SAN DIEGO — The popular restaurant chain Red Lobster is in the red, and could soon file for bankruptcy protection.
On Monday, the Florida-based company shuttered dozens of its locations, including here in San Diego.
Mira Mesa
The Red Lobster in Mira Mesa is one of up to 120 location closures throughout the nation. A restaurant supply liquidator plans to auction off their kitchen equipment.
While there are still a couple of other Red Lobsters here in San Diego County still open. What their future holds is uncertain.
This sudden shut-down in Mira Mesa was one of the dozens of abrupt closures nationwide on Monday. It was an unwelcome surprise for loyal customers.
"I assumed they were doing pretty well because they're always advertising.," said San Diegan Jayden Douglas, who showed up to the Mira Mesa location only to find it closed. "If they have money for commercials, I'd assume they have enough to keep their company open?"
While the company is still open, Red Lobster is considering filing for bankruptcy protection, as first reported by Bloomberg.
One of the company's recent financial missteps: its all-you can eat "Endless Shrimp" promotion rolled out last summer that contributed to $20 million in total losses for the fiscal year.
"Way too many people participated at way too low a price.," said restaurant analyst John Gordon, founder of Pacific Management Consulting Group based in Sa Diego. "And so the gross profit on that was way too low, and it caused Red Lobster to miss their earnings."
Gordon told CBS 8 that Red Lobster's financial struggles started years earlier, though.
When it changed hands in 2015, its real estate was also sold, meaning that Red Lobster had to start paying rent for its locations: rents that keep rising.
"That put a cost pressure on to Red Lobster," he added.
In 2020, a company called Thai Union assumed Red Lobster's majority ownership.
"They just didn't know what they were doing!," Gordon laughed.
It has also faced the same challenges as many casual dining restaurants, especially since the pandemic.
Red Lobster in particular has attracted a somewhat older customer base.
"The issue with an aging customer base is that they go out less often and they tend to be driven by coupons and special deals," Gordon said.
Even if Red Lobster does end up filing for Chapter 11 bankruptcy, it would still be able to stay open. But it appears it could be with fewer locations to choose from.
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