Good morning. Red Lobster closed about 100 restaurants in May, filed for bankruptcy, and plans to close another 23 restaurants. But now a former P.F. Chang CEO is poised to bring changes to the well-known seafood restaurant chain, and a new CFO is likely to be named too. The new blood will be welcomed as Red Lobster struggles to recover from a shrimp promotion that led to a fiasco.
Fortress Investment Group announced on Monday that Damola Adamolekun will become the chief executive of RL Investor Holdings LLC, a new corporate entity set to acquire Red Lobster following a court approval of the restaurant’s Chapter 11 plan, which is expected next month. Red Lobster would continue to operate as an independent company. Adamolekun led P.F. Chang’s for about three years before he stepped down in August 2023 to return to Paulson & Co. Inc. The 35-year-old is a Wall Street favorite.
I asked Fortress if RL Holdings has decided on a finance chief. A spokesperson said they have no comment regarding a CFO at this time.
In general, companies emerging from bankruptcy seek a finance chief with “world-class stakeholder management” expertise, since the company is usually owned by a consortium of lenders, Jeff Constable, who leads Korn Ferry’s Financial Officers Practice in North America and co-leads it globally, told me. The CFO would also need to be adept in cash flow optimization and strong knowledge of the capital markets, he said.
Red Lobster was sold off by Darden Restaurants to Golden Gate Capital, a private equity firm, for $2.1 billion in 2014. Thai Union, a Bangkok-based seafood supplier, led an investment group that acquired the Red Lobster chain in 2020 and then got involved in day-to-day operations.
There's been C-suite churn at Red Lobster since 2021. Jonathan Tibus, a restructuring advisor, has served as CEO since March, succeeding Horace Dawson, who served in the role for six months, before retiring. Dawson became CEO more than a year after Kelli Valade left in 2022 to become CEO at Denny's, after serving as chief executive for about eight months. Valade replaced the brand’s longtime leader Kim Lopdrup after his retirement in August 2021.
David Schmidt joined Red Lobster as CFO in March 2022 and left the company in September 2022. I asked Red Lobster if the company appointed a new CFO after Schmidt's departure, but I didn't receive a response. Ludovic Garnier, Group CFO at Thai Union, has been reporting on Red Lobster's financials during investor meetings.
A fateful shrimp promotion in 2023 has contributed to Red Lobster's headwinds and financial woes since the pandemic. The company extended its Ultimate Endless Shrimp promotion, $20 per person, to an all-day, everyday event rather than on Mondays only. The restaurant saw a big loss in its third-quarter earnings. This change cost the company more than $11 million and cut into the profits of Thai Union profit. The price of endless shrimp was subsequently increased to $25.
“We had been underestimating this one,” Garnier said during an investor presentation on Nov. 7. “That is why we had to adjust our prices.”
In January, Thai Union announced its intention to pursue an exit of its minority investment in Red Lobster “The combination of COVID-19 pandemic, sustained industry headwinds, higher interest rates and rising material and labor costs have impacted Red Lobster, resulting in prolonged negative financial contributions to Thai Union and its shareholders,” Thiraphong Chansiri, Thai Union Group’s CEO, said in a statement in January.
If he becomes Red Lobster's CEO, Adamolekun will certainly have a lot on his plate.
Sheryl Estrada
sheryl.estrada@fortune.com
