Senior Financial Analyst | Budgeting & Strategic Planning | Financial Storytelling Expert
I will start this with a disclaimer that I am not a huge fan of Red Lobster. However, I find this an intensely interesting case study. While the blame for their financial woes has been thrown only at the pervasive "all you can eat shrimp" promotion, the company was already on the decline when it decided to make this a staple menu item. I believe that the crux of the issue was a July 2014 sale of property owned by Red Lobster that netted them $1.5 billion. It also gave them a permanent rent cost that did not exist before that time. Rent costs that they most likely could not control and increased over time. In fact, by 2023 the rent cost was $200 million for the year. Comparing that to the $11 million lost from the shrimp promotion, it seems clear what the real culprit was. I suppose it may not have been an issue had the money been put back into the company. Instead, they went for asset stripping even though this strategy had destroyed other companies (Sears for example). I am interested to see how this new CEO will create a plan to address the bigger issues at the company. Though I'm sure the shrimp will be missed. #CaseStudy #RedLobster #AssetStripping (Source: NBC News - https://lnkd.in/eqzf5K2i )
Red Lobster is no longer in bankruptcy! 35 year old Damola Adamolekun is the new CEO & promises better service, food and interiors, but no more $20 unlimited shrimp on the standard menu “We’re making a comeback!”
Future Controller/ CFO | Process Improvement, Leadership, Independently Studying for CPA, Financial Analysis, System & Database Administration.
2moI found what you said insightful because it addresses an issue that many organizations have: trying to use assets for short-term gain without taking contingencies into account because they want that to look good on the P&L and the adjusted EBITDA. You bring up a GREAT example with Sears. Thank you for that insight.