Why Red Lobster May Close More Restaurants

Why It Matters

The ongoing restaurant closures reshape Red Lobster’s footprint, affecting franchisee earnings and signaling broader risks for brands saddled with legacy lease‑back debt.

Key Takeaways

• Red Lobster plans to close additional underperforming locations.
• High lease costs stem from 2014 sale‑and‑leaseback deal.
• Sales are up 10% but still below pre‑bankruptcy levels.
• Cost cuts include manager layoffs and corporate staff reductions.
• Turnaround hinges on menu updates and restaurant renovations.

Summary

Red Lobster’s CEO Deola Amolan told the Wall Street Journal the chain will likely shutter more restaurants, extending the closures that began during its 2024 bankruptcy filing.

The company eliminated about 130 sites—roughly one‑fifth of its footprint—in 2024 and is now targeting additional under‑performing units, especially those burdened by the $1.5 billion sale‑and‑leaseback arrangement that left it with costly rents. While systemwide sales have risen roughly 10% year‑over‑year, they remain well short of pre‑bankruptcy levels, prompting further cost‑saving measures such as manager layoffs and corporate staff reductions.

Amolan emphasized that the brand is “very damaged” and highlighted recent menu innovations like permanent seafood boils and a refreshed marketing push. Technomic data cited in the podcast shows a 33% decline in system sales over five years and a 22% drop in average unit volume, underscoring the structural challenges the chain faces.

For franchisees and investors, the continued closures signal a protracted restructuring that could improve profitability but also reduce market presence. The outcome will hinge on how effectively Red Lobster can modernize its locations and align lease obligations with a leaner operating model.

Original Description

Why is Red Lobster closing restaurants?

This week on the Restaurant Business podcast The Week in Restaurants we look at Red Lobster, which is reportedly considering closing more restaurants. We talk about why the seafood chain may be taking that step.

We also talk about McDonald’s earnings, its value push and Grinch socks.

And we look at the Fat Brands bankruptcy, which has centered on its controversial founder and CEO, Andy Wiederhorn.

On Tech Check, Joe Guszkowski talks delivery.