- Red Lobster filed for Chapter 11 bankruptcy after suffering significant financial losses.
- CEO Jonathan Tibus questioned the company's purchasing processes, including from its owner Thai Union.
Red Lobster didn't go bankrupt just because of too much endless shrimp.
But the company's CEO faulted its owner and key seafood supplier Thai Union for its role in the shrimp debacle — and in Red Lobster's trajectory — in a filing on Sunday.
Jonathan Tibus, a turnaround expert who took the CEO job in March, wrote that Red Lobster had long bought much of its shrimp from Thai Union.
"I understand that Thai Union exercised an outsized influence on the Company's shrimp purchasing," Tibus said.
He said Red Lobster executives objected to then-CEO Paul Kenny's May 2023 plan to add $20 unlimited shrimp to the menu permanently. But Kenny forged ahead, a decision that cost Red Lobster $11 million in operational and financial expenses, he added.
While unlimited shrimp boosted traffic to the chain, profits suffered as customers took advantage of this low-margin deal.
The relationship with Thai Union "strained" Red Lobster's supply chain, and Kenny circumvented his company's normal buying processes, Tibus said. Kenny axed two shrimp suppliers "in apparent coordination with Thai Union and under the guise of a 'quality review,'" Tibus added.
As Red Lobster doubled down on unlimited shrimp, its supply chain was strained, "resulting in major shortages of shrimp," Tibus said.
He said that despite Red Lobster's dire straits, Thai Union hadn't offered additional financial support, adding that Red Lobster's debtors were investigating the relationships among Kenny, Thai Union, and Red Lobster.
In a statement to Business Insider after publication, a Thai Union spokesperson called the allegations "meritless."
"Thai Union has a been a supplier to Red Lobster for more than 30 years, and we intend for that relationship to continue," the company said.
Problems went beyond shrimp
Red Lobster is perhaps best known for the all-you-can-eat shrimp promotion.
In an earnings call in November, Ludovic Garnier, the finance chief of Thai Union, told investors the promotion was "one of the key reasons for the losses we generated" in the third quarter of 2023.
As the Business Insider reporter Emily Stewart wrote earlier this month, the problem was never just shrimp: "The brand has been plagued by various problems — waning customer interest, constant leadership turnover, and, as has become a common tale, private equity's meddling in the business."
On Sunday, the seafood chain said in a statement that it had filed for Chapter 11 bankruptcy. Red Lobster said its restaurants would "remain open and operating as usual during the Chapter 11 process."
The development came just a week after it said it was closing more than 50 branches in the US.