The Red Lobster Fiasco
A masterclass on the worst parts of late stage capitalism.
I grew up in a middle class suburb of Detroit and regularly went to Red Lobster in the 80s and 90s, like many other families back then. Despite the fact my parents owned a Chinese restaurant, we frequently went out to eat at other places and Red Lobster was in our rotation. But fast forward to 2024 and the once popular chain has fallen, going bankrupt and just now emerging with new management hoping for a turnaround.
Many people have suggested that Red Lobster’s $20 Ultimate Endless Shrimp promotion was the cause of their bankruptcy, which wasn’t the case. The brand lost $11 million from that ill-advised deal which was a mere drop in the ocean of its $1 billion debt. The massive failure of an all-you-can-eat shrimp proposition wasn’t the straw that broke the crustacean’s back, rather it was a poorly designed hail mary desperately launched to salvage an already failing business.
I honestly hadn’t thought much about Red Lobster—if at all—in the decades between my teenage years this year when they were in the news. It was like running into an old acquaintance from your high school and seeing that they weren’t doing great. And the more I dug into the story, it became clear that Red Lobster hadn’t been doing well for quite some time, with a long series of unfortunate events priming it for it’s demise in 2024.
The story goes beyond just another restaurant failing due to the pandemic. It reveals how calculating private equity firms and an overextended global seafood conglomerate led to the downfall of an iconic American restaurant brand. A place that my parents, grandparents, and even Beyonce saw as an aspirational experience at one time. And in this story are textbook examples of what can happen when the dark side of late stage capitalism emerges to take a bite out of investors, employees, and customers alike.
How Did We Get Here?
The significantly abridged story of the rise and fall of Red Lobster can be summarized as: Bill Darden opens the first Red Lobster in Florida, 1968 and provides readily available seafood to landlocked American states. In just 2 years, it had become attractive enough of a business that General Mills bought them in a ploy to diversify their business. By 1983 it was the largest sit-down service food chain in America with 350 locations in 36 states. In 1995, General Mills spun it off and bundled it with the Olive Garden to form Darden Restaurants, a publicly traded company that still operates today.
After decades of hard times and failing to connect with younger audiences, Red Lobster was sold to a San Francisco private equity company, Golden Gate Capital, for $2.1 billion. Golden Gate Capital quickly did a lease-buyback where it sold all the underlying Red Lobster real estate for $1.5 billion and the stores were now paying rent to the new owner—a common tactic that provides liquidity to a company wanting to tap into the cash value of its real estate assets.
By 2020, with the pandemic placing a chokehold on all restaurants, Red Lobster’s rent payments were suffocating the business, representing as much as 50% of the revenue for some locations. That same year, Golden Gate Capital sold the chain to a nearly $4.1 billion dollar Bangkok based global seafood conglomerate, Thai Union.
Thai Union installed new management looking to aggressively cut costs and improve operations. The new interim CEO forged antagonistic relationships with the C-Suite and store management alike. Thai Union then eliminated the contracts of other seafood suppliers so that they could be Red Lobster’s sole supplier of shrimp. With greater pricing power and and a massive opportunity to offload tons of shrimp, Thai Union made the call to put the endless shrimp promotion back on the menu permanently. Two months later, in January 2024, they divested their stake in Red Lobster and took a $530 million loss. Red Lobster filed for bankruptcy in May 2024 and emerged from Chapter 11 last week, now owned by a group of creditors who installed the 35-year old former CEO of PF Chang’s as their new leader.
Ultimate Endless Greed
America has been in the throes of late-stage capitalism since the end of World War II, a phase where wealth has increasingly concentrated among the rich, and corporate influence has grown significantly. This stage follows earlier phases of capitalism, such as the industrial revolution's rapid growth and the more regulated post-Great Depression era.
Late-stage capitalism is characterized by a strong focus on consumerism and profit, often at the expense of workers' well-being and the environment, with the pervasive feeling that the political system is skewed in favor of the wealthy elite. There are proponents of late capitalism that cite its ability to spur innovation, economic growth, consumer choice, job creation, and efficiency, but few of those positives are demonstrated in the case of Red Lobster.
In hindsight, two crucial decisions seem responsible for many of Red Lobster’s failures: private equity selling its real estate and letting Thai Union take over. If not for the cash grab from private equity to liquidate the real estate, Red Lobster may have lived to fight longer without the immense burden of paying rent, especially during the pandemic when revenue slowed to a crawl.
