Red Lobster

Red Lobster's 2024 bankruptcy after 56 years of operation demonstrated how promotional strategies can become death sentences when unit economics break down. The 'Ultimate Endless Shrimp' promotion that drove traffic also drove losses—the company reportedly lost $11 million on the promotion as customers consumed far more shrimp than pricing assumed. This is promotional dependency creating negative unit economics at scale. The mechanism failure was optimizing for traffic without profitability. Red Lobster's private equity owners (Thai Union, then later Golden Gate Capital) focused on short-term metrics that sacrificed long-term viability. Sale-leaseback transactions extracted $2.3 billion in real estate value while creating ongoing rent obligations; promotional pricing drove volume at unprofitable margins. Each decision made sense individually but collectively consumed the organism. Red Lobster also demonstrated how casual dining was being squeezed from multiple directions. Fast casual offered better perceived value; fine dining offered better experiences; delivery apps captured convenience. The casual dining format—driving to a restaurant for mid-priced meals—lost its position in consumer routines. Red Lobster's Cheddar Bay Biscuits remain beloved, but not enough to sustain 650 locations serving increasingly unprofitable meals.