NNN Beast - Net Lease News Digest’s Post

Any one else notice all of the Red Lobster buildings coming on the market? The chain is struggling, a bankruptcy expert has been brought in and my guess is there is a high probability of a significant number of stores will be closing or re-negotiating their rent. If you have a Red Lobster in your portfolio, review their sales and check to see if your rents are significantly over market. If the sales are low or the rents are high, start thinking of an exit strategy.

Red Lobster bankruptcy has much to do with Wall Street "bean counters" and "financial guru MBAs" (working for Private Equity) than business model and management problems or all you can eat shrimp promotions. When PE acquired Red Lobster they immediately decided to sell off the real estate assets of the restaurant chain. The sale of the real estate assets was sort of an original sin (or death wish) for Red Lobster's current troubles. As a restaurant, if you don't own your real estate you are prone to cash problems whenever sales fluctuate. Private Equity is great at (and a master of) just unloading assets and monetizing assets. And in this case they effectively paid for the purchase of Red Lobster by selling the real estate from under the restaurants. It was great for investors, they probably even made more money, but when the restaurant sales fell, the profitability was challenged, and Red Lobster debt looked bad, and then suddenly those leases started erroding revenue profits. The retail and restaurant apocalypse is all about having their real estate sold out from under their businesses so that you have to pay the rent in good times and in bad. https://lnkd.in/gGRJFjyG #redlobster #privateequity #pe #bankruptcy #equity #realestate #debt #restaurant #lease #rent #assets #selloff #profitability #sales #retail

🚨 BREAKING NEWS: Facing an uncertain future, Red Lobster takes unprecedented steps. With 99 locations up for auction and investor exit looming, the seafood chain navigates possible bankruptcy. KEY TOPICS: 🔸Closure Locations: Spread across the U.S., including Denver, Indianapolis, Rochester (NY), Sacramento (CA), San Antonio, and San Diego. 🔸Magnitude of Closure: Restaurant Business Magazine reports 99 locations shutting down, constituting about 15% of the chain's 700 locations. 🔸Seeking Buyers: CNBC reports Red Lobster's efforts to avoid bankruptcy by seeking a buyer. Check out more here: https://lnkd.in/gm5ZqAfw

Red Lobster filed for #bankruptcy an early AM [U.S.] report in The Wall Street Journal said. It plans to sell itself to current #lenders. The #Orlando-based #restaurant operator got $100M in #debtor-in-posession #financing commitments. Golden Gate Capital bought the #casualdining seafood chain from multi-concept operator Darden 10 years ago for $2.1B. The #privateequity firm sold half [to be staged at a 10-year interval] of the chain to Thai Union Group PCL. in 2016 for an upfront $575M. It sold its remaining stake to the same buyer four years later. Red Lobster suffered during the #pandemic when both sit-down #dining and commercial #fishing plunged. The #chain had about 650 locations at last count and recently closed dozens of sites in 20 states. #PublicCompany Darden’s move a decade ago looks prescient of course; a long-time owner selling cd be a #redflag. I recall it had then gone under new execs and was trying to focus on its higher-end chains. On that score, Red Lobster was costlier without being worth it. Darden still owns Olive Garden, e.g., which is the reverse — moderate but can feel like family abundance or even [relatively] snooty, with the grated cheese and whatnot, plus the value, via the endless soup and salad. My town has locations of each. Can’t escape from the lobstah for less than $30+, and it’s tumbleweeds in there. The OG is $20, and it’s packed. People considering lobster and scampi are prolly willing to splurge — go to truly high-end — rather than an ersatz chain. “Several restaurant #chains have recently declared bankruptcy or are seeking a sale. Higher #finance costs, slower #consumer #spending and declining #investor interest in #food #investments have hurt restaurants’ #balancesheets, filings and restaurant executives showed,” the Journal said.

The ultimate endless shrimp deal could spell the ultimate end. While the pandemic and rising labor costs have made the restaurant business harder than ever, Red Lobster can't get out of the red due in part to losses from all-you-can-eat promotions. Truth be told, Red Lobster has faced some rough seas the past few years, and the last straw is the $22 million loss in 2023 for its largest investors who are now seeking an exit before they get pulled under. Unfortunately, Cheddar Bay Biscuits likely won't provide the lifejacket needed to stay afloat. Restaurant chains have struggled mightily since the pandemic, and with razor-thin margins, declines in-person dining have contributed to mounting operating losses. For Red Lobster, the seafood chain embarked on marketing and publicity campaigns that, well, worked too well. In fact, the popular all-you-can-eat promotions haven't been all smooth sailing. The $20 deal resulted in a whopping $11 million loss for the company in just one quarter. And while the price has since been raised to $25, chances are the chain won't be able to sell enough shrimp to fully recover the $11 million hit. Is the Lobsterfest really over? Well, it depends. Red Lobster obviously is a mayday situation, and bankruptcy would buy it time to come up with a plan moving forward, which probably includes renegotiating leases, removing some contracts, and any other restructuring to cut costs. That doesn't necessarily mean Red Lobster winds up in the boiling pot, but some of its locations could wind up getting cooked https://lnkd.in/etK5MQv6 #redlobster #restaurant #marketing #business #bankruptcy #economics #labor #realestate

