Red Lobster shareholders sue Thai Union over endless shrimp losses

Red Lobster shareholders are suing Thai Union Group, alleging the seafood supplier used its control of the restaurant chain to push a money-losing endless shrimp promotion that benefited Thai Union. The case adds a legal fight to the fallout from a deal that Red Lobster’s own bankruptcy filings linked to its financial decline.

A trust representing shareholders filed the lawsuit in May in Orange County, Florida, CNBC reported, citing the complaint. The suit alleges Thai Union, a Thailand-based seafood company whose shares trade on the Stock Exchange of Thailand, used its controlling stake in Red Lobster to force business decisions that helped Thai Union at Red Lobster’s expense.

The complaint says Thai Union pursued contracts that the shareholders describe as uneconomic for the restaurant chain, CNBC reported. Red Lobster and Thai Union did not immediately respond to Fortune’s requests for comment.

Bloomberg reported that the shareholders say they are owed millions after Red Lobster filed for Chapter 11 bankruptcy in May 2024. They are also seeking to unwind about $32 million in transactions that they allege Thai Union pressured the chain to make in 2023, and they have requested a jury trial to decide damages, according to Bloomberg.

How the shrimp deal changed

Red Lobster had offered endless shrimp as a seasonal promotion for about 20 years, CNBC reported. The limited-time deal regularly drew customers, according to the lawsuit, but shareholders allege Thai Union pushed Red Lobster to make it a permanent menu item in 2023.

The promotion was priced at $20 when it became a regular offering, according to Fortune. At one point, Fortune reported, the offer contributed to an $11 million quarterly loss for Red Lobster.

Thai Union first bought a minority stake in Red Lobster in 2016 and led a 2020 buyout that gave it majority control, CNBC reported. The lawsuit says Thai Union later helped install Paul Kenny, a shareholder and veteran restaurant executive, as interim chief executive in 2022.

Shareholders allege Kenny pushed both to keep endless shrimp on the menu and to make Thai Union Red Lobster’s exclusive shrimp supplier, CNBC reported. The lawsuit says Kenny often told others that Red Lobster owed Thai Union exclusive purchases of its products. Kenny did not immediately respond to Fortune’s request for comment through LinkedIn.

As customers responded to the deal, the lawsuit alleges, Red Lobster restaurants ran short of shrimp and struggled to keep up, CNBC reported. The complaint also says the promotion pulled diners away from higher-margin menu items and lowered spending per visit.

Red Lobster increased the price of the deal from $20 to $22 and then to $25 before removing it from the menu in 2024, Fortune reported. By September 2023, the chain had defaulted on a $275 million term loan from Fortress Investment Group, according to Fortune.

Bankruptcy and recovery

Former Red Lobster CEO and restructuring adviser Jonathan Tibus wrote in a bankruptcy court filing that endless shrimp was one factor in the company’s financial problems, Fortune reported. Tibus also cited a difficult broader economy and stronger competition across the restaurant industry.

Thai Union had divested from Red Lobster by the time the chain entered bankruptcy and did not contribute capital to the Chapter 11 process, Fortune reported. Red Lobster emerged from bankruptcy in September 2024 after closing about 130 restaurants and cutting roughly 10% of its corporate workforce.

Under CEO Damola Adamolekun, Red Lobster has worked on menu changes and service standards, according to Fortune. Adamolekun told The Wall Street Journal in February that sales were up 10% from a year earlier.

Adamolekun had previously said endless shrimp would not return, saying, “because I know how to do math,” Fortune reported. Red Lobster brought the promotion back in April, but only as a limited-time offer, according to the company.

This story draws on original reporting from Fortune.