Red Lobster will emerge from bankruptcy – but CEO warns restaurant closures are just the beginning of radical changes for the chain

RED Lobster’s bankruptcy path was revealed after the chain announced its new owners.

On Monday, the bankrupt seafood restaurant confirmed that RL Purchaser LLC, a new group within Fortress Credit Corporation, will take over after no other bidders come forward.

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RL Purchaser was what is known as a “stalking horse bidder”, which is a company that makes an initial offer for the assets of a bankrupt company and sets the price for the start of the auction.

When Red Lobster filed for bankruptcy two months ago, it scheduled an auction for July 23.

However, this was canceled after no bidders came forward in time for the network’s July 18 deadline, making the stalking horse bidder the automatic owner.

The lack of interest may be due to Red Lobster’s announcement at a hearing in July that a traditional asset sale would not occur.

“The idea is to…maintain operational continuity and potentially reduce the costs and complexities associated with a traditional asset sale,” said attorney Jeffrey Dutson of King & Spalding LLP, representing Red Lobster at the hearing, according to the Orlando Business Journal.

RL Comprador raised US$376 million for the network’s assets, according to the news agency.

The new entity already has a history of buying bankrupt companies, as it has already purchased Vice Media and Alamo Drafthouse.

The asset sale will be reviewed at an approval hearing on July 29, according to federal court documents seen by USA today.

Fortress Credit Corporation declined to comment to the news outlet on Tuesday, and Red Lobster and its attorneys did not respond to requests.

Ahead of next week’s approval hearing, Red Lobster CEO Jonathan Tibus revealed how the seafood chain’s sales will undergo widespread changes.

Under new ownership, the chain will be able to restructure and improve operations.

The main issues to be addressed will be those highlighted in the bankruptcy filing as major contributors to Red Lobster’s financial failures.

Red Lobster closed a number of restaurants as it filed for Chapter 11 protection, citing billions of dollars in debt and “a bloated and underperforming restaurant footprint.”

The weak economic environment and increased competition have been blamed for its recent financial failures, as well as the all-you-can-eat shrimp deal for just $20.

According to financial reports from last year’s fiscal third quarter, the network lost $11 million that quarter purely due to a deal designed to increase traffic.

In the fourth quarter, the company suffered an operating loss of $12.5 million, according to CNN.

To address these concerns, the CEO promised widespread changes in a 124-page document.

Red Lobster’s marketing strategy and supply chain management will be reevaluated, according to USA today.

In addition, the chain must also look at efficiency, customer satisfaction and employee experience.

The CEO has a “three-pronged strategic priority plan” focusing on culture and employee retention, making the chain’s outlets a “great place to work” as well as providing “consistent experiences and excellent customer service.”

Red Lobster will also need to look at how it can reduce expenses and increase profits while providing customers with good quality food.

The CEO warned of a continued focus on improving operations, which will lead to a chain crackdown on non-productive spending across all areas of the business.

There may be further closures as “financially burdensome” locations are identified in hopes of relocating employees from those locations.

Tibus’ position as CEO will not be confirmed if the sale goes through, meaning the future of his bankruptcy plan is also in doubt.

The US Sun has reached out to Red Lobster for comment.