Restaurant prices are up more than 4% over the last year thanks to continued inflationary pressures, and the ripple effects across the industry are evident. Case in point: @RedLobster's preparation for Chapter 11 bankruptcy protection. This comes after last year’s attempt to address tighter dining budgets and draw in more customers with a new “all-you-can-eat” shrimp deal. It was so popular, it cost the restaurant $11 million in losses in just one quarter. And that’s just one example — so many restaurants are struggling in this economic environment. Traffic is down and margins tighter than ever… leading many brands, like Red Lobster, to turn to value menus and other promotions that don’t always pay off. The question is not about whether or not to find ways to provide diners with more value – that’s always a good idea. The question is about *how* to provide that value. There’s an inherent challenge in a one-size-fits-all discounting strategy: it’s actually cannibalizing your expected profit if it’s not driving incremental traffic. In other words, unnecessarily discounting items for diners who would have visited without the perk is bad for business). That leaves stores in an even tougher financial position. That’s why I’ll keep talking about personalized, 1-to-1 incentives that adjust based on diner needs and available margin. When customers get just the right promotion to behave differently, restaurants preserve their margin and see more foot traffic — driving more *profitable* dollars. https://lnkd.in/e8yFM5MB   #hospitality #inflation #profitability #redlobster #redlobsterbankruptcy

Red Lobster has emerged from bankruptcy with new management and ownership as the struggling seafood-restaurant brand looks to turn the tide after seeking to boost traffic with an all you can eat shrimp deal that wound up costing it millions and causing it to file bankruptcy. https://lnkd.in/gv2PPAQA #bankruptcy #landlords #retail #chapter11 #chapter7 #reorganization #creditorsrights #debtorcreditorsrights #landlordtenants #ceosanddirectors #ceosandofficers #officersanddirectors

This article may have an inherent anti-business bias, but it also goes into detail a lot of the issues that brought down Red Lobster and also issues with Private Equity purchasing businesses and then breaking them in two; retail and real estate. It also goes deeper into the seafood industry. If you want another viewpoint into the collapse of Red Lobster, this is a nice read. It wasn't the Shrimp that brought Red Lobster down, there were fundamental issues with the company and ownership structure that did that.

🚨 Iconic Red Lobster declares bankruptcy. Blame it on the shrimp 🍤. Apparently, last year’s $20 Endless Shrimp promotion was one of the big straws that finally broke the lobster's back. Meant to increase ⬆️ foot traffic, which it did, the too-generous promotion’s popularity led to $11 million in losses in Q3 of last year. Just another hit to the company’s growing financial woes. 📌 Fast-forward to this year and the company just closed about 100 restaurants, with 48 set to enter auctions to sell furniture and equipment. Now, the company has filed for Chapter 11 bankruptcy protection to improve operations and streamline their business. I hope this iconic restaurant brand can make its way to safer harbors, however their locations are usually saddled with really high rents, given a sale-leaseback situation a few years ago. We will see where the ocean currents take them! Read more here: https://bit.ly/44QHIaB #TSCG #CREtail #RetailStores #CRE #Retail

Red Lobster, on the brink of seeking bankruptcy protection has been recently blaming its downfall on an ill fated “all you can eat shrimp” promotion, but its troubles go deeper than that, maybe even to its real estate. Back in 1995, Red Lobster’s owner, General Mills sold off the chain along with the rest of its restaurant division, which also included Olive Garden, as Darden Restaurants. But in 2014, amid flagging sales and pressure from investors, Darden sold Red Lobster for $2.1 billion to Golden Gate Capital, a San Francisco private-equity firm. That’s when the problems began. You see, to raise enough cash to buy the lucrative seafood chain, Golden Gate sold off Red Lobster's real estate to another entity — American Realty Capital Properties — and then immediately leased the restaurants back. As soon as they sell the real estate, the private-equity company is made whole, but the restaurant chain is now saddled with added rent indefinitely. It gets more complicated but as Red Lobster continued its downward trend over the next decade, few will remember how the economics have changed for Red Lobster from its heyday. Some will say Red Lobster is no longer in vogue, that consumer tastes have changed but we know better.