Red Lobster’s popular Endless Shrimp deal dented profits

Red Lobster’s “irresistible” all-you-can-eat shrimp promotion is indeed hard to resist.

The Ultimate Endless Shrimp deal became so popular that it contributed to the restaurant chain’s third-quarter profit decline, forcing the restaurant chain to increase the price from $20 to $25.

Thai Union Group, which owns a large stake in the chain, said in a third-quarter earnings conference call this month that the deal was partly responsible for an $11 million operating loss.

Red Lobster hoped the promotion would boost traffic at its U.S. locations in the fall and winter, when restaurants are typically at their emptyest.

Ultimate Endless Shrimp has been a Red Lobster guest favorite for over 18 years. But this summer, the restaurant went a step further and offered the previously seasonal offering “all day, every day” instead of just Mondays.

Guests could choose two shrimp dishes from a menu, including shrimp Alfredo served on a bed of linguine and a skewer of grilled shrimp over rice.

“And if they crave more,” an announcement about the promotion says, “they can order additional shrimp selections until their craving is completely satisfied.”

According to Ludovic Garnier, chief financial officer of Thai Union Group, the offer actually resulted in a slight increase in traffic compared to last year.

“But something that differs from our expectations is that the proportion of people who opted into this action was much higher than expected,” Mr. Garnier told investors this month.

He said Ultimate Endless Shrimp was one of the “major reasons” for Red Lobster’s operating losses in the third quarter.

The miscalculation, first reported by the trade publication Restaurant Business, led the company to raise the price from $20 to $22 and then to $25.

“It’s one of the iconic promotions for Red Lobster, so we want to keep it on the menu,” Mr. Garnier said. “But of course we have to be much more careful about the entry point and the price.”

Still, he attributed the revised offering to the increase in guest numbers – although, he explained, the company expected a larger uptick.

They hoped that guests drawn to their local Red Lobster by the offer would also be lured by other menu items.

But too many remained loyal to the endless shrimp.

“And that was completely unexpected, completely different than any numbers we’ve seen before,” Garnier said.

Perhaps too many have heeded the advice outlined in Red Lobster’s own promotional material: “Insider tip: Avoid grabbing the extra biscuit to make room for endless amounts of shrimp.”

Susan Beachy contributed to the research.


Posted

in

by