The rise and fall of Red Lobster, which just filed for bankruptcy after a failed endless shrimp promotion

Bill Darden opened the first Red Lobster restaurant in Lakeland, Florida (not pictured). He would later go on to launch Olive Garden, too.

At the time, there was a gap in the market for affordable seafood, especially in landlocked areas like Lakeland. Red Lobster's mission was to serve "delicious, high-quality seafood" to the masses, according to the restaurant's website.

"In most of middle America, you couldn't get decent seafood. Red Lobster brought it to the masses," Jonathan Maze, the editor in chief at Restaurant Business, told CNN. "Red Lobster was part of this casual dining revolution."

The restaurant's more relaxed environment and family-friendly prices cemented Red Lobster as one of the first casual-dining concepts.

It was General Mills' first venture into the restaurant industry, according to the company's website.

General Mills put resources into the chain, allowing it to expand coast to coast and transforming the business into one of the first nationwide seafood-restaurant chains.

By 1978, Red Lobster had expanded to 236 restaurants and had made a total of $291 million in sales, CNN reported. By 1985, Red Lobster had expanded to almost 400 locations and $834 million in sales.

In 1984, the company held its first Lobsterfest. The annual event celebrates lobster by releasing new and limited-time-only dishes.

Then in 1992, Cheddar Bay Biscuits, which remain one of the restaurant's most beloved items, were first released. Initially called "freshly baked, hot cheese garlic bread," they were served to people waiting for their tables in the restaurants' lobbies, per Red Lobster. But after a positive response, Red Lobster decided to serve them table-side instead, and five years after their launch, they were renamed Cheddar Bay Biscuits. In 2017, the restaurant reported that staff baked nearly 1 million biscuits every day.

Red Lobster founder Bill Darden died on March 29, 1994, at the age of 75. In 1995, after Darden's passing, General Mills restructured its restaurant division and changed its name to Darden Restaurants, Inc.

Red Lobster remained under the Darden Restaurants umbrella for almost 20 years.

In December 2001, Darden Restaurants reported in a press release that Red Lobster had had "its 16th consecutive quarter of same-restaurant sales gains." Red Lobster made $534.9 million in sales for the quarter, an increase over the previous year, the company said.

"Red Lobster and Olive Garden enjoyed same-restaurant sales growth that once again surpassed the casual dining industry average," Joe R. Lee, then Darden Restaurants' CEO and chairman, said in the press release.

The restaurant chain was steadily adding restaurants and experimenting with promotional deals to bring value-minded customers through the doors.

In the summer of 2003, Red Lobster introduced its Endless Snow Crab promotion, which offered customers all-you-can-eat snow crab for $22.99.

But the promotion worked a little too well. Customers took advantage of the deal by ordering heaps of snow crab, and restaurants couldn't keep up.

Endless Snow Crab cost the company a reported $3.3 million in profits and the chain's then-president, Edna Morris, stepped down as a result. The New York Post also reported in 2003 that the bungled promotion cost Red Lobster a whopping $405.9 million of stock value in a single session after investors began rapidly selling off their shares.

The deal ended up being what Restaurant Business called "one of the biggest marketing blunders in industry history."

The shrimp deal, a much more affordable option at the time for restaurants to make all-you-can-eat, was a hit with customers and reinvigorated the brand.

The brand also made updates to its restaurants. Wood-fired grills were added to Red Lobster locations nationwide, and restaurant designs changed, inspired by the "historic fishing village of Bar Harbor, Maine," the restaurant said on its website.

The Great Recession majorly impacted the restaurant industry, and casual-dining brands took the brunt as people cut back on luxuries like dining out. Nationwide food-and-beverage chains like Bennigan's were forced to shutter, and others, like Starbucks, closed hundreds of locations, CBS News reported in 2008.

Restaurant Business reported that, after the Great Recession, Red Lobster was also struggling to make a comeback, putting pressure on Darden to turn away from the brand and focus on other restaurant concepts.

CNN reported that by 2008, Olive Garden's sales were outperforming Red Lobster's, and Darden was diversifying its portfolio of restaurants with fast-growing chains like Longhorn Steakhouse, Capital Grille, and Yard House.

Red Lobster was no longer Darden's darling.

In 2014, Darden sold the chain to Golden Gate Capital for $2.1 billion. At the time, the firm called Red Lobster "an exceptionally strong brand" with plenty of opportunities for growth.

On Red Lobster's website, the move was heralded as "charting a new course as an independent company."

