Red Lobster Creditors Sue Thai Union, Alleging 'Endless Shrimp' Scheme Drove Chain to Bankruptcy

A lawsuit filed by a trust on behalf of Red Lobster creditors alleges that the chain's former owner, Thai Union, used the "Endless Shrimp" promotion as a scheme to extract profits, ultimately contributing to Red Lobster's 2024 bankruptcy filing. The suit claims Thai Union treated Red Lobster as a "distribution arm" for its own products, seeking to "squeeze out every drop of value" from the restaurant chain.

Creditors are seeking jury determination of monetary damages, stating they were owed approximately $295 million when Red Lobster filed for bankruptcy. Thai Union, a Bangkok-based seafood producer known for brands like Chicken of the Sea, acquired a minority stake in Red Lobster in 2016 and gained majority control four years later.

The lawsuit contends that Thai Union transformed the "Endless Shrimp" deal from a limited-time offer into a permanent menu item, despite it being economically unviable. This change, according to the suit, led to Red Lobster losing $11 million in a single quarter. The increased demand from the promotion allegedly compelled Red Lobster to purchase large quantities of shrimp from Thai Union at inflated prices, while the average spending per diner decreased.

According to the complaint, Thai Union representatives exerted influence over Red Lobster's operations after the company began struggling amid pandemic-related closures and competition. Paul Kenny, identified as a Thai Union shareholder, allegedly asserted control, leading to the resignation of Red Lobster CEO Kelli Valade after just seven months. Kenny was later named interim CEO in August 2022.

Thai Union allegedly "took control of shrimp purchasing" by placing its personnel within Red Lobster's decision-making structure. The suit states Kenny interfered with supplier contracts, suggesting Red Lobster "owed it to Thai Union to purchase its products exclusively." In 2023, Kenny reportedly banned a long-standing supplier of pre-breaded shrimp for a year, making Thai Union the sole provider for nearly half of Red Lobster's shrimp needs and allowing it to charge "significantly more" than the market rate.

Red Lobster later defaulted on a loan from Fortress Investment Group, which subsequently took control of the board. In January 2024, Thai Union announced its divestment from Red Lobster. The restaurant chain is now owned by an investment group led by Fortress.

Currently, Red Lobster is undergoing a turnaround effort led by CEO Damola Adamolekun, who was hired in August 2024. In April, the "Endless Shrimp" promotion was reintroduced, but this time as a limited-time offering.