Endless shrimp was a successful annual limited-time offer for Red Lobster for 20 years. The new major shareholder in Red Lobster is Thai Union, a canned seafood company based in Bangkok. Thai Union saw the promotion as a way to get rid of the huge amounts of shrimp it was catching and made it an everyday item. (Thai Union became Red Lobster’s largest investor in 2020. ).
Sunday, Red Lobster filed for bankruptcy. This brings to light Thai Union’s part in the never-ending shrimp mess. Red Lobster said it is investigating the circumstances of that promotion, which Red Lobster management opposed.
The filing said that Thai Union chose the CEO of Red Lobster and got rid of two of its breaded shrimp suppliers. This gave Thai Union exclusive rights to supply shrimp to the chain.
That caused prices to go up, and it wasn’t in line with how the company usually chooses suppliers based on expected demand, the chain said in its filing.
Red Lobster said in the filing that Thai Union’s decision caused operational and financial problems for the company and put heavy supply obligations on it.
Endless shrimp alone didn’t doom Red Lobster. Analysts and former leaders of the chain say that the American seafood icon was brought down by a number of things, such as bad management by Thai Union and handoffs between investors and corporate parents.
“Some operational decisions made by former management have hurt [Red Lobster’s] finances in recent years,” the company said in its bankruptcy filing.
Over the past 20 years, fast-casual chains like Chipotle and quick-service chains like Chick-fil-A have grown very quickly and become very popular. This has put pressure on Red Lobster. Red Lobster has had trouble adding Millennials to its core Baby Boomer customer base for years because it hasn’t spent enough on marketing, food quality, service, and restaurant upgrades.
“Red Lobster was the foundation of casual dining. In a previous interview with CNN, Alex Susskind, a professor of food and beverage management at Cornell University, said, “They were powerful and well-known, and they changed the way Americans eat seafood.”
But the company didn’t build on that foundation, Susskind said. “Red Lobster had incredible popularity among Baby Boomers. They didn’t bring in a newer generation. ”.
Red Lobster’s popular Endless Shrimp promotion has become the stuff of legend. For a set price customers could indulge in unlimited shrimp dishes until fully satisfied. But was the epic all-you-can-eat shrimp deal actually causing the struggling restaurant chain to lose money? Let’s analyze the financials and employee experiences to determine if Endless Shrimp was a money-losing proposition.
The Allure of Endless Shrimp for Customers
It’s easy to see why Red Lobster customers found the Endless Shrimp promotion irresistible:
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Low price For around $15-20 the endless shrimp offered an indulgent meal at a bargain basement price compared to normal menu items.
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Unlimited shrimp Customers could continuously order more shrimp dishes without paying extra allowing them to binge guilt-free.
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Variety: Diners could choose from different shrimp preparations like fried, scampi or grilled shrimp.
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Side dishes included: Each Endless Shrimp order came with salad, rice or potatoes, and Cheddar Bay biscuits.
For shrimp lovers, the chance to endlessly feast on unlimited crustacean delights for such a low price point proved incredibly enticing. Red Lobster saw a spike in customer visits during the promotions.
Loss of Profits Reported from Endless Shrimp
In late 2023, Red Lobster’s parent company reported a $11 million operating loss attributed mainly to the Endless Shrimp promotion. This led many to conclude the endless deal was a money loser. Some key points:
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The low $15-20 price meant much lower profit margins compared to the average $28 entree.
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Customers stayed longer, occupying tables for hours while gorging on shrimp, reducing table turnover.
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Some took advantage by sharing Endless Shrimp or stashing extra shrimp to-go against the rules.
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Kitchens struggled to keep up with endless shrimp orders, bogging down operations.
So based on corporate’s reported losses, Endless Shrimp did appear to be an unsustainable, money-losing promotion from a business perspective.
Servers Saw Declines in Tips Due to Endless Shrimp
Front-of-house Red Lobster employees universally despised the Endless Shrimp promotion due to its negative impact on their income. With customers staying longer and spending less per check, servers reported dramatically lower tip earnings during the promotion periods.
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One server made $200 a night before Endless Shrimp but only $90 during the promotion.
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Cheap shrimp brought in more low-income customers who tipped more frugally.
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Campers staying for hours to maximize shrimp orders tied up tables and limited table turns.
The endless shrimp deals, while popular with customers, were financial disasters for waitstaff who saw tip earnings plummet.
Customers Abused the Terms of Endless Shrimp
Red Lobster prohibited take-home boxes for leftover Endless Shrimp and banned sharing shrimp with the entire table. However, servers reported rampant rule-breaking and abusive behavior by customers exploiting the promotion:
- Groups tried to share one Endless Shrimp order across entire tables.
- Patrons grew belligerent when refused take-home boxes for extra shrimp.
- Some diners spent 3-4 hours gorging on 30+ shrimp orders, bogging down kitchens.
- Servers were berated, screamed at and spat on when enforcing Endless Shrimp rules.
