The Raiding of Red Lobster

The bankrupt casual restaurant chain didn’t fail because of Endless Shrimp. Its problems date back to monopolist seafood conglomerates and a private equity play. Read about what went wrong.

Red Lobster, a once-iconic casual dining chain, is going bankrupt. The Red Lobster article explores the reasons behind their downfall, which extend far beyond a single promotional deal.

Key points:

• Red Lobster’s problems began with rising seafood costs around 2013.
• Consolidation in the fishing industry led to less competition and higher prices.
• This consolidation was facilitated by controversial “catch share” policies, which turn fishing rights into private commodities that can be traded like stocks.
• Private equity ownership also played a role:
  • Golden Gate Capital burdened Red Lobster with debt through a sale-leaseback deal.
  • Thai Union, a major seafood supplier, acquired Red Lobster, creating a conflict of interest.
• Red Lobster’s struggles are emblematic of the “retail apocalypse,” where businesses are stripped of resources by owners focused on short-term gains.
• The article suggests that efforts to deregulate American fishing, led by the aquaculture lobbying group Stronger America Through Seafood, could further benefit large corporations.

The “Endless Shrimp” fiasco may have been a bad decision, but it’s a minor point compared to the systemic issues Red Lobster faced. The company became squeezed between rising costs and a changing restaurant landscape, both driven by corporate greed and consolidation, ultimately succumbing to the pressure.