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Michael Hiltzik: It wasn't just the endless shrimp -- Red Lobster's corporate owners drove it into bankruptcy

Michael Hiltzik, Los Angeles Times on

Published in Business News

On the surface, the story of Red Lobster’s bankruptcy is about one of the seven deadly sins: gluttony.

The most eye-catching manifestation of that sin, as my colleague Marisa Gerber reported, was the chain’s experience with its $20 all-you-can eat shrimp promotion, which attracted families that parked themselves in the restaurants for hours at a time, consuming mass quantities.

But that doesn’t account for the gluttony of Red Lobster’s former private equity owners, San Francisco-based Golden Gate Capital, or its subsequent corporate owners, the huge Bangkok-based seafood conglomerate Thai Union.

According to Sunday’s bankruptcy filing by the chain’s new management, the chain was saddled with suffocating leases at “above-market” rents; these were the product of a financing deal entered into by Golden Gate. Thai Union, the filing insinuates, pressured the company into “burdensome supply obligations” that had little to do with the restaurants’ actual needs.

Golden Gate declined to comment. A Thai Union spokesman told me via email that the accusations in the filing are “meritless” and that it intends to continue its 30-year relationship with Red Lobster as a supplier.

That suggests that Thai Union sees more profit from selling shrimp to the chain than it did as a shareholder.

 

Put all this together, and it becomes clear that a major cause of Red Lobster’s financial collapse was the machinations of its owners.

Indeed, the chain got flipped several times among owners looking for a big payoff; when their expectations were disappointed, they sold it off.

As the bankruptcy filing put it, the chain “has gone from a privately-owned enterprise, to part of a publicly-traded organization, and then back to private again.”

It was founded as a single Orlando restaurant in 1968 by Bill Darden, then acquired by General Mills, which then spun off Red Lobster along with its Olive Garden chain as Darden Restaurants. Darden sold Red Lobster in 2014 to Golden Gate, which sold it in stages to Thai Union and exited ownership entirely in August 2020.

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