Red Lobster is reportedly considering filing for bankruptcy to relieve the financial pressures that have weighed on the company.
Red Lobster is considering a Chapter 11 bankruptcy filing to renegotiate burdensome leases and other long-term contracts as well as address rising labor costs, according to a report by Bloomberg, citing people familiar with the negotiations.
The outlet reported that law firm King & Spalding is advising the seafood restaurant chain on the matter and that no final decisions have been made about the bankruptcy filing, although restructuring talks are ongoing.
By filing for Chapter 11 bankruptcy, the company works with creditors and investors to create a debt reduction plan that allows it to move toward a better financial position in the future.
Red Lobster did not immediately respond to a request for comment.
The seafood chain has had a variety of owners and major investors since its founding in 1968 by Bill Darden and Charlie Woodsby.
General Mills acquired the company in 1970 and two decades later, before spinning it off as an independent publicly traded company called Darden Restaurants, in the U.S. and helped expand rapidly across Canada.
Darden Restaurants sold Red Lobster to Golden Gate Capital in 2014. Thai Union, which previously held a quarter stake in the company, bought Golden Gate’s stake in the company in 2021.
Earlier this year, Thai Union announced plans to exit its investment in Red Lobster and take a write-off after declaring in a regulatory filing that the restaurant chain’s “ongoing financial needs no longer match Thai Union’s capital allocation priorities.”
Red Lobster last month brought on Jonathan Tibus as its new CEO. Tibus is considered an expert in developing and implementing restructuring plans at underperforming restaurant, retail, and hospitality companies and has led numerous restructuring efforts.