Endless Shrimp Deal Was Scheme To Squeeze Red Lobster, Suit Says

Red Lobster’s $20 all-you-can-eat shrimp woody wasn’t conscionable a severely designed promotion that inadvertently helped extremity nan iconic American edifice concatenation into bankruptcy.

It was portion of a strategy to “squeeze each driblet of value” from Red Lobster for nan use of its then-owner, seafood elephantine Thai Union Group Pcl, according to a antecedently unreported lawsuit. The suit against Thai Union and definite executives, brought connected behalf of creditors that were owed astir $295 cardinal erstwhile nan concatenation revenge for bankruptcy successful 2024, demands a assemblage proceedings to find monetary damages.

Thai Union pushed Red Lobster to acquisition much and much of its shrimp connected position that “made nary economical sense” for nan chain, nan suit alleges. That turned its shrimp promotion, “a successful bequest Red Lobster strategy” to propulsion successful customers, into “a car crash.”

Thai Union, which has faced accusations of mismanagement ever since Red Lobster’s bankruptcy, has denied wrongdoing. But nan lawsuit, revenge past period successful a Florida tribunal by a creditor-owned trust, contains caller claims of really nan Bangkok-based seafood elephantine allegedly bungled nan chain’s operations. Some of those specifications are based connected interviews pinch Red Lobster employees, nan suit says.

Neither Thai Union nor its US-based lawyers responded to requests for comment. In 2024, nan institution said it disputed each statements astir itself and its narration to Red Lobster. Red Lobster didn’t respond to a petition for comment.

Thai Union catches, processes and sells astir $4 cardinal worthy of seafood annually nether brands including Chicken of nan Sea. In 2016, it bought a number liking successful Red Lobster to commencement building a direct-to-consumer channel. Four years later, it led a buyout of nan concatenation and obtained mostly control, according to nan lawsuit.

‘Losing Money’

Red Lobster had suffered for years from mounting competition, and forced closures during nan pandemic decimated its business. “It soon became clear that Red Lobster was losing money faster than it could move a profit for its caller owners,” nan suit says.

Thai Union dispatched respective representatives to Red Lobster’s office successful Orlando. One of them was Paul Kenny, a edifice executive and Thai Union shareholder, who made clear to Red Lobster’s elder guidance that he, not Chief Executive Officer Kelli Valade, was successful charge, nan suit claims.

Valade soon resigned, citing Kenny’s alleged interference, nan title says. Kenny was named interim CEO successful August 2022. He was assisted by Scott Solar, a Thai Union worker who was Kenny’s “right-hand man,” nan suit says.

Kenny and Solar didn’t respond to requests for remark sent via LinkedIn and email.

Under their supervision, “Thai Union took power of shrimp purchasing successful portion by embedding its ain operatives successful Red Lobster’s decision-making process,” nan suit says. Kenny interfered pinch nan “cadence and process for awarding supplier contracts” and would “often remark that Red Lobster ‘owed’ it to Thai Union to acquisition its products exclusively.”

During a 2023 review, Kenny banned a longtime Red Lobster supplier for a year, leaving Thai Union arsenic nan chain’s sole supplier of astir half of each types of shrimp, nan suit says. The determination ran antagonistic to Red Lobster’s argumentation of having aggregate suppliers and “enabled Thai Union to complaint Red Lobster importantly much for shrimp than nan going marketplace rate.”

Bloomberg has antecedently reported that Red Lobster started buying from Thai Union astatine above-market rates, bypassing normal procurement procedures and without securing a backup supplier.

For years, Red Lobster had tally impermanent bottomless-shrimp promotions. In May 2023, Kenny unilaterally decided to make it imperishable and see premium shrimp, and directed trading unit to beforehand it, nan suit says.

Customers clamored for nan offer. But that didn’t offset “the losses incurred by offering premium shrimp astatine specified a debased price,” and nan woody was implemented excessively quickly, causing shrimp shortages astatine galore restaurants, nan suit claims.

The promotion helped displacement “customers distant from much profitable, higher-ticket paper items, which resulted successful customers spending little money during each visit,” each for nan use of Thai Union, nan suit says.

Later that year, Red Lobster defaulted connected a indebtedness from Fortress Investment Group, which past efficaciously took power of nan chain’s board. Thai Union declined to put further money into nan concatenation and said successful January 2024 that it would divest from nan company. Red Lobster revenge for bankruptcy successful May 2024 and is now owned by an finance group led by Fortress. Fortress declined to comment.

Many of these allegations echo earlier claims made by Jonathan Tibus, a turnaround master who served arsenic CEO of Red Lobster from early 2024 until it exited bankruptcy later that year. In tribunal filings, he alleged that nan determination to make nan $20 “Ultimate Endless Shrimp” imperishable costs nan institution $11 cardinal and saddled it “with burdensome proviso obligations,” peculiarly pinch Thai Union.

The spot revenge nan suit connected behalf of vendors, nutrient distributors and different unsecured creditors. It seeks redress for Thai Union’s “self-dealing and exploitation of Red Lobster.” It’s besides looking to unwind $32 cardinal successful transactions it claims Thai Union and different entities forced Red Lobster to participate into successful 2023.

Red Lobster is now astir 2 years into a turnaround effort nether CEO Damola Adamolekun. It revived nan shrimp promotion successful April, pinch insiders citing its benefits connected a limited-time ground arsenic nan struggling concatenation looks to lure diners.

This time, nan institution is utilizing a different group of vendors to root nan shrimp.

Ronalds-Hannon, Randles and Melin constitute for Bloomberg.