Popular Restaurant with NJ Locations May be Done

In what's become an all too familiar story since the pandemic, another long-time favorite business is faced with its possible demise.

The restaurant business has been hit especially hard.

Under normal circumstances, the National Restaurant Association estimates that only 20% of new restaurants succeed long-term.

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60% of new restaurants fail within the first year, and 80% fail within the first five years.

There's something to be said when a restaurant lasts 56 years, as is the case of Red Lobster.  

Red Lobster Considering Chapter 11 Bankruptcy

A story in Bloomberg.com, says that Red Lobster is considering filing for Chapter 11 bankruptcy.

In short, chapter 11 bankruptcy allows a company to stop the clock on its creditors, allowing the company to reorganize its debts.

The chain is owned by an investment company, Thai Union Group.  Earlier this year, the company announced its intention to sell the group.

Like most restaurants, Red Lobster was crippled by losses during the pandemic.

Great Promotion Resulted in Huge Losses

Incredibly, the company took huge losses, approximately 11 million dollars in losses, on a promotion that backfired.

Last year, the company announced with great fanfare an all-you-can-eat shrimp deal.  The promotion was a big success in terms of customer response.

However, the losses were so great, that the company had to raise the price of the deal to try to try to curtail the sales of the offer.

What's Next for Red Lobster

If Red Lobster does file Chapter 11, the expectation is that the company will renegotiate leases, cut staff, and close locations.