How Private Equity Ended Endless Shrimp

In 2016, musician Beyonce released the song, “Formation.” In one lyric, she mentions the beloved American seafood restaurant chain, Red Lobster. As the song shot up to number one on the Billboard charts, Red Lobster saw its sales rise by an astonishing 33%. Today, Red Lobster is bankrupt and the brand has been forced to close down locations nationwide. So, what exactly happened?

The short answer is that private equity happened. Yes, the same sinister force behind the disappearance of Toys R’ Us and the 99 Cents Store has sunk its fangs into the nation’s largest distributor of medium-quality crustaceans. The long answer is much more complex. 

In 2014, Red Lobster was sold to Golden Gate Capital. At the time Red Lobster Restaurants operated on land owned by Red Lobster. Gold Gate Capital sold that land for a large cash payout, then leased the land back to Red Lobster. When interest rates went up, the leased land became a huge financial burden. Then the price of seafood surged, a global pandemic happened, and Red Lobster’s money problems only multiplied.

In 2020, Golden Gate Capital sold the business to shrimp supplier Thai Union. Thai Union would install a new CEO who would reward them with an exclusive shrimp distribution contract. This allowed them to set even higher prices for shrimp. This brazen conflict of interest effectively allowed Thai Union to extract money from Red Lobster at the expense of the business. As a last-ditch effort to increase restaurant foot traffic, Red Lobster implemented a permanent all-you-can-eat shrimp promotion. Sadly it backfired and the company reported losing millions over a few months. 

While this restaurant is still technically open, it may not be so for long. Before you rush out to get one last taste of those delectable biscuits, get your ‘Free Red Lobster’ t-shirt from ShopTYT first.