The demise of Red Lobster is a perfect case study in how to kill a business

[MULTIZ321]

How private equity rolled Red Lobster

How private equity rolled Red Lobster

When a private-equity firm bought the iconic seafood chain in 2014, it sold the real estate under the restaurants for $1.5 billion. Then the restaurants struggled to pay the rents.

www.nbcnews.com

Richard

 

[ScoopKona]

​

Death of American staple as CEO tanks her own company's stock

An iconic American eatery's stock has plummeted in recent week after the company's CEO said the restaurant is no longer 'relevant'.

www.dailymail.co.uk

Cracker Barrel has lost a significant 16 percent of diners over the past four years - and the trend is ongoing

Another chain whose market has completely passed them by. If you distilled an entire restaurant down, you wouldn't get so much as a thimbleful of flavor. I would have bet on them being sold before Red Lobster. It will take longer for Olive Garden and the various TGIMcFunster chains.

 

[bizaro86]

Another chain whose market has completely passed them by. If you distilled an entire restaurant down, you wouldn't get so much as a thimbleful of flavor. I would have bet on them being sold before Red Lobster. It will take longer for Olive Garden and the various TGIMcFunster chains.

I've only been to Cracker Barrel once, and we definitely found the food extremely bland. I doubt we'd go again.

 

[ScoopKona]

I've only been to Cracker Barrel once, and we definitely found the food extremely bland. I doubt we'd go again.

Pat Boone is extremely bland. This food is for people who think black pepper is waaayyyyy too strong. I'm amazed they've held on for so long. Another place that could do well if they'd update their menu to the late 20th century. (They don't need to go all the way to the 21st. Just get out of the early 1950s.)

 

[Brett]

Pat Boone is extremely bland. This food is for people who think black pepper is waaayyyyy too strong. I'm amazed they've held on for so long. Another place that could do well if they'd update their menu to the late 20th century. (They don't need to go all the way to the 21st. Just get out of the early 1950s.)

It's 1950's southern cooking - lots of ham bits in the vegetables

 

[ScoopKona]

It's 1950's southern cooking - lots of ham bits in the vegetables

Last century's menu for last century's customers. I'm surprised they've hung on this long. They're basically the anti-waffle-house.

 

[DrQ]

Red Lobster staff dish on the toxic and demoralizing workplace and how Thai bosses destroyed the world's largest seafood chain​

• Red Lobster staff opened up about the 'miserable' environment at the workplace
• They blamed Thai bosses for the decline of the world's largest seafood chain
• The company confirmed on Sunday it filed for Chapter 11 bankruptcy protection

Red Lobster staff dish on the toxic and demoralizing workplace

Staff at Red Lobster have opened up about the 'miserable' environment at the workplace and blamed Thai bosses for the decline of the world's largest seafood chain.

www.dailymail.co.uk

 

[Talent312]

Last century's menu for last century's customers. I'm surprised they've hung on this long.

Hey. I'm last century.
I'm also surprised that I've hung on this long.

 

[jorcus]

Another chain whose market has completely passed them by. If you distilled an entire restaurant down, you wouldn't get so much as a thimbleful of flavor. I would have bet on them being sold before Red Lobster. It will take longer for Olive Garden and the various TGIMcFunster chains.

I would not count this chain out. The revenue growth only recently flattened out. This may have as much to do with the current economics of middle America as anything else. They know who they are and they know who they are feeding. The stock tanked because they cut the dividend by 80% not as much because the CEO acknowledged a problem. Where they go from here is anyone's guess but a new people retire on fixed incomes every day and there will always be a demand for low cost sit down service. I went to one for the for the first time in ten years because it was next to a hotel I was staying at. It wasn't great but I could eat it and no one walks out hungry.

 

[ScoopKona]

Hey. I'm last century.
I'm also surprised that I've hung on this long.

Unfortunately, I'm also slightly on the wrong side of 20th/21st ratio. But it will even out soon enough.

I can think of only two industries more dependent on "giving the market what it wants" than restaurants -- and that's movie studios and auto manufacturers. Losing one in five of their customers while serving exactly the same food they always have would stop most restaurants in their tracks. Executive chefs would be fired. New execs would be tasked to make new dishes that keep the existing customers and try to lure new customers in.

