Now that Red Lobster is in the process of getting a new owner, the chain’s post-bankruptcy financial situation is becoming clearer. The sale, which will likely be approved Sept. 5 during a hearing on the matter, will transfer ownership of the restaurant chain to an entity formed by existing lenders, including Fortress Credit Corp.
Red Lobster expects to post a positive net income of $2.1 million by fiscal year 2026, according to a pro forma financial summary highlighted in a Wednesday court filing. That would be a stark contrast to the $52 million loss expected for fiscal year 2025.
Prior to bankruptcy, profits were not in sight for Red Lobster. In fiscal year 2023, the chain posted a $76 million net loss. That year, its $20 Unlimited Endless Shrimp led to $11 million in losses in Q3 2023 alone, according to a court document filed May 19. Even though sales grew 25% from 2021 to 2023, net sales fell in the 12 months preceding its May 2024 bankruptcy.
Its EBITDA also fell 60% during that time leading up to the bankruptcy. However, its post-emergence financial projections show the chain gaining ground on adjusted EBITDA, increasing the metric by 43% from fiscal 2025 to 2027.
Red Lobster's post-emergence projected financials
As part of its restructuring plan, the chain is deploying CEO Jonathan Tibus’s three-pronged strategy to improve financials and drive efficiencies, per a May 19th filing. For example, the company is working to make its brand more compelling and improve its market impact. That strategy includes simplifying its menu down to one that is more efficient and retains customer appeal.
One of its biggest cost-cutting measures was the previous closure of nearly 100 restaurants that were considered “financially burdensome.” In 2023, the chain paid over $190 million in rent, of which $64 million went toward underperforming restaurants. Red Lobster is looking at other means to reduce expenses like, eliminating unproductive spending across all departments.
Additionally, the chain plans to upgrade information technology systems and invest in its restaurants in a targeted fashion. It is developing one standard for store operations across its remaining locations.
