Chad Massaker, MICP, CSD’s Post

🚨 Red Lobster Files for Chapter 11 Bankruptcy 🚨 In 2014, private equity firm Golden Gate Capital made headlines with their $2.1B purchase of Red Lobster. But let’s set the record straight – it wasn't the mouth-watering seafood that caught their eye; it was the land under each restaurant. Here's where it gets interesting – and controversial. 💥 Golden Gate Capital forced all Red Lobster locations to sell their land to another firm they owned for $1.5B. This new firm then leased the land back to franchisees at ABOVE-MARKET rates. 💸 Talk about squeezing the juice out of the lemon! Trung Phan called it out on Twitter/X, and he's spot on. Golden Gate Capital didn't just get their $1.5B back – they secured continuous cash flows from inflated lease payments, effectively milking the franchisees dry. This burden pushed Red Lobster into financial distress, culminating in today's Chapter 11 filing. But wait, there's more! Golden Gate Capital eventually sold the struggling brand to Thai Union Group PCL. Thai Union, the only shrimp supplier for Red Lobster, might have started the infamous Endless Shrimp campaign to dump surplus shrimp and take a complete write-off. 🦐 They’ve now written off over $500M from this deal. Is this the dark side of private equity? Stripping down iconic brands to their bones, leaving nothing but a shell? Let’s discuss. 🔥 Is this smart business or blatant exploitation? How can we protect beloved brands from being hollowed out for quick profits? Your thoughts? 💬 #PrivateEquity #RedLobster #Chapter11 #BusinessStrategy #FinancialCrisis #Controversy

Seeing Red (Lobster): Endless scams, not endless shrimp. The reporting around Red Lobster’s bankruptcy has been pathetic. Although I understand how much fun it is to blame the restaurant’s failure on “endless shrimp,” in fact it’s fun just to say “endless shrimp,” the reality is that Red Lobster is a classic private equity “strip and flip” deal. In 2014, Golden Gate Capitol bought the restaurant chain and promptly sold off it’s real estate, leasing the restaurant buildings back to the chain for “above market” rents. The fate of Red Lobster was sealed by these long-term leases. In all likelihood, Golden Gate pocketed the benefits of the real estate deal and then passed the parcel, with excellent pre-Covid timing, to a corporate owner. Covid didn’t help, but those lucrative leases locked the company into its failing position. “Strip and flip” is a classic private equity move to “purchase controlling interests in companies for a short time, then load them up with debt, strip them of their asset, extract exorbitant fees, and sell them at a profit — implementing drastic cost-cutting measures at the expense of workers, consumers, communities, and taxpayers”. That’s a quote from an analysis Democratic lawmakers wrote in 2019. This is a deal that, in various guises, has been repeated literally thousands of times in the last 30 years, resulting in the accumulation of huge fortunes by a few thousand private equity guys (and they are all guys) at the expense our jobs and communities, not to mention our endless shrimp.

But it’s easy to see how the conflicting incentives created by Red Lobster being owned by one of its biggest suppliers might have led to the company making poor decisions. And Red Lobster’s demise points more generally to the problem that’s created when company owners have, in effect, divided loyalties, and can reap economic benefits for themselves from decisions that may not be in the best interest of the company: like selling off all its real estate, or offering people endless shrimp for $20. #brandstrategy #Vista33 #Colombo #SriLanka

Red Lobster Considers #Bankruptcy to Deal With Leases and Labor Costs. #Seafood #restaurant chain Red Lobster is mulling a Chapter 11 bankruptcy filing as it looks to restructure its #debt, according to people with knowledge of the matter. Red Lobster’s cash flows have been weighed down by onerous leases and labor costs, among other issues. #Restructuring discussions are ongoing and a final decision hasn’t been made, they said. Filing for bankruptcy would allow the company to keep operating while it works on a debt-cutting plan. JSesko@meridianfinance.com 818-914-9271 #tradecreditinsurance

The Oakman Group is relinquishing its management contract of Seafood Pub Company, the chain it saved from administration in 2021. The demerged business will move forward under the sole ownership and direction of former executive Dermot King (pictured), who will transition to a non-executive director role at Oakman once the demerger process has completed. King has owned the Seafood Pub Company brand since its 2021 acquisition, with Oakman running it under a management deal. The deal means Oakman will end the contract and King will run it as an independent business. King moved from COO to CEO of Oakman in 2022, before Peter Borg-Neal returned to the CEO role in a board restructure last year which saw King take charge of the finance team on an interim basis. Seafood Pub Company was founded by Joycelyn Neve in 2010 but filed for administration in June 2020 after failing to secure a Coronavirus Business Interruption Loan (CBIL) or raise additional funding from investors. Oakman did not disclose what her role will be under the new structure. Currently, the 10-strong SPC portfolio consists of the Alma Inn in Colne, the Derby Arms in Longridge, the Farmers Arms in Great Eccleston, the Fenwick in Claughton, the Fleece in Ilkley, the Grand Junction Arms in Tring, the Hesketh Arms in Rufford, the Navigation Inn in Lapworth, the Pointer in Brill and the Three Locks in Stoke Hammond. Following the demerger, Oakman will comprise 33 trading sites and five pipeline sites. The company revealed the divestment as part of its financial reporting for the year ending 2 July 2023. During this period, sales rose by more than 6% from £54.4m to £57.8m. The group also reported that for the five weeks ending on 31 December 2023, the core Oakman Inns business delivered sales of £7.7m, representing an increase of 9.5% on the prior year and like-for-like growth of 4.5%. The positive Christmas trading continued a trend of gradual improvement in performance, following a more challenging start to the first half of 2023 driven by the unseasonably poor weather in July and August. Furthermore, the business revealed that in the second half of 2023 it achieved group sales of £32.3m, a 4.1% increase versus the prior year. Oakman's CEO, Peter Borg-Neal, commented: "External trading conditions remain challenging. However, I am delighted with the way the whole team has come together to deliver significant profit recovery over the past six months. "The business is in great shape to meet the near-term challenges we face and to deliver significant growth in the medium-term." https://lnkd.in/eKaDQAsY