The reason Red Lobster is in dire straits is not because their AYCE shrimp was a horrible loss leader. It's because the AYCE shrimp was the only thing worth ordering on that menu. ("There's nothing else on the menu I want to eat" is constantly mentioned in articles and reviews. It's mentioned in this thread.) There was nothing on the menu which could compete with bottomless shrimp, so that's all people ordered. If they had tinkered with the menu and created dishes people like first, they might have sold something besides shrimp by the metric ton.

Going way back to the "Maniacal Cajun Crab" places that are flourishing in my area, it proves that there is a market for restaurants which sell frozen seafood. That market probably once visited Red Lobster, but has moved on to Maniacal Crab and the absolute glut of sushi and poke joints which seem to open here on a daily basis.

Cracker Barrel's big-picture problem is that it has about as much flavor as a bag of flour. Unless that changes, fast, it will probably go the same route as Red Lobster.

 

[Carolinian]

Most restaurants took a big hit from the Covid lockdowns, and we have had several here in eastern North Carolina fail as a result. I am sure this also did a number on Red Lobster.

 

[ScoopKona]

Here's a story about the closures. Kind-of a "shotgun" story in that there are tons of different reasons given. I think it should have been added that this was a "death by a thousand cuts" bankruptcy:

1) Selling the real estate and not being able to afford rent (duh -- haven't these people seen what has happened to both commercial and residential rent in the last five years?)
2) Buying most of their seafood from a single supplier (Thai Union); and paying more for the same product because Thai Union pulled the strings.
3) Cutting staff, meaning long lines, waiting, and unhappy guests. (This is a rookie mistake failing restaurants always seem to make.)
4) Offering an AYCE option which means the restaurant won't turn nearly as often -- increasing wait times and making servers (and cooks) run around with their hair on fire.
5) Covid is also given as a possibility -- but it's hard to lay the blame on a pandemic which has been essentially been ignored since well before Red Lobster's problems began.

https://www.cnn.com/2024/05/25/business/red-lobster-bankruptcy-thai-union/index.html

 

[davidvel]

Here's a story about the closures. Kind-of a "shotgun" story in that there are tons of different reasons given. I think it should have been added that this was a "death by a thousand cuts" bankruptcy:

1) Selling the real estate and not being able to afford rent (duh -- haven't these people seen what has happened to both commercial and residential rent in the last five years?)
2) Buying most of their seafood from a single supplier (Thai Union); and paying more for the same product because Thai Union pulled the strings.
3) Cutting staff, meaning long lines, waiting, and unhappy guests. (This is a rookie mistake failing restaurants always seem to make.)
4) Offering an AYCE option which means the restaurant won't turn nearly as often -- increasing wait times and making servers (and cooks) run around with their hair on fire.
5) Covid is also given as a possibility -- but it's hard to lay the blame on a pandemic which has been essentially been ignored since well before Red Lobster's problems began.

https://www.cnn.com/2024/05/25/business/red-lobster-bankruptcy-thai-union/index.html

They were far underwater before the real estate sell off. In fact, the sell off helped fund the buy out of Darden. It should have gone under back then, but the sell off extended their demise.

Doesn't Thai Union own all of RL? Would be strange to buy from a competitor.

 

[Brett]

Here's a story about the closures. Kind-of a "shotgun" story in that there are tons of different reasons given. I think it should have been added that this was a "death by a thousand cuts" bankruptcy:

1) Selling the real estate and not being able to afford rent (duh -- haven't these people seen what has happened to both commercial and residential rent in the last five years?)
2) Buying most of their seafood from a single supplier (Thai Union); and paying more for the same product because Thai Union pulled the strings.
3) Cutting staff, meaning long lines, waiting, and unhappy guests. (This is a rookie mistake failing restaurants always seem to make.)
4) Offering an AYCE option which means the restaurant won't turn nearly as often -- increasing wait times and making servers (and cooks) run around with their hair on fire.
5) Covid is also given as a possibility -- but it's hard to lay the blame on a pandemic which has been essentially been ignored since well before Red Lobster's problems began.

https://www.cnn.com/2024/05/25/business/red-lobster-bankruptcy-thai-union/index.html

and bad Feng Shui !

