American casual dining restaurant chain Red Lobster is contemplating Chapter 11 bankruptcy filing as a strategy to alleviate financial strains, Bloomberg has reported.

The company faces challenges with burdensome leases, long-term contracts and escalating labour costs.

The restaurant chain is seeking advice from law company King & Spalding regarding its restructuring options. No definitive decisions have yet been made about proceeding with bankruptcy.

Even after filing, Red Lobster could still maintain operations while negotiating with creditors and investors to establish a debt reduction plan, aiming for a more sustainable financial future.

Red Lobster has not provided an official statement.

Founded in 1968 by Bill Darden and Charley Woodsby, Red Lobster has undergone several ownership changes.

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General Mills acquired the chain in 1970, overseeing its expansion in the US and Canada, and later spun it off into a separate publicly traded entity, Darden Restaurants.

In 2014, Darden Restaurants sold Red Lobster to Golden Gate Capital. In 2021, Thai Union, which held a 25% stake, fully acquired Golden Gate’s interest in the company.

Earlier this year, Thai Union disclosed plans to divest from Red Lobster, citing a misalignment with its capital allocation priorities and announcing a write-off.

Thai Union in its regulatory filing noted that the “ongoing financial requirements no longer align with Thai Union’s capital allocation priorities”.

The seafood chain recently appointed Jonathan Tibus as CEO, replacing Horace Dawson who had been in post since September 2023.