Red Lobster’s shrimp deal fails, causing $11M loss as Americans struggle financially
Red Lobster’s ‘Ultimate Shrimp’ Deal Backfires as Cash-Strapped Americans Eat Chain Into $11 Million Loss
Who would’ve thought that Red Lobster would underestimate the demand for fried and breaded shrimp?
An “Ultimate Endless Shrimp” all-you-can-eat deal offered at the seafood chain’s locations has become a source of financial losses for the company, according to USA Today.
The Ultimate Shrimp deal enables customers to choose two varieties of shrimp — of which they would be served an unlimited amount of servings.
The business strategy behind the deal backfired, according to the CFO of the chain’s parent company, Ludovic Regis Henri Garnier.
Garnier disclosed the thousand cuts by shrimp in a conference call with corporate investors, according to Restaurant Business Magazine.
“We wanted to boost our traffic, and it didn’t work.”
“We want to keep it on the menu. And of course we need to be much more careful regarding what are the entry points and what is the price point we are offering for this promotion.”
Red Lobster’s parent company reported an $11.3M operating loss last quarter “in part due to customers taking advantage of its Ultimate Endless Shrimp deal — where $20 (now $25) bought you as much shrimp as you could stomach in one sitting.” https://t.co/igBUnueBxC pic.twitter.com/YNGQXbPV5M
— Scott Lincicome (@scottlincicome) November 29, 2023
Some fans of the promotion lacked remorse for eating into Red Lobster’s profits.
I was a big part of this, I once took a quick nap in a booth so I could keep eating more shrimp
— Hunter Dale (@hunterdale6) November 30, 2023
The deal — introduced in June — did succeed in driving a 4 percent increase in traffic to Red Lobster locations, at a cost to the company’s profits.
The company is expecting to incur a $20 million overall loss for the year, and $11.3 million this quarter.
Ultimate Shrimp stays on the menu, for now — although its price point has been increased to $25.
Garnier described Red Lobster’s difficulties in appealing to inflation-hit customers increasingly mindful of costs while maintaining the company’s overall profitability.
The CFO indicated that Red Lobster had brought in corporate consultants to aid in the long-term economic strategy of the chain.
“We are really monitoring very closely the situation in order to improve the operation and the efficiency and the marketing of Red Lobster.”
“And then on the flip side, we also have the support from the advisors to see, what are we doing in the mid-term and also in the long-term with the business?”
The post Red Lobster’s ‘Ultimate Shrimp’ Deal Backfires as Cash-Strapped Americans Eat Chain Into $11 Million Loss appeared first on The Western Journal.
How did customers taking full advantage of the Ultimate Endless Shrimp deal contribute to Red Lobster’s operating loss?
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I’m sorry but if Red Lobster puts out an all you can eat shrimp promotion, I’m going to take full advantage.
— Jake 💧 (@hoodiejake) November 29, 2023
Red Lobster’s parent company, Darden Restaurants, reported an operating loss of $11.3 million in the last quarter, partly due to customers taking full advantage of the Ultimate Endless Shrimp deal.
The promotion allowed customers to enjoy as much shrimp as they could eat in one sitting for a set price. Originally priced at $20, the deal was later increased to $25. However, this adjustment did not stem the losses.
The popularity of the deal caught Red Lobster by surprise, leading to a significant increase in shrimp consumption that exceeded their expectations. Customers viewed the offer as an opportunity to indulge without worrying about the cost, resulting in excessive shrimp consumption that was not financially sustainable for the restaurant chain.
Red Lobster has been struggling to recover from the losses incurred by the Ultimate Endless Shrimp deal. The company had hoped the promotion would boost customer traffic and ultimately increase profits. However, the opposite happened, causing a strain on the chain’s finances.
Despite the financial setback, Red Lobster plans to keep the Ultimate Shrimp deal on the menu. The company recognizes the need for better strategic planning and pricing to ensure the promotion does not place such a heavy burden on their bottom line in the future.
Red Lobster’s experience with the Ultimate Endless Shrimp deal serves as a cautionary tale for other businesses. It highlights the importance of accurately forecasting demand, setting appropriate prices, and managing resources effectively. While promotions can be powerful tools to attract customers, they must be carefully planned and executed to avoid significant financial losses.
As for Red Lobster, they have learned a valuable lesson and will likely approach future promotions with a more cautious mindset, ensuring they have a solid financial plan in place before offering such enticing deals to their customers.
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