We Done Runned Out of Skrimps!

Where Red Lobster learns that no, shrimp are not "endless"...

When you hang a sign out front that reads "all you can eat shrimp," they will come. And they will eat all that they can. And the quantity that they can eat might alarm you. That is, if you've never visited my country. If you've been to my country, the United States of America, it should come as no surprise that very large and hungry people will come from miles around to get a good deal on an AYCE (all you can eat) buffet. And if they bring it all right out to your table? Good God, what are you thinking? Why don't you just lay some massive conveyor belt out to a trough in the center of a warehouse and start piping those sweet crustaceans in? Mee-Maws on their three-wheeled scooters will roll in from the farm, good-old-bubbas in their work boots and wrap-around sunglasses driving Ford F-150s will roll over the grannies to get in line to score the first shovel full of Parrot Isle Jumbo Coconut Shrimp. Stoners will trip over their bongs in a clumsy rush to get to that AYCE prawn sale.

All of this, more or less, happened. And now Red Lobster is filing for bankruptcy. In a country where Walmarts and Targets don't stock less than a 3XL clothing size, the executives at Red Lobster thought it would increase revenue if they ran their popular "Endless Shrimp" special... full-time! Boy did it increase revenue. But not in a good way. What's the old business school lesson, er, warning? "We lose money on every sale, but we make it up in volume." The Lobster began to advertise the "ULTIMATE Endless Shrimp" special for $20. And like some form of food zombies, the dining rooms filled up, but the zombies couldn't seem to. It was almost comical. It became a challenge for some; here, one writer's personal best was spending 8 hours at the shrimp trough.

After the special started in the third quarter of '23, RL reported a loss of $10 million.

“We knew the price was cheap. But the idea was to bring more traffic in the restaurants,” Thai Union CFO Ludovic Garnier said in an earnings call earlier this month. They upped the "Endless..." price a couple of bucks. By the close of the fourth quarter, they'd lost another 12.5 million. Maybe there was more to the equation than "more traffic," Lud.

Red Lobster has always fascinated me. I don't recall dining there, though I'm sure I did once or twice. I'm not a food snob, but RL just never had any appeal. I've always lived in cities with great seafood restaurants... and the R. Lobster has always seemed anachronistic - dark, outdated, frumpy. And yet, I know many folks who talked about it as if it were restaurant dining at its finest. I can't count the number of friends that joked about the place, and then told a story about a parent or other relative, maybe a friend that believed it was the equivalent of a three Michelin star restaurant. These were usually rural or unsophisticated diners (and again, I don't mean that as a slight.) Some stories describe relatives of limited means who were impressed. Maybe it's just the idea of lobster on the menu. Unless you live in Maine or the Florida Keys, lobster can certainly seem exotic, even extravagant. And if you live in a town that only has a Sonic, a DQ, and a Billy Bob's Pizza Parlor, it can seem even more ritzy. The Lobster was to many, in a word, "fancy."

To me, the place has always seemed like Long John Silver's with linen napkins and a bar.

Well, they DO have those Cheddar Bay Biscuits. (C'mon, who doesn't like a biscuit fished out of Cheddar Bay?)

As with everything, there's more to this bankruptcy than just our friends and Homer Simpson consuming an entire Gulf of Mexico's worth of shrimp. The Lobster has been on the ropes for a couple of decades, at least. "Endless Shrimp" was a dumb business decision too far... one of many bad ideas.

Like every restaurant, RL has had to deal with inflation, rising rents, rising labor costs, fierce competition, the pandemic, and changing consumer tastes. And it isn't like they haven't already had an all-you-can-eat promotion that almost sunk the ship. Back in 2003, they ran an "Endless Snow Crab" promotion that cost them millions. (And a CEO lost her job over that one, too.) What happened? They underestimated the popularity of the promotion, wholesale crab prices happened to rise during the special, and patrons took too much time at their tables cracking crab legs and ordering plate after plate of tasty crab parts. (With customers spending so much time at the table cracking/eating/eating more, it limited customer turnover in the restaurants.) Surprise! You're losing money!

You know there was some jr. executive in the room that day when the Endless "Shrimp" idea was up on the PowerPoint. "Hey, we should be careful about this, I heard that back in 2003..." "Shut up, Dave, unless you want to wind up back on the boat, baiting lobster traps! We know what the hell we're doing here!" (Dave would later move into the taco space, opening up a chain of "Big Ass Burritos." He's doing quite well, and has never run an AYCE promotion.)

From Business Insider:

Red Lobster first opened in Lakeland, Florida, in 1968 and was acquired by the food conglomerate General Mills in 1970. General Mills then spun the chain off in 1995 along with the rest of its restaurant division, which also included Olive Garden, as Darden Restaurants. In 2014, amid flagging sales and pressure from investors, Darden sold Red Lobster for $2.1 billion to Golden Gate Capital, a San Francisco private-equity firm.

I know what you're thinking: "Ah. Private equity. They surely set the company right by concentrating on excellent value for the customer, great employee relationships, and improving each and every store." But you'd be wrong, my little seafood enthusiast. When Private Equity comes to the rescue, the cure is often worse than the disease. In this case, they sold off the real estate under the stores, and quickly entered into lease agreements with the buyer. This is a typical quick grab for Private Equity. They can usually recover most or all of their investment from the land sale and probably gain a little pocket money and maybe have little left over to try and fix the bigger problem. Very little.

When they lost their property, they were suddenly beholden to a fixed lease - often a long one. A couple of the properties were bought back. A few were remodeled and updated a bit.

Again from Business Insider:

"The thing that private equity does is just unload assets and monetize assets. And so they effectively paid for the purchase of Red Lobster by selling the real estate," Jonathan Maze, the editor in chief of Restaurant Business Magazine said. "It'll probably be fine, generally, but 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."

Within a couple of years, the business had been sold in bits and pieces to other investment groups, each one with a different "turnaround" idea. Debt was restructured. New concepts and branding tweaks were discussed and some were partially implemented, but none had much time to succeed before management was shuffled or ownership changed. And then the pandemic hit. Most analysts agreed that at that point they were doomed. A few thousand pounds of shrimp sold at a loss finally finished them off.

With predictable bullshittery, the MAGA cult blames Joe Biden for Red Lobster's woes. Like he ate all the shrimp? Yes, my friends, Joe B. and his stormtroopers shut down the Lobster while allowing Applebee's to thrive.

Restaurant analysts agree that it wasn't just the shrimp. They don't blame the pandemic, either. Lots of chains survived those challenges, a couple have thrived. It was the years of meddling and predatory greed by investors that led them off the cliff. Private equity carved out the easy, profitable parts that weakened the whole.

That, and the whole "casual dining" space has changed. Without a bit of flair, they're perceived as boring and stale (plus, you have to tip!) Lobster and excellent seafood can be found in fine dining establishments and now in "fast-casual" restaurants. More importantly, consumers (especially younger ones,) expect good store design, healthy (or at least) interesting menus, and unique bar options... in other words, an "experience," not just an entree and two sides. By the time someone realized that whatever vision there had been was long gone, it was too late anyway. Wall Street had sold the dirt out from under them.

If a few stores make it through Chapter 11 bankruptcy, keep Joe and his whole Bidenomic vibe away. And don't forget to try the new Ultimate All You Can Eat, Endless Lobster Special (limit one.)

But those biscuits weren't half bad.
(biscuit recipe. You're welcome.)