Red Lobster’s “Endless Shrimp” and “Endless Crab Legs” promotions are being blamed, in part, for its financial challenges as the restaurant chain shutters dozens of U.S. locations. While it’s unclear what these closures might mean for the 27 restaurants in Canada, Red Lobster is expected to file for bankruptcy protection in the U.S. this month.
To get more diners into its restaurants, Red Lobster made its “Endless Shrimp” and “Endless Crab Legs” promotions permanent, but the company didn’t expect how much seafood its customers would eat.
“That’s led to millions of dollars in losses,” says Marvin Ryder, a business professor at McMaster University in Hamilton, Ont. “They made a terrible assumption that you and I would only go back twice for endless shrimp, and instead people went multiple times.”
While the promotions are partially to blame for steep quarterly losses, they are part of a string of challenges that go back years. The company has gone through four CEOs in five years.
“When you have a different CEO with a different vision of where the company should go, that leads to a lot of jerking around,” Ryder says.
Like many restaurants, Red Lobster is also struggling with high interest rates, inflation and a younger generation it has not had a great deal of success connecting with.
CTV News spoke to several people outside a Red Lobster in downtown Toronto, many of whom had fond memories of visiting the restaurant as a child, but have not been back in years.
“I feel like it was a very nostalgic thing,” one man said. “But I haven’t heard of anyone who has gone to Red Lobster lately.”
Another woman told CTV News she last ate at the restaurant eight years ago, and has no plans to go back.
“If you want to connect with a younger generation you need to rethink your menu into more bite size bits,” Ryder says, with menu items that are “less expensive that the younger generation can afford.”
By filing for bankruptcy protection, Red Lobster will have time to restructure and offload some of its most expensive leases. Ryder anticipates Red Lobster will survive, but as a smaller company with fewer restaurants.
“Maybe in the order of 500 locations,” he predicts. “And the most expensive 140 might be gone.”
There are 27 locations in Alberta, Saskatchewan, Manitoba and Ontario. There were previously locations in Quebec, which the company closed in 1997 due to financial losses.
CTV News reached out to Red Lobster for comment and has not yet heard back.
