THOMPSON: Red Lobster: From fine dining to bankruptcy

  OPINION I was in Lakeland, FL, for a baseball tournament the Summer before entering university in 1968. After the game, I took my girlfriend to the newest fancy restaurant in town. It was Red Lobster, the first of what would become an international chain of more than 700 restaurants. A couple weeks ago, Red Lobster filed for bankruptcy…closing more than 100 restaurants. More on why the bankruptcy later…it wasn’t just the bad business decision of offering folks a bottomless cauldron of shrimp for $20…though that meant an $11 Million loss in the third quarter of 2023. My definition of a fine restaurant has changed over the past 56 years…but back in the day if you took a girl out for dinner where the total bill was near $10…you were dining high on the hog. I remember ordering frog’s legs that night…even then I sought more adventurous fare. It was a different era. Consider first, that folks in Lakeland…about 45 minutes inland from Tampa or anywhere else in Florida’s interior towns…didn’t have fresh seafood like lobster and shrimp. The founders of Red Lobster - Bill Darden and Charley Woodsby - reasoned that if you could make a seafood restaurant a success in a landlocked community, you could open one anywhere. It turned out they were right, for a very long time. Restaurant chains have become profitable ventures based on the reputation of that single first restaurant. Investors - hoping to capture lightning in a bottle - fuel growth…but almost inevitably start cutting corners…changing recipes and other things that made that first restaurant a huge success. Oh, maybe it’s OK if you’re one of the fast-food joints…a burger is a burger and fries are fries most anywhere. Consistency is important at McDonald’s, for example, but the food choices aren’t as large or as sophisticated. Though, we can all speak to how uneven burger chains can be. It was Red Lobster - as it spread throughout the South in the early1970s - that gave a few million folks their first tastes of dishes like calamari, snow crab, lobster and key lime pie. But within the first decade…changes left diners later saying…“it’s not as good as it used to be.” Still, I recall meeting actor John Travolta in a Cadillac dealership service waiting room in Florida nearly 30 years ago…and during our conversation he mentioned that Red Lobster was his favourite restaurant. Of course, when I first saw him he was holding two doughnuts…with a couple bites in his mouth…and as he explained, “Man, the doughnuts they have here are great!” Maybe Travolta’s palate isn’t as sophisticated as his millions could afford? So, why did Red Lobster file for bankruptcy? First, it’s Chapter 11, which allows a restructuring to pay off debt…not Chapter 14 that closes the doors. Even so, more than a thousand employees lost jobs…a hundred restaurants closed…some already sold at auction…even the lobsters swimming in the salt water tanks. The bankruptcy filing listed 166 companies owed money. Everyone from lawn companies to locksmiths and air conditioner maintenance firms and aquarium tenders are seeking payment. Initially, some reports laid blame on last summer’s Ultimate Endless Shrimp deal, offering all-you-can-eat lobster and shrimp for just $20 a person. Even raising prices to $25 was too little, too late. Some folks stayed four hours…eating more crustaceans than at a lavish Sunday brunch buffet. As costly a misstep as that was…it wasn’t what put a nearly 700-unit restaurant chain out of business. Rather, Red Lobster has in the last decade relied on private equity financing. Private equity is known on the street by another name - more a function of what it does - asset stripping. You can blame asset stripping for colossal failures of retail chains…Sears, Mervyn’s and ShopKo, as well as health-care bankruptcies like Steward Healthcare and Manor Care. All these companies relied on private equity investors The investors, basically, sell the company’s most salable assets, enriching themselves and leaving a skeleton of the former company. Unfortunately, the arcing lines of asset stripping and COVID-19 crossed for Red lobster and thousands of other restaurants…and diners…at least the right kind of diners…didn’t come back to Red Lobster. The chain was left with folks determined to squeeze every bit of value out of the $20 they spent…eating pounds of shrimps and lobsters in one sitting. To make matters worse, folks who don’t share that philosophy of dining chose not to share the dining experience with those they considered gluttons. I haven’t been in a Red Lobster in more than 45 years. Quite frankly, as a trained chef, I cook much better seafood at home. When, I told my wife, Bonnie, I was writing a column about Red Lobster, her lip curled…she said she ate in a Red Lobster in Alberta…and it was one of the worst dining experiences in her life. There are a couple Red Lobster restaurants in Calgary and Edmonton. Time will tell whether Red Lobster restaurants in 24 cities across Canada can keep their doors open. The only person more devastated than the hundreds of employees and creditors…well, maybe, John Travolta. — Don Thompson, an American awaiting Canadian citizenship, lives in Vernon and in Florida. In a career that spans more than 40 years, Don has been a working journalist, a speechwriter and the CEO of an advertising and public relations firm. A passionate and compassionate man, he loves the written word as much as fine dinners with great wines. We welcome your comments and opinions on our stories but play nice. 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