The company said that its $11 million loss in the third quarter was partly due to its “Ultimate Endless Shrimp” deal, which lets customers pay $20 for all the shrimp they can eat.
The seafood chain is raising the price of the deal to $25, according to Thai Union Group, the restaurant’s parent company. Thai Union Group said the restaurant was about to lose $20 million in 2023.
Thai Union Group CFO Ludovic Regis Henri Garnier told Restaurant Business Magazine, “We tried to get more people to come in, but it didn’t work.”
“We want to keep it on the menu. And, of course, we need to be much more careful about how people can join and how much we charge for this promotion. ”.
Patrons can choose between two shrimp selections when plunking down money for the “Ultimate Endless Shrimp” deal.
You can choose from Garlic Shrimp Scampi, Coconut Shrimp, Shrimp Linguine Alfredo, Walt’s Favorite Shrimp, and Garlic Grilled Shrimp Skewer on the Red Lobster menu.
Red Lobster traditionally has made the deal available on a limited time offer. But in June it added it to the daily menu in hopes of boosting traffic.
“And, of course, we need to be a lot more careful about how people can join and how much we charge for this promotion.” ”.
Food prices have been going up and up because of inflation and rising labor costs at Red Lobster’s 670 locations across the country. The company has been having a hard time making a profit.
Thai Union, a seafood company based in Thailand, led a group of investors that bought Red Lobster from Golden Gate Capital in 2020. Thai Union’s US brands include Chicken of the Sea.
Red Lobster’s Endless Shrimp promotion has been a beloved annual tradition for seafood lovers for over 20 years. However, in 2024, Red Lobster made the fateful decision to make Endless Shrimp a permanent menu item This led to catastrophic losses for the struggling seafood chain, contributing to their eventual bankruptcy filing. But how did an iconic promotion go so wrong?
The Origins of Endless Shrimp
Endless Shrimp started in 1994 as a limited-time offer to attract customers during slow summer months The deal allowed customers to eat unlimited shrimp for one flat price. It was an instant hit, bringing droves of diners into Red Lobster every summer and becoming an annual tradition
For years, Endless Shrimp was a highly profitable promotion. Red Lobster only had to run it for a couple of months per year. They could also limit supply and raise the price, optimizing profits. Customers loved the novelty of gorging on shrimp without limit for a short period. It was a win-win.
New Ownership and Loosened Purse Strings
Trouble began after Red Lobster was acquired by Thai Union Group in 2020. As an international seafood corporation, Thai Union had a glut of shrimp to offload.
In summer 2024, against Red Lobster management’s objections, Thai Union made Endless Shrimp a permanent menu feature for $20. The goal was to sell more shrimp.
Thai Union expected a 20% traffic increase, but Endless Shrimp actually drove a staggering 40% rise in customers. Restaurants were overwhelmed, service suffered, food costs ballooned, and profits plunged.
The Hidden Dangers of Endless Shrimp
On the surface, Endless Shrimp seems like a foolproof way to get more paying customers in the door. However, several factors made it disastrous as an ongoing promotion:
- No limits: With no time limit or caps on shrimp, some customers would linger for hours feasting. This reduced table turnover.
- Food costs: Profit margins on endless promotions are slim. Making it permanent ballooned shrimp costs.
- Supply issues: Red Lobster’s suppliers couldn’t keep up with surging demand, leaving some locations understocked.
- Cannibalizing menu: Some customers only ordered Endless Shrimp, not add-ons like drinks, desserts, and appetizers which drive profit.
- Labor challenges: Servers struggled to keep pace with endless shrimp orders. More staff was needed, increasing costs.
In short, Endless Shrimp created a perfect storm of low profits, inflated expenses, supply shortages, and disgruntled staff and customers.
The Decline and Eventual Bankruptcy of Red Lobster
Endless Shrimp was the final nail in the coffin for Red Lobster after years of declining sales and increasing competition from fast casual chains. Profits took a nosedive in 2024, with Red Lobster losing $11 million specifically attributed to Endless Shrimp.
By May 2024, Thai Union was desperate to offload the flailing company. Saddled with piles of debt and stuck in expensive leases, Red Lobster filed for bankruptcy in summer 2024. Over 30 locations closed almost immediately, with more likely to follow.
Could Red Lobster Have Been Saved?
Red Lobster’s bankruptcy provokes questions of whether the downfall could have been avoided with wiser leadership decisions:
- Keeping Endless Shrimp as a limited-time offer to retain novelty and control costs
- Resisting pressure from Thai Union to make short-sighted changes
- Modernizing branding and menus to attract younger generations
- Focusing on core guest experiences, not gimmicky promotions
Alas, hindsight is 20/20. The lure of Endless Shrimp as a quick fix for lagging sales made too much sense on paper. But in reality, this drastic change destroyed the financial viability of a once-thriving brand.
The Future of Endless Shrimp
As of Red Lobster’s bankruptcy filing in 2024, the fate of Endless Shrimp remains uncertain. Some locations may retain it as a last-ditch effort to drive traffic. But most experts agree Endless Shrimp should return to being a temporary promotion.
This saga serves as a cautionary tale on the risks of drastically changing a proven formula. The lure of short-term profits and panacea promotions can lead to long-term pain if not carefully executed. Moderation and balance are key in the restaurant industry.
At its heart, Red Lobster’s story is a tragic case of how a once-successful brand can quickly lose its way in the face of shifting consumer tastes, undisciplined leadership, and a refusal to adapt.
Red Lobster Is Hemorrhaging Millions Because of Endless Shrimp | WSJ What Went Wrong
Why did Red Lobster scrap the $20 endless shrimp deal?
Red Lobster did not immediately respond to ABC News’ request for additional comment. Red Lobster and Thai Union Group have scrapped the $20 endless shrimp deal, raising the price to $25, after the seafood supplier reported more than $11 million in losses.
Why did Red Lobster lose $11 million?
During a presentation about sales from the third quarter of last year, Ludovic Garnier, the chief financial officer of Thai Union Group, a seafood conglomerate that has been Red Lobster’s largest shareholder since 2020, cited the endless shrimp deal as a key reason the chain had an operating loss of about $11 million during that time frame.
Did Red Lobster really offer $20 shrimp?
Above, a restaurant in North Miami, Fla. Red Lobster promised customers an endless supply of shrimp for $20 — a gamble the struggling restaurant chain hoped would help pull it out of its pandemic doldrums. But Americans, and their appetites, had other plans.
Does Red Lobster have endless shrimp?
Last summer, Red Lobster made $20 endless shrimp a permanent menu item. Endless shrimp was a successful annual limited-time offer for Red Lobster for 20 years.