Red Lobster files for bankruptcy after sudden closure of nearly 50 restaurants

Red Lobster has officially filed for Chapter 11 bankruptcy after weighing the possibility in April and shuttering nearly 50 locations overnight, according to a news release.

Per Restaurant Business Online, the seafood chain, which has around 650 locations across the United States, has struggled in recent years due to leadership troubles and strategic missteps.

Last summer, Red Lobster launched a $20 all-you-can-eat shrimp deal which, although popular with customers, ended up costing the company over $11 million in one quarter.

Customer demand overwhelmed what the chain could afford, which also reportedly contributed to the millions in losses.

The seafood restaurant chain said in a court filing that it has more than 100,000 creditors and estimated assets between $1 billion and $10 billion. The company's estimated liabilities are between $1 billion and $10 billion.

The document is signed by CEO Jonathan Tibus, a corporate restructuring specialist who took the top post at Red Lobster in March.

"The Company intends to use the proceedings to drive operational improvements, simplify the business through a reduction in locations, and pursue a sale of substantially all of its assets as a going concern," the news release states.

Restaurant liquidator, TAGeX Brands, revealed last week that it was auctioning off kitchen items and furniture from the shuttered locations as part of its "largest restaurant equipment auction ever."

Inventory being auctioned off includes kitchen equipment, furniture, tables and chairs.

"This restructuring is the best path forward for Red Lobster," Tibus said. "It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth. The support we've received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests."

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Editor's note: The Associated Press contributed to this article.

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