. They do a fantastic job running Yard House for example.

[storewanderer]

Darden strikes me as a strong operator and I was always concerned what would happen once they divested Red Lobster. And here we are...

I think losing the Darden "efficiencies" greatly hurt Red Lobster.

But I am confident Darden is better off without Red Lobster, than they would be had they kept it...

Chain restaurants have a lifespan. I think the fast food industry specifically burger and multiple chains in that industry are about to have a very rude awakening to that reality.

[Romr123]

When I was at KFC in the late 80s the lifespan of a KFC box was 30 years...I don't think they have done anything that would cause a step-change in that life since; the reasoning was that the technology and decor/setup/offering changes the older buildings become obsolete.

You can see that as they have taken labor out of the restaurants---particularly noticeable with the non-burger restaurants....in 1990 Taco Bell had just gotten out of the cooking taco meat in the location (moving to boil-in-the-bag) but was still cooking beans from scratch. KFC was still shredding cabbage, mixing biscuits and had 75% of their chicken being chicken-on-the-bone (i.e. breaded and fried in the restaurant). Buildings were scaled to those proportions (kitchen versus dining).


Fast forward 30 years---you've got the boxes from 1990 proportioned with relatively larger kitchens coming up to be scraped and rebuilt---the new boxes have an altered kitchen/dining split--plus more drivethrough capacity--boxes are now smaller/cheaper to construct--better ROI for the operator---and the cycle begins again.

[BillyGr]

When I was at KFC in the late 80s the lifespan of a KFC box was 30 years...I don't think they have done anything that would cause a step-change in that life since; the reasoning was that the technology and decor/setup/offering changes the older buildings become obsolete.

You can see that as they have taken labor out of the restaurants---particularly noticeable with the non-burger restaurants....in 1990 Taco Bell had just gotten out of the cooking taco meat in the location (moving to boil-in-the-bag) but was still cooking beans from scratch. KFC was still shredding cabbage, mixing biscuits and had 75% of their chicken being chicken-on-the-bone (i.e. breaded and fried in the restaurant). Buildings were scaled to those proportions (kitchen versus dining).


Fast forward 30 years---you've got the boxes from 1990 proportioned with relatively larger kitchens coming up to be scraped and rebuilt---the new boxes have an altered kitchen/dining split--plus more drivethrough capacity--boxes are now smaller/cheaper to construct--better ROI for the operator---and the cycle begins again.

And of course, go the other way and you have the earliest ones (after they went to having their own spots vs. being part of other restaurants) that were simply for take-out without much (if any) seating or drive thru and were smaller due to that (with the majority devoted to the kitchen).

[ClownLoach]

When I was at KFC in the late 80s the lifespan of a KFC box was 30 years...I don't think they have done anything that would cause a step-change in that life since; the reasoning was that the technology and decor/setup/offering changes the older buildings become obsolete.

You can see that as they have taken labor out of the restaurants---particularly noticeable with the non-burger restaurants....in 1990 Taco Bell had just gotten out of the cooking taco meat in the location (moving to boil-in-the-bag) but was still cooking beans from scratch. KFC was still shredding cabbage, mixing biscuits and had 75% of their chicken being chicken-on-the-bone (i.e. breaded and fried in the restaurant). Buildings were scaled to those proportions (kitchen versus dining).


Fast forward 30 years---you've got the boxes from 1990 proportioned with relatively larger kitchens coming up to be scraped and rebuilt---the new boxes have an altered kitchen/dining split--plus more drivethrough capacity--boxes are now smaller/cheaper to construct--better ROI for the operator---and the cycle begins again.

Makes sense. Chick-fil-A says the life is 25 years and we are seeing complete closures for at least full interior demolition to the bare walls that result in closures for at least 8+ months. None I have seen are demolished and rebuilt but I have heard that is a possible outcome if necessary. Unfortunately I'm now finding these are resulting in mass layoffs and not transfers. WARN act notices are being filed.

[buckguy]

Tying up contracts has a lot to do with these things, in this case, Red Lobster's majority owner, Thai Shrimp.

Thai Union Group is the name of the company. They were an equity partner when Golden Gate owned them and became the sole supplier of shrimp.

Their influence on management decisions is being investigated as part of the bankruptcy but if you look at the bigger picture, the private equity ownership was a much bigger the problem than how they was doing their shrimp promotions. The sale of real estate with unfavorable leasebacks was a much bigger problem. The subsequent increase in costs as RL was coming out of a period of high inflation pretty much guaranteed they would have trouble surviving. Their sales had been declining for years and the interruptions during COVID didn't help either. Darden's "efficiencies" weakened their business model and even without the real estate manipulation they would be in trouble. I don't know why it's a surprise when some chain that has limped along for ages finally seems like it might bite the dust.

I do not believe Darden "efficiencies" have caused as much damage to the brand as Thai Union removing them because of their ineptitude. Remember Darden WAS Red Lobster, it's not like they bought it and screwed it up. And Darden has taken over other operations and done just fine. They do a fantastic job running Yard House for example.

Darden has famously degraded its acquisitions. Red Lobster's heyday was under General Mills---Darden sold them because they were an underperformer. They tried saving money by combining RL and Olive Garden kitchens, which makes no sense. Longhorn was much better under its original ownership. Darden's "fine dining" places are overpriced for what they are. Bahama Breeze seems to have crashed and burned pretty quickly. Olive Garden has always been a joke.

[pseudo3d]

Thai Union Group is the name of the company. They were an equity partner when Golden Gate owned them and became the sole supplier of shrimp.

Their influence on management decisions is being investigated as part of the bankruptcy but if you look at the bigger picture, the private equity ownership was a much bigger the problem than how they was doing their shrimp promotions. The sale of real estate with unfavorable leasebacks was a much bigger problem. The subsequent increase in costs as RL was coming out of a period of high inflation pretty much guaranteed they would have trouble surviving. Their sales had been declining for years and the interruptions during COVID didn't help either. Darden's "efficiencies" weakened their business model and even without the real estate manipulation they would be in trouble. I don't know why it's a surprise when some chain that has limped along for ages finally seems like it might bite the dust.

I do not believe Darden "efficiencies" have caused as much damage to the brand as Thai Union removing them because of their ineptitude. Remember Darden WAS Red Lobster, it's not like they bought it and screwed it up. And Darden has taken over other operations and done just fine. They do a fantastic job running Yard House for example.

Darden has famously degraded its acquisitions. Red Lobster's heyday was under General Mills---Darden sold them because they were an underperformer. They tried saving money by combining RL and Olive Garden kitchens, which makes no sense. Longhorn was much better under its original ownership. Darden's "fine dining" places are overpriced for what they are. Bahama Breeze seems to have crashed and burned pretty quickly. Olive Garden has always been a joke.

Darden Restaurants IS the General Mills restaurant group, just spun off. I don't think too much changed with the spinoff. Darden did pull the plug on China Coast, which despite adding new locations quickly, wasn't going anywhere and was a money-loser. General Mills could've absorbed that loss, but Darden wasn't.

The problem I believe stems from the fact that restaurant chains tend to have a certain "lifespan" (new->trendy->holding->decline) and by the 2000s Red Lobster didn't have the same cache under its early days under General Mills, and Darden didn't really have anything new to offer. Bahama Breeze was founded in 1996 but never became a big success, and because of their relative age, Red Lobster and Olive Garden were starting to underperform. Unfortunately, this dip in Darden's performance caused them to hijacked by a hedge fund. That's when things started to go sideways for everything.