Golden Gate Capital bought Red Lobster for $2.1 billion then earned $1.5 billion from the sale of its real estate, essentially recovering almost all of their capital in one fell swoop. Golden Gate may have had good intentions to salvage the brand—they did invest in new kitchens, dubbed “The Kitchen of the Future” project—but it’s hard to be sympathetic when they recouped so much of their investment while saddling the business with a huge recurring rent bill that proved fatal to the business. I mean, how would you feel if someone bought your house, rented it back to you, then you went broke trying to pay that rent? But in late-stage capitalism, the golden rule is that whoever has the gold makes the rules.
As for Thai Union, it’s still an open question whether or not any laws were broken when they made themselves the exclusive supplier of shrimp then launched Ultimate Endless Shrimp. But it’s not a good look. That’s like if a bunch of wheat farmers bought Kellogg’s and made them sell cereal to consumers at a loss using only their crop. Is that a conflict of interest, or just vertical integration?
Shrimp farming also happens to be one of the biggest destroyers of ecologically rich mangroves that can sequester four times as much atmospheric carbon than land based forests. Despite a lot of lip service from Thai Union on its sustainability efforts, critics have noted their lack of transparency and paltry results that add up to greenwashing. Again, late stage capitalism prefers profits over planet. Because who needs mangroves when you have all that shareholder value, right?
Monoculture Driven Consumerism
Like Golden Gate, Thai Union went for the cash grab, selling Red Lobster a ton of shrimp and at least profiting in the short term whether or not the unlimited shrimp promotion actually worked. Obviously, that backfired.
When your only tool is a hammer, everything looks like a nail. In Thai Union’s case, when you have a shitload of shrimp, the solution to every problem easily becomes, “let’s sell a shitload of shrimp.” I am viscerally triggered on the rare occasions that a video clip showing a horde of diners making a violent run on the crab legs at an all-you-can-eat buffet appears in one of my social feeds. It’s not humanity at its finest. Promotions like Ultimate Endless Shrimp are the epitome of monoculture driven consumerism, metastasized.
I have long advocated for eaters to broaden their diets as a means of creating more sustainable food systems but also highly enjoyable hedonism (see here, here, here, and here). But I’m fully aware that not everyone has the luxury of eating a biodiverse diet of whole foods. Income inequality is rampant in our current phase of capitalism, so eating fresh, sustainable food is hard for many. The wealthy have the luxury of reflecting on the planetary ramifications of their diets while everyone else is just trying to put food on the table.
So when you have an already struggling middle class coming out of a pandemic full of economic hardship and Red Lobster says you can eat as much shrimp as you want for $20, people are going show up. And they did, in droves. “We were expecting an increase of 20% in customer traffic, but the actual number was up to 40%,” Thai Union CEO Thiraphong Chansiri said in November 2023 of the endless shrimp effect.
Red Lobster employees dreaded Ultimate Endless Shrimp. They had to deal with people trying to break the rules and smuggle shrimp out in tupperware containers. Cops had to be called because customers were irate they couldn’t get to-go bags. Cooks were pushed to the brink trying to keep up with orders. Some would camp out for hours on one shrimp order and tap water, leaving servers with paltry tips on tables that never turned. Like WalMart advertising diapers at unprofitably low prices to get people into the store, deep discount promotions only work if people buy enough other stuff to make up for the loss on diapers/shrimp.
Unruly customers aside, I have to think that many were politely following the rules and just trying to feed their families affordably. I get that and don’t blame those people. We’re all just out here trying to feed ourselves and loved ones. But in a different world where the majority of people are financially secure and income inequality isn’t an issue, Red Lobster may have been afforded the opportunity to promote high quality, responsibly sourced, and well prepared seafood sold at a profit. Maybe it wouldn’t have ever felt the need to create a race to the bottom with an unprofitable shrimp eating orgy that brought out the worst in people and displaced acres of mangroves.
When one of things necessary to sustain human life is also a lucrative business controlled by highly concentrated power structures, bad things can happen. Is endless shrimp essential for human life? Of course not. But for many things that are essential to life like clean water, basic food, shelter, healthcare, and safety, the companies that supply those things are not immune to the same mistakes that were made in managing Red Lobster, with much higher stakes.
From exorbitantly priced insulin, to the Nestle baby formula scandal, to the Flint water crisis, we’ve seen a steady stream of cases where everyday people pay dearly for the short-sightedness and incompetence of a powerful few. To be clear, I’m not anti-capitalist or against companies earning big profits. But we need a more precise and robust way to account for the externalities of a big business on people, planet, and society in the short and long term. Otherwise it’s our children and grandchildren who will be left trying to clean up the mess that we left for them.
The alluring promise of endless shrimp was ultimately an illusion. Is the same true for the current state of capitalism?
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Mike Lee is a food futurist and author of the book Mise: On the Future of Food.