Red Lobster's push for cheap deals may be backfiring, say experts, as losses pile up

Red Lobster's push to lure diners with cheap deals may be backfiring, with one retail expert warning the strategy could be attracting the wrong customer as losses continue to mount.

The Florida-based seafood chain — which filed for bankruptcy in 2024 — has leaned heavily on promotions like seafood boils and $20 lobster rolls to drive traffic.

While the discounts have generated buzz and helped lift sales, they have not been enough to offset deeper financial challenges, according to a Bloomberg report. 

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The company has lost money in four of the past five quarters and may need tens of millions in additional funding to stay afloat, Bloomberg reported, citing sources.

Sales rose 12.5% in February, with monthly revenue improving year over year, but those gains have not been enough to offset ongoing losses, according to the report.

A major issue is Red Lobster's costly long-term leases, which CEO Damola Adamolekun called the "most important structural piece" the company is working through as part of its turnaround.

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At the same time, Red Lobster is also bringing back its fixed-price, all-you-can-eat "endless shrimp" deal, as FOX Business reported recently — a move that sparked debate on social media.

"Endless shrimp returns, the exact thing that bankrupted them last time," one user wrote. 

"History repeating or redemption arc? Either way, I'm eating good tonight."

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"They went bankrupt doing it, took a break to 'think about it' and chose violence again," another user chimed in.

Others pushed back on the idea that the promotion caused the bankruptcy.

"Private equity brought them to bankruptcy," one person wrote. 

"They sold the land the restaurants were on."

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Another said, "If you think endless shrimp is what tanked Red Lobster, you have a child's understanding of how these businesses operate."

Red Lobster's reliance on discounts may be part of the problem, said Bob Phibbs, a retail consultant in New York.

Phibbs said heavy promotions can become "unsustainable" and attract lower-spending customers.

"When your main calling card is 'look how cheap we are,' you end up attracting a certain shopper," Phibbs told Fox News Digital.

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"You can attract that shopper, but you have to have an upper end to balance it," he added.

Phibbs pointed to higher-margin items such as desserts and bar offerings as ways to offset deep discounts.

"[If] the margin-killing promotions become the main items sold, [it's] unsustainable," he said. 

"For Red Lobster to move ahead, they need to renovate their aging locations, have a new service level and attract the more profitable customer."

Phibbs added, "I think Adamolekun is on the right track, but will the market allow him time to get that new consumer?"

Fox News Digital reached out to Red Lobster for comment.

"We're always paying attention to what our guests are asking for," a spokesperson for Red Lobster previously told FOX Business. "We're grateful for the enthusiasm and encourage guests to keep sharing their feedback with us. We're listening."