Red Lobster's Ultimate Endless Shrimp promotion described as a 'car crash for the company, lawsuit says

• Thai Union allegedly forced Red Lobster to purchase increasing amounts of above-market priced shrimp and banned competitors from supplying the chain, causing restaurants to run out of stock and be unable to turn over tables
• Red Lobster filed for Chapter 11 bankruptcy in May 2024 after defaulting on a $275 million term loan from Fortress Investment Group in September 2023, ultimately being acquired by RL Holdings in September 2024
• The lawsuit claims Thai Union 'treated the company as little more than a distribution arm for its own products' and divested its stake in May 2024 without contributing capital to the bankruptcy process

Summary: Red Lobster Lawsuit Over Failed Shrimp Promotion

Key Development:

Red Lobster creditors filed a lawsuit in Orange County, Florida, alleging that former controlling shareholder Thai Union exploited the restaurant chain through its disastrous "Everyday $20 Ultimate Endless Shrimp" promotion, described as a "car crash" for the company.

Main Allegations:

• Thai Union, a seafood producer with minority ownership, allegedly forced Red Lobster to purchase increasing quantities of overpriced shrimp at above-market rates
• The company banned competitors from supplying the chain, creating a captive distribution channel
• Then-interim CEO Paul Kenny, associated with Thai Union, allegedly implemented the promotion over objections from Red Lobster employees
• The promotion caused restaurants to run out of shrimp, immobilize operations, and accumulate massive oversupply

Financial Impact:

• Red Lobster defaulted on a $275 million term loan from Fortress Investment Group in September 2023
• The company filed for Chapter 11 bankruptcy protection in May 2024
• Thai Union divested its stake in May 2024 without contributing capital to the bankruptcy process
• The chain emerged from bankruptcy in September 2024 under new ownership by RL Holdings, backed by Fortress

Market Context:

Red Lobster's collapse resulted from multiple factors including expensive leases, increased competition, reduced consumer spending, and the failed shrimp promotion. Thai Union acquired its minority stake in 2016 and gained effective control through partnerships. The lawsuit alleges Thai Union treated Red Lobster as a distribution arm rather than prioritizing the restaurant chain's interests.