Red Lobster CEO Details Post-Bankruptcy Turnaround

Damola Adamolekun took the helm at Red Lobster shortly after the restaurant chain filed for Chapter 11 bankruptcy. In his first days, he encountered a workforce that had been through significant turmoil. The new CEO has outlined a comprehensive strategy to restore the brand's former glory, focusing on operational improvements and employee morale.

The chain's financial distress stemmed from a combination of high rent, increasing labor expenses, and aggressive promotional pricing. Following an acquisition by Fortress Investment Group, the company is now pivoting toward a recovery plan centered on guest experience and food quality.

When Damola Adamolekun arrived at Red Lobster three months after the bankruptcy filing, the internal atmosphere was challenging. During an appearance on the "Next to Lead" podcast, Adamolekun provided a candid assessment of the situation he inherited.

He stated that the company had been through a great deal, resulting in a workforce that felt demoralized. "Morale is very low," he said. "People are beat down."

To address this, Adamolekun emphasized the importance of delivering a "message of hope" and "possibility." In his first town hall meeting, he set an ambitious goal for the staff, promising that Red Lobster would execute the greatest comeback in the history of the restaurant industry. His objective was to galvanize the team around a unified vision.

By May 2024, Red Lobster had encountered severe financial headwinds. The chain's private equity owners had burdened the company with expensive leases, creating a heavy financial overhead. Simultaneously, labor costs were rising, squeezing profit margins further.

Promotional strategies also contributed to the decline. The popular "Endless Shrimp" promotion, in particular, proved to be a financial drain, bleeding money rather than driving sustainable traffic. These factors combined led to the company shuttering dozens of locations and ultimately filing for Chapter 11 bankruptcy.

Following the filing, a buyer group led by Fortress Investment Group acquired the company. This acquisition paved the way for Adamolekun's installation as CEO, tasked with stabilizing the business.

Adamolekun is organizing his recovery efforts around three specific principles: food, hospitality, and ambience. He aims to improve the actual experience for guests through targeted changes in these areas.

Regarding food, the chain has introduced new products such as seafood boils. On the service front, Red Lobster launched the "Red Carpet Hospitality" program, designed to make customers feel "like family." For the physical environment, the company is undertaking efforts to remodel the restaurants.

Adamolekun noted that some changes were implemented quickly, including:

• Updating menus
• Instituting new bonus plans for staff

However, he acknowledged that redesigning the restaurants requires more time and has been the "bulk of our attention."

Damola Adamolekun brings a track record of success to the role. Prior to Red Lobster, he led Paulson and Associates' investment in P.F. Chang's. He became the chief strategy officer and took over as CEO in 2020.

Under his leadership at P.F. Chang's, the company launched a to-go business that proved vital during the COVID-19 pandemic. This strategy helped the company reach revenues of approximately $1 billion.

Despite this history, Red Lobster has a significant distance to travel to achieve a similar turnaround. By the end of 2023, the company was incurring operating losses exceeding $10 million per quarter. External factors, including the pandemic and a consumer shift toward steakhouses, had dwindled the customer base. However, early indicators are promising; the new seafood boil has been described as a "certified hit."