Rampant abuses of the promotion’s terms cut further into profits and created chaos for employees struggling to enforce policies.
So Did Endless Shrimp Lose Money?
Based on corporate losses, server tip declines, rampant policy breaking and kitchen bottlenecks, it’s clear the Endless Shrimp promotion was unsustainable and did ultimately lose money for Red Lobster. While the cheap shrimp lured in customers, the terms and execution were financially problematic:
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The low $15-20 price point meant much lower per-customer profits.
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Long campers limited table turnover, reducing revenue potential.
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Policy exploitations increased costs of shrimp orders.
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Bogged down kitchens led to worse service, affecting perceptions of food quality.
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Chaotic scenes from enforcement battles created a less-than-ideal dining experience.
Though popular with customers seeking an indulgent shrimp feast, Endless Shrimp failed as a sustainable, profitable promotion. The financial bleeding it caused likely was a contributing factor in Red Lobster’s eventual downfall.
Key Takeaways on the Viability of Endless Shrimp
While customers unsurprisingly loved the idea of unlimited shrimp for a low fixed price, the execution had major flaws that ultimately made it a money loser:
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Endless consumption + low pricing = bad math for profits
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Lack of time limits or shrimp order pacing meant potential for abuse
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Ongoing availability diminished its allure as a limited-time promotion
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Poor rules enforcement empowered those seeking to game the system
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Staff paid the price through lost tips and abusive behaviors
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Damage to brand reputation from chaotic scenes during promotions
The lessons of Endless Shrimp are clear – unlimited food or drink promotions can be money losers if not thoughtfully structured. For success, reasonable limits must be set and enforced to prevent blatant over-consumption. Moderation remains key, even when endless indulgence is on the menu.
Frequently Asked Questions about Endless Shrimp Losses
Here are some common questions about whether Red Lobster’s Endless Shrimp promotion lost money:
How much did Red Lobster reportedly lose from Endless Shrimp?
Their parent company reported an $11 million operating loss mainly attributed to Endless Shrimp.
Did customers order too much shrimp compared to normal entree prices?
Yes, the low $15-20 price let customers order far more shrimp than a typical $28 entree.
How did Endless Shrimp affect employees and their tip income?
Tips plummeted as diners stayed longer and spent less per check compared to regular higher-priced menu items.
What rules did customers break that drove up Red Lobster’s costs?
Sharing shrimp across large groups and taking home extra shrimp was prohibited but rampant.
How did Red Lobster try to stop the losses from Endless Shrimp?
They raised the price to $25 and enacted stricter enforcement of the promotion’s terms.
Could Endless Shrimp have succeeded with better rules and execution?
Possibly, with shrimp order limits per person, time limits on tables, and better rules enforcement.
Was Endless Shrimp’s failure predictable given unlimited consumption?
In hindsight, yes – unlimited food/drink deals often lose money without careful limits and rules.
While the appeal of indulging in unlimited shrimp is clear, Red Lobster’s epic promotion simply proved unsustainable from a profit perspective. The lessons learned can guide future restaurants exploring similar unlimited offers to ensure they don’t sink the bottom line. Moderation and reasonable limits remain key.
Owned by General Mills
In 1968, the first Red Lobster opened in Lakeland, Florida, about an hour south of Orlando. At that time, casual dining was just getting started.
The brand was started by southern restaurateurs Bill Darden and Charley Woodsby. Darden owned several Howard Johnson’s restaurants, one of the first casual dining concepts.
“Our motto was informal and family prices,” Woodsby later said. They saw an opportunity to bring seafood to landlocked people at more affordable prices than fine-dining restaurants.
“In most of middle America, you couldn’t get decent seafood. “Red Lobster made it popular for everyone,” said Jonathan Maze, editor-in-chief of the trade magazine Restaurant Business. “Red Lobster was part of this casual dining revolution. ”.
Just two years into Darden and Woodsby’s venture, General Mills acquired the brand. General Mills owned brands like Betty Crocker, Wheaties, and Cheerios. The company also wanted to get into the restaurant business with Red Lobster’s five simple restaurants.
By the early 1970s, with General Mills’ advertising muscle behind it, Red Lobster opened restaurants across the South.
Red Lobster rose quickly and was the first casual dining chain to advertise on network television, according to a Harvard Business School study. Red Lobster also developed the first national seafood distribution system in the 1970s.
“Many diners preferred their seafood fried in those days, and Red Lobster’s hush puppies could be considered an early ‘signature item,’” Joe Lee, the first general manager at Red Lobster and later its president, said in a journal article. “Families were welcomed with high chairs and a 59-cent child’s plate.”
By 1978, Red Lobster had 236 restaurants and $291 million in sales. It had 372 restaurants and $834 million in sales in 1985.
In 1995, General Mills split off its restaurant business into a new company called Darden Restaurants, which was named after Bill Darden, the founder of Red Lobster. At first, the company had the well-known chain Red Lobster and the new chain Olive Garden, which General Mills started in 1982.
