Red Lobster is in trouble. Its answer: all-you-can-eat lobster. This came just a few months after a promotion for unlimited shrimp caused the company to lose a lot of money, which it is still trying to recover from.
Red Lobster is giving 150 lucky winners an “Endless Lobster Experience,” which includes two hours of free Cheddar Bay Biscuits, unlimited lobster, and two sides. This is in honor of its annual Lobsterfest.
The Florida-based chain is hardly the first retailer to use these kinds of stunts to get attention. But the Endless Lobster Experience comes at a tumultuous time: Red Lobster reported a record $12. 5 million operating loss in the fourth quarter of 2023.
And in January, Thai Union Group, a small investor, said it was leaving Red Lobster because it had lost $19 million in the first nine months of 2023. In a statement released on January 16, Thiraphong Chansiri, CEO of Thai Union Group, said that Red Lobster had “negative financial contributions to Thai Union and its shareholders.” This was due to the COVID-19 pandemic, high interest rates, rising costs, and industry headwinds.
During an earnings call with analysts on February 19, Thai Union Group’s chief financial officer, Ludovic Garnier, changed the $19 million number and said that Thai Union Group lost $22 million at Red Lobster in 2023.
During the earnings call, Chansiri confirmed that the company is selling its Red Lobster stake. He also said that the process could take three to four months. A FactSet transcript of the call says that Chansiri said, “We’re not expecting to get anything much from the sale.”
A previous all-you-can-eat deal contributed to Red Lobster’s financial woes. In June, Red Lobster announced that its “Ultimate Endless Shrimp” deal would become a permanent menu item. Even though the price went up from $20 to $22 to $25 over the course of 2023, Red Lobster still lost $11 million in the third quarter of that year because the item was so popular and there weren’t many new customers.
While Thai Union looks for buyers, Red Lobster keeps holding Lobsterfest, an event that the chain has been holding every year since 1984.
First 150 people who enter on February 20 will have the chance to enjoy Red Lobster’s free feast, as long as supplies last. But there’s a caveat: The experience includes a maximum of 12 one-and-one-fourth pound Maine lobsters. If you make it past 12, you’ll be offered Maine lobster tails or Caribbean Rock lobster tails. While the food is free, beverages, tax and gratuity are not included.
As is their custom, the Florida-based chain is celebrating Lobsterfest with 10 limited-edition menu items. These include five new dishes like the Crispy Lobster.
Red Lobster will share information about the Endless Lobster Experience contest on its social media sites, such as Facebook, X, Instagram, and TikTok.
Red Lobster fans are waiting for their chance to win a feast, but Chansiri, the head of the Thai Union, has no plans to eat anything from the sea.
“Other people stop eating beef,” he said on Monday’s earnings call. “I’m going to stop eating lobster. ” Ad Feedback Ad Feedback Ad Feedback.
Red Lobster’s endless shrimp promotion has become the stuff of legends. For one flat price you can indulge in unlimited succulent shrimp until your heart and stomach desire no more. It’s an indulgent dream come true for shrimp lovers. But with such an incredible deal on offer, exactly how much does the chain lose by letting customers eat to their heart’s content? What’s the true cost behind Red Lobster’s all-you-can-eat shrimp specials?
In this article, we’ll break down the economics behind the chain’s famous shrimp deals. You’ll learn how the pricing and profit margins actually work on these too-good-to-be-true shrimp platters. We’ll also look at how changes and adjustments to the promotion over the years have impacted Red Lobster’s bottom line. Let’s dig in to find out if unlimited shrimp really is sustainable for restaurants.
The Origin Story of Endless Shrimp
Red Lobster first debuted its endless shrimp offer in the 1990s as a seasonal promotion. The idea was to draw in customers during slower months and get people excited about the chain again. And it worked – the first year it ran, Red Lobster saw a 25% surge in customer traffic compared to the prior year without the endless shrimp promotion
Given this success, Red Lobster decided to bring back the offer year after year. For customers, it became an annual tradition to get their shrimp fix. Red Lobster’s profits also rose, despite the low $20 price point for unlimited shrimp.
