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Red Lobster May Soon File for Chapter 11 Bankruptcy, Here’s Why

Even another shoutout from Beyoncé might not be enough to turn around the seafood palace's fortunes.

<p>Jonathan Fickies / Bloomberg / Getty Images</p>

Jonathan Fickies / Bloomberg / Getty Images

Red Lobster, the massively popular seafood chain, decided to be generous last summer, with inflation pinching its customers’ budgets. It brought back its Ultimate Endless Shrimp deal — much to the delight of its diners, but the $20 all-you-can-eat deal proved too tempting.

And despite the fact that the Orlando-based chain subsequently boosted the price to $25, the move resulted in a staggering $11 million third-quarter loss — and the consequences may be even steeper.

Now, speculation is growing that Red Lobster will soon seek a possible Chapter 11 bankruptcy filing or implement an extensive restructuring plan. This week, Bloomberg reported that the company had retained King & Spalding, a law firm that specializes in bankruptcy, to explore its options.

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Related: Endless Shrimp Is Financially Ruining Red Lobster

At the very least, Red Lobster wants to explore shedding leases at some of its 650 restaurants and getting out of long-term contracts, Bloomberg said. While companies can do that and remain solvent, those steps are much easier to take under the protection of a bankruptcy court. If the seafood restaurant were to seek Chapter 11, it would be one of the most high-profile failures across the chain restaurant world.

But the move would not be a surprise.

Since last fall’s dismal earnings report, the company has been hit by more bad news. In January, its primary investor, Thai Union Group PLC, wrote down the value of its stake in Red Lobster, and said the seafood group no longer aligned with its “allocation priorities.” Thai Union, has controlled the chain since 2020 when it took on the chain from Golden Gate Capital, which acquired it in 2014 from its founders, Darden Restaurants.

Related: This Is Why Cannabis Makes You Hungry, According to Science

A Red Lobster bankruptcy, or even big cuts, would ripple through communities across the country where the seafood chain does business. Some of its big fans took to social media when word of its potential restructuring came to light, while the Daily Show also weighed in: “If you’re going on a bad anniversary dinner, I’ve got some news for you,” declared Daily Show correspondent Dulcé Sloan.

There’s no word from Beyoncé, who famously namedropped the chain in her 2016 hit, "Formation" — where, after some NSFW fun, she rewards her man by taking him to Red Lobster. But even another shoutout from Beyoncé might not be enough to turn around the seafood palace's fortunes — perhaps the Bey Hive has found other fish in the sea.

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Read the original article on Food & Wine.