Red Lobster has finally managed to get the capital infusion it needed to stay afloat. Fortress Group has a reputation for turning around failing restos. But the new owner may mandate major changes in the business plan – and the menu…
There was some question about whether anyone with the requisite liquidity could be found to bail out the Lobster at all. The situation looked bleaker and bleaker, week after week, after the chain’s big seafood-supplier partner bowed out.
But the middle of last week, a well-known holding company with considerable investments in res-taurant and food operations stepped forward to enter the bidding. At the end of the day, they were the only ones in sight. And won the company be default.
Who bought it?
Fortress Investment Group offered (US)$376 million to acquire Red Lobster. A court hearing to ap-prove the sale is set for July 29. The chain has been under Chapter 11 bankruptcy supervision since the spring.
“The overarching goal of the committee was to make sure that there was a viable go-forward business with a maximum footprint,” said Brad Sandler, an attorney representing the unsecured creditors’ committee. “That’s what this transaction does.”
Fortress has significant experience in taking over and revivifying drowning restaurants. Sadler says that should be, “extremely positive and constructive,” for Red Lobster, going forward.
What happens now?
The deal allows the chain to continue operating the majority of its remaining locations on a busi-ness-as-usual basis while the change of ownership is completed at the top level of the organization.
Red Lobster closed more than 100 of its 570 locations in concert with its bankruptcy application. A large share of the funds being sought by creditors was delinquent rent on store properties. It remains unclear whether the chain will be able to successfully renegotiate leases for all existing locations under new ownership.
My take
The ‘Saving Red Lobster’ saga is far from over. And I’m thinking that Fortress is probably not going to be afraid to make some major changes in both the business plan and the menu, to ensure the chain can come back quickly, and continue operating on a solid financial footing. One thing we can con-fidently predict: There will be no more ‘Endless Shrimp’ deals.
As for the former Red Lobster executive suite – they’ll clean house. And put in people they know and trust. That’s probably just what the chain needs – new leadership not burdened by corporate ‘tradi-tions’, or the former leadership’s outdated, unworkable concept of what Red Lobster is, and how it should be run.
~ Maggie J.