However, as inflation drove up food costs over the years, it became harder for Red Lobster to maintain profit margins on endless shrimp. The low price point also failed to keep up with rising shrimp prices.
This tension ultimately turned the promotion from an annual boon into an anchor threatening to sink profits.
Estimating Red Lobster’s Shrimp Profit Margins
So how much does Red Lobster actually make – or lose – on endless shrimp? Here are some ballpark estimates on costs and profit margins:
- Shrimp market price: $4-7 per pound
- Serving size: Approx. 5 shrimp per serving
- Cost per serving: Around $1-2
- Profit margin per serve: Anywhere from $0.50 to $1.50
With an average ticket price of $20, Red Lobster needs customers to consume 10 servings or less to turn a profit. Any more than that, and they start losing money.
As you can imagine, diners motivated to “get their money’s worth” didn’t restrain themselves to just 10 servings. Many ate 15, 20, even 30 servings or more to maximize the value.
Suddenly instead of making a slim profit, Red Lobster saw their margins dissolve into losses as people gorged on shrimp.
The Downfall of Endless Shrimp
Despite the promotion’s popularity among diners, endless shrimp eventually proved unsustainable for Red Lobster’s bottom line.
In 2003 and 2009, losses from all-you-can-eat shrimp specials led to monetary woes. But the final nail in the coffin came in 2022, when surging inflation and shrimp prices meant Red Lobster couldn’t make money on endless shrimp even at a $25 price point.
The result? Locations hemorrhaging money, with operating losses of $11 million in Q3 2022 alone. By early 2023, Red Lobster teetered on the edge of bankruptcy.
However, in a desperate effort to save itself, Red Lobster made changes:
- Raised prices to $28 in 2023 to cover costs
- Limited shrimp special to 2 hours per seating
- Offered cheaper crab and fish specials instead
Unfortunately, it was too little too late. The chain was forced to permanently discontinue endless shrimp in late 2023.
Why Endless Shrimp Was Never Sustainable
There are a few key reasons why Red Lobster’s unlimited shrimp promotion failed in the long run:
1. Small profit margins: Shrimp are expensive, so profit off each serving was minimal.
2. Volume eating: Customers would consume 20+ shrimp to “get their money’s worth.”
3. Rising costs: Inflation and higher shrimp prices made it unprofitable over time.
4. Price inflexibility: The expected $20 price anchored customer perceptions.
5. Competition: Other chains offered cheaper shrimp deals.
The result was a promoting that ultimately underpriced a costly menu item and overfed customers motivated by value, not taste.
The Aftermath: Bankruptcy and Closures
After discontinued endless shrimp in late 2023, Red Lobster sustained itself on its core menu for a few months before the lack of cash flow caught up.
In early 2024, its parent company announced the discontinuation of over 40 locations. By mid 2024, Red Lobster filed for bankruptcy, sunk by debts exceeding $1.2 billion.
While endless shrimp alone didn’t cause Red Lobster’s demise, industry experts agree it played a pivotal role. The unsustainable promotion reduced margins and hurt the chain’s bottom line during an already difficult economic climate.
What’s Next for Red Lobster?
Red Lobster still maintains hundreds of locations, but its future remains uncertain even after bankruptcy. Some speculate the chain could be sold off entirely or dissolved into a smaller operation.
Moving forward, the chain will likely have to rely on core menu offerings rather than flashy loss-leading promotions. Time will tell if Red Lobster can claw its way back from the brink after its brush with endless shrimp.
The Moral of the Story
The tale of Red Lobster’s all-you-can-eat shrimp special offers some valuable lessons for restaurants:
-
Don’t underprice high-cost ingredients as loss leaders
-
Limit volume for endless promotions to contain costs
-
Adjust pricing regularly to keep up with inflation
-
Focus on full-margin items as your profit center
Only time will tell if any restaurant can make endless shrimp sustainable. But for now, it seems the days of $20 all-you-can-eat shrimp are gone forever.
