Red Lobster in Ontario court to discuss US bankruptcy case, Canadian assets: documents

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An attorney for Red Lobster Canada, Inc. says he will ask an Ontario court today to recognize and enforce the chain’s U.S. bankruptcy protection proceedings, a process that documents show could include the sale of Canadian assets.

Linc Rogers told The Canadian Press in an email that he would file an application Tuesday with the Ontario Superior Court of Justice on behalf of the beleaguered seafood restaurant chain’s Canadian operations. He declined to comment further on Red Lobster’s future in Canada.

However, an affidavit filed in court on May 20 by the CEO of Red Lobster Management LLC states that the purpose of the US proceeding is to organize a sale of most or all of the company’s assets, including those of Red Lobster Canada .

“With a looming liquidity crisis and no meaningful ability to raise new capital, RL Group’s board of directors has determined that a value-maximizing sale would be the best possible alternative,” Jonathan Tibus’ filing said.

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Red Lobster, which expanded into Canada in 1983, has 2,000 Canadian employees, who are largely part-time, non-union and work at the chain’s 27 locations in Ontario, Alberta, Manitoba and Saskatchewan.

The company leases 26 properties across the country and owns two others in Ontario, including a Brantford restaurant site and an Etobicoke location on The Queensway, where it owns a building but not the land.

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The Canadian operations represented approximately 4.7 percent of the company’s total consolidated revenue last year.

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Details about the chain’s Canadian footprint and performance are part of a filing last week that convinced an Ontario court to grant the company a stay of proceedings, preventing creditors from taking action against the company.

The postponement came as Florida-based Red Lobster Management LLC filed for Chapter 11 bankruptcy protection in the US. The American company had already closed dozens of locations as it struggled with rising costs.

Red Lobster, Tibus said, has faced “significant challenges” in recent years, including “supply chain disruptions, hyperinflation impacting food, labor and delivery costs, substantial increases in capital costs and real estate rents, and shifts in casual dining trends. both during and after the COVID-19 pandemic.”

Another filing from the company shows that annual customer numbers have fallen 30 percent since 2019 and have only “marginally improved from pandemic levels.”

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Even the “Ultimate Endless Shrimp” promotion, which was once offered permanently, hampered the company’s financial performance.

Tibus labeled it a “significant cash flow” that cost $11 million, according to a separate filing from the Red Lobster company.

The company said it is now investigating whether former CEO Paul Kenny and Thai Union, a seafood conglomerate with a stake in Red Lobster, encouraged marketing of the promotion that was so “excessive” that it caused “major shrimp shortages, with restaurants often went out to eat. days or weeks without” the seafood.

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In June 2023, Tibus said the company had begun working on a plan to reduce expenses and waste while restoring business growth. Court documents show the plan was intended to “simplify” the menu and “implement a sensible promotional calendar with fewer limited-time offers.”

However, Tibus said the brand continues to face “significant liquidity and operational challenges, which were exacerbated and accelerated by significant overmarket and underperforming leases and poor operational and marketing decisions by previous management.”

Red Lobster did not respond to a request for comment on the filing or the future of its Canadian assets.

The chain was founded in the US in 1968, but has since amassed 551 American restaurants and several in Mexico, Ecuador, Japan and Thailand.

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It has more than 64 million customers a year and is responsible for 20 percent of all North American lobster tails and 16 percent of all rock lobster sold worldwide, according to court records.

It started as a private company but was purchased by food manufacturer General Mills, which eventually spun off its restaurant division as a publicly traded company.

General Mills sold the brand to Golden Gate Capital in 2014 and in 2016, Thai Union Group bought a stake in the chain but is reportedly divesting from Red Lobster.

&copy 2024 The Canadian Press

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