Red Lobster is suing its former owner, Thai Union Group, and other defendants for the chain’s bankruptcy. The case revolves around a disastrous 2024 promotion that caused millions in losses. The ill-fated “Everyday $20 Ultimate Endless Shrimp” promotion is at the center of the lawsuit.
Financial Struggles and Ill-Fated Promotion
In May 2024, creditors filed a lawsuit seeking damages, two years after Red Lobster’s bankruptcy. The lawsuit targets former CEO Paul Kenny, various officers, and its former owner. Red Lobster faced financial trouble in 2023, hitting a point of potential insolvency.
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The lawsuit claims that Thai Union prioritized its own interests over those of the chain. The group allegedly forced uneconomic contracts that, while beneficial to Thai Union, made no sense for Red Lobster. This included pushing more shrimp items onto menus, which required the chain to buy more shrimp at inflated prices from it.
One particularly damaging move was the “Everyday $20 Ultimate Endless Shrimp” promotion. This campaign, which ran over the objections of the employees not affiliated with Thai Union, resulted in what the filing called a “car crash.” Stores were overwhelmed, running out of shrimp and unable to serve customers efficiently.
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Thai Union’s strategy was to underprice the shrimp promotion to maintain high demand. Red Lobster was already struggling with high rent payments and a problematic promotion.
The Road to Bankruptcy
The lawsuit alleges that the defendants breached their fiduciary duty by acting against Red Lobster’s interests. Consequently, Thai Union began divesting itself from Red Lobster, leaving the chain without further capital support. This ultimately led to the chain filing for Chapter 11 bankruptcy protections in May 2024.
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Red Lobster and the chain’s former owner did not respond to requests for comment. Thai Union had previously dismissed similar claims in bankruptcy court pleadings as “meritless allegations.” The lawsuit is one step in Red Lobster’s bankruptcy process.
Red Lobster Hit Hard by Promotions
The creditors aim to recover funds to pay off remaining debts from the bankruptcy filing in 2024. This process involves investigating and pursuing legal actions against those responsible for the chain’s downfall. Investors are working to collect what they can and make distributions to claims, helping to settle remaining debts.