Frequently Asked Questions
Still curious about the rise and fall of Red Lobster’s famous promotion? Here are answers to some common shrimp questions:
When did Red Lobster first offer endless shrimp?
The first iteration launched in the 1990s as a seasonal promotion. It quickly became an annual tradition.
What was the original price for endless shrimp?
Around $20 when it first launched in the 90s. The price later increased to $25 before being discontinued.
How many shrimp do people eat during endless shrimp?
Reports of diners consuming 20-30 shrimp were common. Competitive eaters would put away 60+ shrimp.
Does Red Lobster still offer endless shrimp?
No, endless shrimp was permanently discontinued in late 2023 after years of losses.
What caused Red Lobster to go bankrupt in 2024?
Excessive losses from unsustainable promotions like endless shrimp were major contributing factors.
Does any restaurant still offer endless shrimp specials?
A few chains may offer limited time shrimp specials, but none currently offer unlimited “all-you-can-eat” style shrimp deals.
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Fear & Greed Index
Red Lobster is in trouble. Its answer: all-you-can-eat lobster. This came just a few months after a promotion for unlimited shrimp caused the company to lose a lot of money, which it is still trying to recover from.
Red Lobster is giving 150 lucky winners an “Endless Lobster Experience,” which includes two hours of free Cheddar Bay Biscuits, unlimited lobster, and two sides. This is in honor of its annual Lobsterfest.
The Florida-based chain is hardly the first retailer to use these kinds of stunts to get attention. But the Endless Lobster Experience comes at a tumultuous time: Red Lobster reported a record $12. 5 million operating loss in the fourth quarter of 2023.
And in January, Thai Union Group, a small investor, said it was leaving Red Lobster because it had lost $19 million in the first nine months of 2023. In a statement released on January 16, Thiraphong Chansiri, CEO of Thai Union Group, said that Red Lobster had “negative financial contributions to Thai Union and its shareholders.” This was due to the COVID-19 pandemic, high interest rates, rising costs, and industry headwinds.
During an earnings call with analysts on February 19, Thai Union Group’s chief financial officer, Ludovic Garnier, changed the $19 million number and said that Thai Union Group lost $22 million at Red Lobster in 2023.
During the earnings call, Chansiri confirmed that the company is selling its Red Lobster stake. He also said that the process could take three to four months. A FactSet transcript of the call says that Chansiri said, “We’re not expecting to get anything much from the sale.”
A previous all-you-can-eat deal contributed to Red Lobster’s financial woes. In June, Red Lobster announced that its “Ultimate Endless Shrimp” deal would become a permanent menu item. Even though the price went up from $20 to $22 to $25 over the course of 2023, Red Lobster still lost $11 million in the third quarter of that year because the item was so popular and there weren’t many new customers.
While Thai Union looks for buyers, Red Lobster keeps holding Lobsterfest, an event that the chain has been holding every year since 1984.
First 150 people who enter on February 20 will have the chance to enjoy Red Lobster’s free feast, as long as supplies last. But there’s a caveat: The experience includes a maximum of 12 one-and-one-fourth pound Maine lobsters. If you make it past 12, you’ll be offered Maine lobster tails or Caribbean Rock lobster tails. While the food is free, beverages, tax and gratuity are not included.
As is their custom, the Florida-based chain is celebrating Lobsterfest with 10 limited-edition menu items. These include five new dishes like the Crispy Lobster.
The chance to win the Endless Lobster Experience will be advertised through Red Lobster’s social media channels, including Facebook, X, Instagram and TikTok.
Red Lobster fans are waiting for their chance to win a feast, but Chansiri, the head of the Thai Union, has no plans to eat anything from the sea.
“Other people stop eating beef,” he said on Monday’s earnings call. “I’m going to stop eating lobster. ” Ad Feedback Ad Feedback Ad Feedback.