 

[CO skier]

I get these coupon offers all the time and take full advantage. It used to be $10 off my $32 live lobster dinner ($10 coupon with $30 minimum purchase). Now it is $10 off $40 minimum purchase, and my live lobster dinners are now $39.99 (missed it by one cent). So, I just add-on a Chocolate Wave Dessert for "free" and get a couple bucks off the lobster dinner.

 

[Carolinian]

Here's a story about the closures. Kind-of a "shotgun" story in that there are tons of different reasons given. I think it should have been added that this was a "death by a thousand cuts" bankruptcy:

5) Covid is also given as a possibility -- but it's hard to lay the blame on a pandemic which has been essentially been ignored since well before Red Lobster's problems began.

https://www.cnn.com/2024/05/25/business/red-lobster-bankruptcy-thai-union/index.html

The Covid lockdowns had a huge impact on restaurants locally, and those which owned their own real estate had a better survival rate. When the governor closed them and they had no income, if they were leasing property, they still had to pay the lease. If they owned the property, especially if it were paid for, they only had to pay the taxes, which was much more survivable.

We had three Chinese buffet restaurants in our town when the Covid lockdowns came and only one of them survived the Covid lockdowns. Even a number of fast food chain restaurants went down after the lockdowns, even though they still could do some business with drive thru lanes. A nearby town had three pizza buffet restaurants that always had good traffic but none of them survived the Covid lockdowns. We have one pizza buffet restaurant in our town and I was chatting with the owner when I was in there for lunch one day, saying I was happy they had made it through when the others I mentioned had failed. He immediately pointed out the difference. The three that failed all leased their buildings, and his business which has been around for decades owns its building free and clear. The others simply couldn't keep up the lease payments with no income coming in.

It seems Red Lobster had the same combination of problems, selling their real estate and having to make lease payments, then having their income crippled by the Covid lockdowns.

 

[ScoopKona]

It seems Red Lobster had the same combination of problems, selling their real estate and having to make lease payments, then having their income crippled by the Covid lockdowns.

We never had any "lockdowns." It was stupid to go out in public for something so mundane as restaurant food, sure. But there were no lockdowns.

And, again, for the umpteenth time, there are restaurants in my area selling frozen seafood and are absolutely killing it. Full parking lots all the time, from opening until close.

The problem wasn't the pandemic, or non-existent lockdowns, or endless shrimp. The problem was Red Lobster's market demanded better food and went elsewhere. There are dozens and dozens of these new seafood restaurants in a city which once only had a few Red Lobsters. The market is 100% OK with a place selling frozen seafood. Just not bland, boring frozen seafood.

 

[Carolinian]

We never had any "lockdowns." It was stupid to go out in public for something so mundane as restaurant food, sure. But there were no lockdowns.

And, again, for the umpteenth time, there are restaurants in my area selling frozen seafood and are absolutely killing it. Full parking lots all the time, from opening until close.

The problem wasn't the pandemic, or non-existent lockdowns, or endless shrimp. The problem was Red Lobster's market demanded better food and went elsewhere. There are dozens and dozens of these new seafood restaurants in a city which once only had a few Red Lobsters. The market is 100% OK with a place selling frozen seafood. Just not bland, boring frozen seafood.

That varied by state, usually at the whim of whoever the governor was. Some like Florida and South Dakota remained open with no restrictions. In North Carolina, the very first lockdown was the restaurants, which were closed by executive order of the governor except as to drive through or takeout and many of them were not set up for that. Even those that were, it tanked revenue. It was tough on the restaurant business until they were allowed to reopen. Your state may have been more fortunate, but many were not.

This may be a matter of semantics. We, as individuals were not locked down where we could not go out, but the restaurants were locked down where they could not let us in, and that put them in a bad way, businesswise.

I never think of chain restaurants when I think of seafood. On the Outer Banks there are several local favorites that have been there for decades. When we use our summer timeshare weeks there, we always head to Sam 'n Ommies in Nags Head and Darryls in Manteo. If I am doing a trip to the Crystal Coast, it is the Sanitary Seafood Restaurant in Morehead City which predates World War II. These restaurants offer a lot of fresh local seafood, as well as some frozen. If we are visiting my brother below Wilmington, it is one of the cluster of seafood restaurants at Calabash, NC. Closer to home, if we want seafood, we drive over to Winterville to the Dixie Queen which has again, been there for decades. There is a Red Lobster in Greenville, the next town north of Winterville, but I have always wondered how they survived with the Dixie Queen just down the road.

