The outside of a Pink Lobster restaurant on Could 20, 2024 in Austin, Texas. Pink Lobster has filed for Chapter 11 chapter safety after a failed lease-back settlement and “limitless shrimp” promotion backfired towards firm income.
Brandon Bell | Getty Pictures
Restaurant chain Pink Lobster’s “On a regular basis $20 Final Countless Shrimp” providing was described as a “automobile crash” as collectors of the chain sued former controlling shareholder Thai Union.
In a go well with filed in Orange County, Fla., in Could, the collectors mentioned that Thai Union — a seafood producer with shares traded on Thailand’s inventory alternate — knew in 2023 that the chain was going through important monetary headwinds and risked insolvency. The go well with, filed by a belief on behalf of the Pink Lobster collectors, requests a jury trial to find out damages.
As a substitute of contemplating the pursuits of the restaurant chain, “Thai Union doubled down on a marketing campaign to squeeze out each drop of worth that it may by way of uneconomic contracts that benefited Thai Union and made no financial sense for Pink Lobster.”
Thai Union and Pink Lobster did not instantly reply when contacted for remark by CNBC.
Pink Lobster filed for chapter in Could 2024, shuttering eating places across the U.S. and submitting for Chapter 11 safety because it confronted elevated competitors, costly leases, a broader pullback in shopper spending, and fallout from the shrimp promotion.
The corporate had defaulted on a time period mortgage of $275 million from Fortress Funding Group in September 2023.
The corporate exited Chapter 11 in September 2024 after being acquired by non-public investor group RL Holdings, reportedly led by Fortress. RL Holdings nonetheless owns Pink Lobster.
The go well with alleged that Thai Union had pressed Pink Lobster to buy growing quantities of its shrimp at above-market costs and banned a competitor from supplying the restaurant chain.
Thai Union and then-interim CEO Paul Kenny “engineered and carried out” the endless-shrimp promotion over the objections of Pink Lobster workers not affiliated with Thai Union, and this led to eating places across the nation being “immobilized” as they ran out of shrimp and had been unable to show over tables, the lawsuit alleged.
“When it was clear that the On a regular basis $20 Final Countless Shrimp providing was wreaking havoc on Pink Lobster and its stability sheet, Kenny doubled down. He responded by persevering with the providing—and producing tens of thousands and thousands of {dollars} extra in overpriced shrimp orders for Thai Union—and finally left Pink Lobster with an enormous oversupply,” the submitting learn.
Pink Lobster introduced again the endless-shrimp promotion in April, in accordance with its web site, although it mentioned the promotion was for a restricted time and did not present the price.
Thai Union had purchased a minority stake in Pink Lobster in 2016, then successfully managed the corporate after teaming up with one other associated shareholder in 2020 for a majority stake and three out of 5 of Pink Lobster’s board seats.
It later divested its stake in Could 2024, and the go well with alleged that it didn’t contribute any capital within the Chapter 11 course of.
“Thai Union handled the corporate as little greater than a distribution arm for its personal merchandise, milking no matter worth it may from Pink Lobster, particularly as the corporate grew to become bancrupt,” the lawsuit mentioned.