🚨FOOD INDUSTRY NEWS🚨 Seafood restaurant chain Red Lobster is considering a Chapter 11 bankruptcy filing as it looks to restructure its debt. The company's cash flows have been weighed down by onerous leases and labor costs, among other issues. Filing for bankruptcy would allow the company to keep operating while it works on a debt-cutting plan. 🦐 #redlobster #restructure #debt #foodindustry #newsletter

Asset Stripping Drove Red Lobster To File For Bankruptcy The "Endless Shrimp Special" was a shrimp lovers delight. Many waited with bated breath every year, for September to roll around, just to partake in the experience of the all-you-can-eat shrimp special, which lasted for 3 months. Then in 2019, the restaurant chain began offering "Endless Shrimp" every Monday. Undoubtedly, Red Lobster was already feeling a financial squeeze and knew that the "Endless Shrimp Special" would bring customers in every week. Apparently, this wasn't enough, because 3 years later, the special became an everyday event! Now, the "Endless Shrimp Special" is being partially blamed for the company's financial problems. It proved to be an 11-million-dollar loss for Red Lobster. One of the company's major shareholders forced Red Lobster into the frequency of "Endless Shrimp" and changed some of their seafood suppliers. This led to much higher costs. However, the bigger problem was asset stripping. A private equity firm bought the seafood chain in 2014. It then sold off the real estate under the restaurant for $1.5 Billion! After the sale, Red Lobster was forced to start paying rent on stores that they previously owned. According to the bankruptcy filing, by 2023, its rents totaled $200 million a year! This crippled Red Lobster. They had almost 600 locations across 44 states. So far, they have closed roughly 200 locations.

Good lesson here: Rent/Sales ratios are important - and it's important to know what the proceeds of a #saleleaseback are being used for. Will it produce more revenue to pay the lease? Or is the #investor harvesting the capital and crippling the business? Golden Gate paid $2.1B for Red Lobster, then sold the real estate in sale-leaseback for $1.5B. As of 2023, rent/sales was 10%. https://lnkd.in/ehtX4GW3 #CCIM #Development #QSR Meybohm Real Estate Finem Group at Meybohm Commercial #land

Smart strategy for acquiring struggling restaurant chains. The question is how much will it take to turn so many brands toward profitability in a recessionary economy? Another story to follow in the upcoming months. #Distressed #restructuring #turnaroundmanagement #distresseddebt #distressedinvesting #corporarefinance #NPL #turnaround #operationalimprovement #financialimprovement #nonperformingloans #bankruptcy #chapter11 #corporaterestructing  #cashisking

Sea of Debt? Red Lobster Considers Bankruptcy to Deal With Leases and Labor Costs Red Lobster, a prominent seafood chain, is contemplating a Chapter 11 bankruptcy to restructure costly leases, tackle long-term contracts, and manage increasing labor expenses. The appointment of a new CEO and engagement with legal advisors signal strategic shifts as the brand prepares for potential ownership changes.   Financial data reveals significant losses for Red Lobster, amounting to $33 million in 2022, alongside closures of several restaurants. Despite facing economic headwinds and leadership transitions, the brand aims to sustain operations through restructuring efforts, including divesting from contracts and renegotiating leases.   Red Lobster operates approximately 650 locations nationwide, spanning 542 cities across 44 states and territories. Florida hosts the highest number of Red Lobster stores, with about 60 locations, followed closely by Texas with 55 and California with 43. Contact Andy Cepeda or Vincent Knipp for more restaurant news. Andy Cepeda 📞 (972) 755-5138 Andy.Cepeda@marcusmillichap.com Vincent Knipp 📞 (972) 755-5205 Vincent.Knipp@marcusmillichap.com   👉 Click link for details: https://lnkd.in/gXDtnrEg #NNN #retail #realestate #investment #investing #commercialrealestate #property #passiveincome #cre #investor #realestateinvesting #commercialproperty #netlease #retailrealestate #redlobster #bankruptcy