 

[davidvel]

That varied by state, usually at the whim of whoever the governor was. Some like Florida and South Dakota remained open with no restrictions. In North Carolina, the very first lockdown was the restaurants, which were closed by executive order of the governor except as to drive through or takeout and many of them were not set up for that. Even those that were, it tanked revenue. It was tough on the restaurant business until they were allowed to reopen. Your state may have been more fortunate, but many were not.

This may be a matter of semantics. We, as individuals were not locked down where we could not go out, but the restaurants were locked down where they could not let us in, and that put them in a bad way, businesswise.

I never think of chain restaurants when I think of seafood. On the Outer Banks there are several local favorites that have been there for decades. When we use our summer timeshare weeks there, we always head to Sam 'n Ommies in Nags Head and Darryls in Manteo. If I am doing a trip to the Crystal Coast, it is the Sanitary Seafood Restaurant in Morehead City which predates World War II. These restaurants offer a lot of fresh local seafood, as well as some frozen. If we are visiting my brother below Wilmington, it is one of the cluster of seafood restaurants at Calabash, NC. Closer to home, if we want seafood, we drive over to Winterville to the Dixie Queen which has again, been there for decades. There is a Red Lobster in Greenville, the next town north of Winterville, but I have always wondered how they survived with the Dixie Queen just down the road.

He says it so it must be true. (In his own world, everything he thinks/says is true.)

Of course many counties/states had literal lockdowns for a time where you could only leave your house for essential matters.

 

[ScoopKona]

This may be a matter of semantics. We, as individuals were not locked down where we could not go out, but the restaurants were locked down where they could not let us in, and that put them in a bad way, businesswise.

Again, the restaurants which couldn't survive this were probably already in financial dire straits. Restaurants transitioned to takeaway and delivery.

And we never had the kind of lockdown where people had to show their "essential" card and prove they were on their way too or from doing something essential.

You're making it sound like this was East Germany in the 1970s. We were asked, politely, to stay home.

And none of the "covid killed business" argument holds water because there are thousands of restaurants doing the exact same thing Red Lobster used to do, and they have lines out the door. They're making food which the paying customers enjoy and come back for. (I'm generally only interested in fresh-off-the-boat seafood. But not everyone has the luxury of living near the boats.)

These seafood restaurants don't need to sell gift cards at a discount or offer online coupons to try to entice guests in. Guests are lining up without any sales, AYCE specials, or "Thursday Free King Crab Giveaway and Make-Your-Own-Change" night. And they don't need "covid ruined us" as an excuse because business is good.

 

[davidvel]

so . . . in his world the pandemic did not harm/kill any businesses, especially restaurants, because many restaurants survived, and many were already on shaky ground; there were no government lockdowns because it was not like East Germany and we didn't carry cards.

That must be some good coffee he's drinking.

 

[CO skier]

That must be some good coffee he's drinking.

... and it leads to memory loss

May 8:

Howard Johnson's (with it's "it comes in the back frozen and we just heat it" menu) is extinct.

May 28:

And, again, for the umpteenth time, there are restaurants in my area selling frozen seafood and are absolutely killing it. Full parking lots all the time, from opening until close.

What a joker.

Anyone can post out of all sides of their keyboard on social media and convince themself they are some kind of "expert."

 

[CO skier]

We were asked, politely, to stay home.

I was at a ski resort in Colorado March 2020 when the Colorado governor ordered ski resorts, restaurants and other businesses to close. There was nothing "polite" about it. California was worse. Soon after, timeshares and hotels in multiple states were just some of the additional businesses ordered to close for months -- there was nothing "polite" about it.

 

[CO skier]

I've only been to Cracker Barrel once, and we definitely found the food extremely bland. I doubt we'd go again.

I like their Chicken Fried Steak for breakfast or lunch. Very good value for $15 -- and enough for 2 meals to go.

 

[T_R_Oglodyte]

You're making it sound like this was East Germany in the 1970s. We were asked, politely, to stay home.

My son-in-law, his mother, and his uncle were in Czechoslovakia in the 1970s and 1980s. They said the pandemic lockdown in CA was exactly like life in eastern Europe at that time.