Red Lobster’s endless shrimp could be a red herring

Since Red Lobster filed for bankruptcy on May 19, many, including the restaurant chain itself, have attributed it at least partly to the fact that it made its Ultimate Endless Shrimp all-you-can-eat promotion permanent in June 2023.

For just $20 (since raised to $22 and then $25), it’s no wonder the deal might not have been a moneymaker, with current and former servers telling Slate that they served diners who’d order as many as 16 rounds of shrimp scampi or 30 orders of fried shrimp. (“He was a skinny guy too,” said the server of the latter. “I was like, Where is it all going?”)

But some industry observers have considered the importance of the shrimp-promotion factor and, like a beleaguered Red Lobster line cook, they have other fish to fry.

Kvetch of the day: In data provided to Retail Brew, Placer.ai tracked foot traffic at Red Lobster over the 28 months from January 2022 through April 2024, and found traffic had been down year-over-year for more than half (15) of those months.

And while the chain did record YoY traffic increases in the six months after it made endless shrimp truly endless, even that promotion began to lag. In the last four full months, foot traffic was down from last year for two of them, in January (-8.9%) and April (-4.5%).

Another non-shrimp factor in Red Lobster’s predicament is paying rent, which it’s had to do much more in the last decade.

Business Insider notes that in 2014, when the division of General Mills, Darden Restaurants, that owned the chain, sold it to a private equity fund, Golden Gate Capital, the fund financed the deal largely by selling off Red Lobster’s real estate, meaning those restaurants had to now take on leases and rent.

“They effectively paid for the purchase of Red Lobster by selling the real estate,” Jonathan Maze, editor in chief of Restaurant Business Magazine, told Business Insider. “[B]ut there’s going to come a time in which your sales fall, your profitability is challenged, and your debt looks too bad, and then suddenly those leases are going to look awfully ugly.”