Endless Shrimp Deal Was Scheme to Squeeze Red Lobster, Suit Says

Red Lobster’s $20 all-you-can-eat shrimp deal wasn’t just a badly designed promotion that inadvertently helped tip the iconic American restaurant chain into bankruptcy.

It was part of a scheme to “squeeze every drop of value” from Red Lobster for the benefit of its then-owner, seafood giant Thai Union Group Pcl, according to a previously unreported lawsuit. The suit against Thai Union and certain executives, brought on behalf of creditors that were owed about $295 million when the chain filed for bankruptcy in 2024, demands a jury trial to determine monetary damages.

Thai Union pushed Red Lobster to purchase more and more of its shrimp on terms that “made no economic sense” for the chain, the suit alleges. That turned its shrimp promotion, “a successful legacy Red Lobster strategy” to pull in customers, into “a car crash.”

Thai Union, which has faced accusations of mismanagement ever since Red Lobster’s bankruptcy, has denied wrongdoing. But the lawsuit, filed last month in a Florida court by a creditor-owned trust, contains new claims of how the Bangkok-based seafood giant allegedly bungled the chain’s operations. Some of those details are based on interviews with Red Lobster employees, the suit says.

Neither Thai Union nor its U.S.-based lawyers responded to requests for comment. In 2024, the company said it disputed all statements about itself and its relationship to Red Lobster. Red Lobster didn’t respond to a request for comment.

Thai Union catches, processes and sells about $4 billion worth of seafood annually under brands including Chicken of the Sea. In 2016, it bought a minority stake in Red Lobster to start building a direct-to-consumer channel. Four years later, it led a buyout of the chain and obtained majority control, according to the lawsuit.

‘Losing Money’

Red Lobster had suffered for years from mounting competition, and forced closures during the pandemic decimated its business. “It soon became clear that Red Lobster was losing money faster than it could turn a profit for its new owners,” the lawsuit says.

Thai Union dispatched several representatives to Red Lobster’s headquarters in Orlando. One of them was Paul Kenny, a restaurant executive and Thai Union shareholder, who made clear to Red Lobster’s senior management that he, not Chief Executive Officer Kelli Valade, was in charge, the lawsuit claims.

Valade soon resigned, citing Kenny’s alleged interference, the complaint says. Kenny was named interim CEO in August 2022. He was assisted by Scott Solar, a Thai Union employee who was Kenny’s “right-hand man,” the suit says.

Kenny and Solar didn’t respond to requests for comment sent via LinkedIn and email.

Under their supervision, “Thai Union took control of shrimp purchasing in part by embedding its own operatives in Red Lobster’s decision-making process,” the suit says. Kenny interfered with the “cadence and process for awarding supplier contracts” and would “often remark that Red Lobster ‘owed’ it to Thai Union to purchase its products exclusively.”

During a 2023 review, Kenny banned a longtime Red Lobster supplier for a year, leaving Thai Union as the chain’s sole provider of nearly half of all types of shrimp, the suit says. The decision ran counter to Red Lobster’s policy of having multiple suppliers and “enabled Thai Union to charge Red Lobster significantly more for shrimp than the going market rate.”

Bloomberg has previously reported that Red Lobster started buying from Thai Union at above-market rates, bypassing normal procurement procedures and without securing a backup supplier.

Temporary Promotion

For years, Red Lobster had run temporary bottomless-shrimp promotions. In May 2023, Kenny unilaterally decided to make it permanent and include premium shrimp, and directed marketing staff to promote it, the suit says.

Customers clamored for the offer. But that didn’t offset “the losses incurred by offering premium shrimp at such a low price,” and the deal was implemented too quickly, causing shrimp shortages at many restaurants, the suit claims.

The promotion helped shift “customers away from more profitable, higher-ticket menu items, which resulted in customers spending less money during each visit,” all for the benefit of Thai Union, the suit says.

Later that year, Red Lobster defaulted on a loan from Fortress Investment Group, which then effectively took control of the chain’s board. Thai Union declined to put additional money into the chain and said in January 2024 that it would divest from the company. Red Lobster filed for bankruptcy in May 2024 and is now owned by an investment group led by Fortress. Fortress declined to comment.

Many of these allegations echo earlier claims made by Jonathan Tibus, a turnaround specialist who served as CEO of Red Lobster from early 2024 until it exited bankruptcy later that year. In court filings, he alleged that the decision to make the $20 “Ultimate Endless Shrimp” permanent cost the company $11 million and saddled it “with burdensome supply obligations,” particularly with Thai Union.

The trust filed the suit on behalf of vendors, food distributors and other unsecured creditors. It seeks redress for Thai Union’s “self-dealing and exploitation of Red Lobster.” It’s also looking to unwind $32 million in transactions it claims Thai Union and other entities forced Red Lobster to enter into in 2023.

Red Lobster is now roughly two years into a turnaround effort under CEO Damola Adamolekun. It revived the shrimp promotion in April, with insiders citing its benefits on a limited-time basis as the struggling chain looks to lure diners.

This time, the company is using a different set of vendors to source the shrimp.

Top photo: A Red Lobster restaurant in Alexandria, Virginia. Bloomberg.