To finance the deal, Golden Gate sold off Red Lobster's real-estate holdings to a separate company, meaning that Red Lobster would now be leasing its restaurants. Over time, this has proven costly for the brand.

CNN reported that Thai Union took a $575 million minority stake in the brand, and made efforts to become the main seafood supplier to Red Lobster and cut restaurant costs to increase profits.

However, many of the changes were begrudged by Red Lobster employees.

An anonymous former Red Lobster executive told CNN that Thai Union changed Red Lobster menus based on "cost-cutting decisions" and "executive opinion," rather than customer preferences.

Servers were also reportedly instructed to cover 10 tables per service instead of three in an effort to save on labor costs.

Restaurants lost billions in sales in March 2020 alone, and two-thirds of people reported cutting back on fast-casual dining visits that month, Business Insider reported at the time.

Subsequently, restaurants and fast-food chains made major changes during the pandemic to drive business. Red Lobster was no different and began embracing pandemic-era initiatives like curbside pickup and to-go ordering.

Also in 2020, Thai Union assumed the majority ownership of Red Lobster after Golden Gate Capital announced its plans to sell its remaining equity stake in the chain.

Between 2021 and 2022, Red Lobster welcomed new executives into key executive positions, including CEO, chief marketing officer, chief financial officer, and chief information officer.

However, all of them departed from the company within a span of two years, CNN reported.

In January 2023, Restaurant Business reported that Red Lobster had closed eight restaurants in the span of a few months as part of a routine review of restaurant performance. However, the worst was yet to come.

Initially a one-day-a-week deal for $20, Endless Shrimp became a daily promotion in summer 2023 to attract more customers as Red Lobster struggled to keep up with a changing industry.

However, inflation and the rising cost of seafood created rough seas for the chain. In 2023, Red Lobster raised the price of Endless Shrimp twice, eventually landing at $25 to cope with demand and improve profits.

Despite the increased price, the all-you-can-eat strategy backfired. The chain reported operating losses of $11 million and $12.5 million in the two quarters following the initial daily endless shrimp promotion launch.

In 2024, the deal is only available on Mondays.

However, Endless Shrimp isn't the sole cause of Red Lobster's demise, Business Insider's Emily Stewart wrote in an analysis of the chain's struggles over the years.

Changing tastes are also a major issue.

The seafood restaurant industry faces significant challenges in the US, Darren Tristano, the CEO and founder of Foodservice Results, a food-industry consultancy, told BI.

Many customers in the mood for seafood are more likely to seek it out at a steakhouse, rather than a seafood-specific restaurant or chain like Red Lobster.

"If anything, the Endless Shrimp deals are probably as much a symbol of just either desperation or poor management or both," Jonathan Maze told BI.

"The combination of the Covid-19 pandemic, sustained industry headwinds, higher interest rates, and rising material and labor costs have impacted Red Lobster, resulting in prolonged negative financial contributions to Thai Union and its shareholders," Thiraphong Chansiri, Thai Union Group's CEO, said in a statement.

"After detailed analysis, we have determined that Red Lobster's ongoing financial requirements no longer align with our capital allocation priorities, and therefore are pursuing an exit of our minority investment," he continued.

John Gordon, a restaurant analyst in San Diego, told BI, "They [Thai Union] were totally unprepared to hold a casual-dining restaurant."

Bloomberg reported that Red Lobster was considering a bankruptcy filing.

According to sources familiar with the situation who spoke to Bloomberg, opting for bankruptcy would enable Red Lobster to sustain its operations while reducing debts and expenses.

The report also indicated that Red Lobster was receiving legal guidance from the law firm King & Spalding, who didn't respond to Bloomberg's requests for comment.

Representatives for Red Lobster didn't respond to requests for comment from Business Insider.

According to previous reporting by Business Insider, California, Colorado, Florida, New York, and Texas were among the states affected by the restaurant closures. A restaurant liquidator confirmed to BI that the chain would be selling off kitchen items and furniture from closed locations.

Red Lobster did not make a public statement about the restaurant closures.

Nearly a month after reports first emerged that the chain would file, it finally released a statement announcing it had voluntarily filed for Chapter 11 bankruptcy.

Red Lobster said its roughly 550 remaining restaurants will "remain open and operating as usual during the Chapter 11 process."

It also explained that the chain will be using the bankruptcy process to "drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets."

"This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth," Red Lobster's CEO Jonathan Tibus said in the statement.