But Red Lobster fell behind its sister brand Olive Garden under Darden.
By 2008, Olive Garden’s sales had eclipsed Red Lobster’s. Darden also acquired fast-growing chains such as Longhorn Steakhouse, Capital Grille and Yard House.
“Darden stopped investing in Red Lobster. “Things slowly got worse,” Les Foreman told CNN. From 2002 to 2022, he was director of operations and divisional vice president at Red Lobster. Red Lobster’s sales began declining and Darden prioritized investments in its other brands.
Darden soon faced pressure from activist investors pushing the company to split in two.
Darden responded to activist pressure by announcing plans in 2013 to sell Red Lobster, separating the chain from the rest of its business.
The following year, Darden sold Red Lobster to Golden Gate Capital, a private equity firm, for $2.1 billion. To help fund the deal, Red Lobster spun off its real estate assets in a transaction known as a sale leaseback agreement. Red Lobster had long owned its own real estate but would now be paying rent to lease its restaurants.
In the restaurant business, sale leasebacks are very common. However, Red Lobster ended up losing money because it was stuck with leases it couldn’t pay.
“That produced cost pressures on Red Lobster that they’ve never had before,” said analyst John Gordon. “It became a problem. ”.
While this was going on, fast-casual and quick-service restaurants grew thanks to lower prices, thousands of new drive-thru restaurants, and online delivery. These chains pressured the casual dining sector.
According to Technomic, a restaurant research firm, casual dining has gone down from making up 33.6 percent of all restaurant sales in 2013 to 31.1 percent in 202023.
Red Lobster’s controlling shareholder Thai Union also hurt the brand, say former employees and analysts.
Thai Union was a top supplier of shrimp to Red Lobster for more than 20 years. In 2016, Thai Union took a $575 million minority stake in the brand. In 2020, Thai Union deepened its financial interest in Red Lobster.
Thai Union saw an opportunity to grow its business and also become a bigger supplier to Red Lobster.
To save money on labor, it also tried pushing Red Lobster’s waitstaff to the limit by going from having waiters cover three tables to having 10 waiters cover 10 tables.
A lot of Red Lobster executives left when Thai Union took over, which caused a lot of turnover in the C-suite. Red Lobster hired a new CEO, CMO, CFO, and CIO in 2021 and 2022. All left the company within two years.
Then came the all-you-can-eat shrimp mishap last year.
Thai Union CEO Thiraphong Chansiri said in November, “We were expecting an increase of 2020% in customer traffic, but the actual number was up to 2040%.”
Two months later, Thai Union said it was pulling its money out of Red Lobster, which cost it $530 million. As well as “sustained industry headwinds, higher interest rates and rising material and labor costs,” the company said the pandemic was to blame. ”.
“I’m going to stop eating lobster,” Chansiri said this year. Ad Feedback Ad Feedback
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Fear & Greed Index
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. The new major shareholder in Red Lobster is Thai Union, a canned seafood company based in Bangkok. Thai Union saw the promotion as a way to get rid of the huge amounts of shrimp it was catching and made it an everyday item. (Thai Union became Red Lobster’s largest investor in 2020. ).
The change cost Red Lobster $11 million.
Sunday, Red Lobster filed for bankruptcy. This brings to light Thai Union’s part in the never-ending shrimp mess. Red Lobster said it is investigating the circumstances of that promotion, which Red Lobster management opposed.
The filing said that Thai Union chose the CEO of Red Lobster and got rid of two of its breaded shrimp suppliers. This gave Thai Union exclusive rights to supply shrimp to the chain.
That caused prices to go up, and it wasn’t in line with how the company usually chooses suppliers based on expected demand, the chain said in its filing.
Red Lobster said in the filing that Thai Union’s decision caused operational and financial problems for the company and put heavy supply obligations on it.
Thai Union did not immediately respond to CNN’s request for comment.
Endless shrimp alone didn’t doom Red Lobster. Analysts and former leaders of the chain say that the American seafood icon was brought down by a number of things, such as bad management by Thai Union and handoffs between investors and corporate parents.
“Some operational decisions made by former management have hurt [Red Lobster’s] finances in recent years,” the company said in its bankruptcy filing.
Over the past 20 years, fast-casual chains like Chipotle and quick-service chains like Chick-fil-A have grown very quickly and become very popular. This has put pressure on Red Lobster. Red Lobster has had trouble adding Millennials to its core Baby Boomer customer base for years because it hasn’t spent enough on marketing, food quality, service, and restaurant upgrades.
“Red Lobster was the foundation of casual dining. In a previous interview with CNN, Alex Susskind, a professor of food and beverage management at Cornell University, said, “They were powerful and well-known, and they changed the way Americans eat seafood.”
But the company didn’t build on that foundation, Susskind said. “Red Lobster had incredible popularity among Baby Boomers. They didn’t bring in a newer generation. ”.