Beloved Restaurant Chain Is Now At High Risk of Bankruptcy

March 27, 2024

A beloved restaurant chain is now at high risk of bankruptcy after multiple CEOs have repeatedly made the same mistake.

Red Lobster president Edna Morris lost her job after she misjudged how much customers would eat during a $22.99 all-you-can-eat crab promotion.

The chain lost millions on her miscalculation.

“It wasn’t the second helping on all-you-can-eat but the third,” then Chairman Joe R. Lee told analysts, during a Darden earnings call back when that brand owned Red Lobster.

“And maybe the fourth,” added former Chief Operating Officer Dick Rivera.

Amazingly, the company repeated the same mistake under Its current owner Thai Union Group, reports TheStreet.

The seafood chain used an all-you-can-eat shrimp offer as a way to bring people into the restaurant.

It worked, but at $20, it was priced too low for the company to make money on the deal.

That deal is still on the menu, but the price has been raised to $25.

Now, the struggling chain has replaced its CEO Horace Dawson, who is retiring, with Jonathan Tibus, managing director of management consultant Alvarez & Marsal.

Tibus is considered a turnaround expert who helped Kona Grill and Krystal through their Chapter 11 bankruptcy filings.

Thai Union Group has already shared that it intends to divest itself of the Red Lobster brand.

“During the past years, the combination of Covid-19 pandemic, sustained industry headwinds, higher interest rates and rising material and labor costs have impacted to Red Lobster business resulting in prolonged negative financial contributions to the company and its shareholders,” Thai Union said in a Jan. 16 media release.

“After detailed analysis, the board of directors has determined that Red Lobster’s ongoing financial requirements no longer align with our capital allocation priorities and therefore the company is pursuing an exit of the minority investment.”

FoodserviceResults CEO Darren Tristano believes the company is headed toward a resolution.

“It appears that Red Lobster is planning for a turnaround, bankruptcy, or fire sale,” he told SeafoodSource.

Red Lobster is now considered a “zombie brand,” Tristano said.

“[Red Lobster] continues to wander aimlessly looking for direction,” he said.

Thai Union Group has said it does not expect to make any money on a sale of the brand and has already taken a $527 million writedown.

“Because Red Lobster has not yet named a new buyer, it would appear that bankruptcy would be the best option followed by a sale after the balance sheet gets cleaned up,” Tristano added.

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This massive US company will now close 200 facilities, part of a plan to reduce its labor needs and save $3 billion by 2028.

UPS aims to close around 200 U.S. facilities as it shifts more volume into a growing number of automated package hubs, a top executive said during the logistics giant’s investor and analyst conference Tuesday.

The company is consolidating locations as part of its “Network of the Future” initiative, which aims to reduce UPS’ reliance on manual labor in its package sortation operations and save $3 billion by the end of 2028, said Nando Cesarone, EVP and President U.S.

Additionally, UPS is closing 40 sorts this year — up from 30 in 2023 — and seeks to automate other aspects of its operations, such as dispatching for package cars and feeder trucks moving volume in its network.

“Network of the Future is targeting all activities for automation within our four walls,” Cesarone said.

“These building consolidations and automations yield real savings.

For example, we’ll have fewer feeder runs.

We’ll be able to eliminate both a.m. and p.m. ground and air feeds in many, many locations.”

Examples of UPS’ cost-saving efforts, according to an investor presentation, include consolidating four facilities in Massachusetts, Connecticut and Rhode Island into nearby hubs.

The company also plans to shutter its Chalk Hill facility in Texas and its New York Capital Village Center hub while modernizing nearby facilities to help handle volume growth.

Facility consolidation will lower UPS’ cost to serve customers while improving its volume-per-resource ratio, Cesarone said.

That ratio is calculated as the average daily volume divided by U.S. employees.

The ratio was 51 in 2023, and UPS wants it to increase to about 59 in 2026.

At the same time, UPS will invest in 63 automation projects throughout the country to support projected volume growth in a less labor-intensive manner.

The logistics giant aims to more than triple the number of automated buildings in its network by the end of 2028, growing to 400 facilities, Cesarone said.

The large majority of automation projects will be completed in existing buildings, while 10 will come from newly built locations.

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Also Read: A Massive Discount Retailer Is Now Closing 600 Stores

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