Additional Coverage:
Creditors of Red Lobster have filed a lawsuit accusing former major shareholder Thai Union of prioritizing its own interests over the restaurant chain’s financial health, particularly in connection with the “Everyday $20 Ultimate Endless Shrimp” promotion. The seafood giant’s involvement, the suit claims, contributed significantly to Red Lobster’s financial troubles.
The legal action, filed in Orange County, Florida, alleges that Thai Union was aware by 2023 that Red Lobster was struggling financially and facing potential insolvency. Instead of helping stabilize the chain, Thai Union allegedly pushed Red Lobster to buy increasing quantities of overpriced shrimp exclusively from them, shutting out competitors and locking the restaurant into unfavorable contracts.
Creditors describe the shrimp promotion as a “car crash” that severely disrupted operations. According to the lawsuit, the campaign, engineered by Thai Union and interim CEO Paul Kenny despite employee objections, caused supply shortages that immobilized restaurants nationwide, preventing efficient table turnover and hurting revenues. Even as the promotion’s negative impact became clear, Kenny reportedly doubled down, increasing orders and leaving Red Lobster with a costly shrimp surplus.
Red Lobster filed for Chapter 11 bankruptcy protection in May 2024 amid rising competition, high lease costs, and broader consumer spending declines. The company had defaulted on a $275 million loan the previous September. After emerging from bankruptcy in September 2024 under new ownership led by private investors including Fortress Investment Group, Red Lobster continues operations but is no longer affiliated with Thai Union.
The suit criticizes Thai Union for treating Red Lobster largely as a distribution channel for its own products, extracting value at the expense of the restaurant’s financial stability, and for failing to support the company financially during the bankruptcy process. Thai Union, which had acquired a controlling stake in Red Lobster between 2016 and 2020 before divesting in 2024, has yet to publicly respond to the allegations.
This case highlights the complex risks when suppliers hold significant control over restaurant chains, especially when promotional campaigns become financially unsustainable. The outcome of the jury trial will determine the extent of damages owed to Red Lobster’s creditors.