Red Lobster is reportedly considering declaring bankruptcy to relieve the financial strains that have weighed on the company.
According to Bloomberg, citing people familiar with the negotiations, Red Lobster is considering filing for Chapter 11 bankruptcy to renegotiate costly leases and resolve other long-term commitments, as well as growing labor expenses.
According to the site, the seafood restaurant chain is being consulted by legal firm King & Spalding on the matter, and while negotiations regarding restructuring are ongoing, no final decisions have been made about filing for bankruptcy.
Red Lobster appointed Jonathan Tibus as its new CEO last month
By declaring Chapter 11 bankruptcy, the firm can continue to operate while working with creditors and investors to implement a debt reduction plan that will allow it to move forward on a more solid financial footing.
Red Lobster did not immediately reply to a request for comment.
Bill Darden and Charley Woodsby launched the seafood franchise in 1968, and it has had several owners and key investors since then.
General Mills bought the company in 1970 and helped it swiftly develop across the United States and Canada before spinning it off into an independent, publicly traded company called Darden Restaurants more than two decades later.
Darden Restaurants sold Red Lobster to Golden Gate Capital in 2014. Thai Union, which formerly owned a one-fourth ownership in the corporation, acquired Golden Gate’s stake in 2021.
Thai Union said earlier this year that it would quit its stake in Red Lobster and incur a write-off, citing the restaurant chain’s “ongoing financial requirements no longer align with Thai Union’s capital allocation priorities.”
Red Lobster appointed Jonathan Tibus as its new CEO last month. Tibus is recognized as an expert in formulating and implementing restructuring strategies at underperforming restaurants, retail, and hospitality businesses, having led multiple restructuring efforts.