Red Lobster gets new CEO amid troubles

NEW YORK CITY –

TikToks of customers stuffing their faces with a US$20 endless shrimp. More than 100 restaurant closures and thousands of layoffs. A revolving door of CEOs. Chapter 11 bankruptcy.

Damola Adamolekun, the new chief executive of Red Lobster, is taking over a chain in turmoil. And he’s only 35.

“There’s a hole to climb out of, for sure, and that will be the hardest part,” Adamolekun told CNN last Friday in his first on-camera interview as CEO over lobster tail, snow crab legs, garlic shrimp scampi, crispy dragon shrimp and cheddar bay biscuits.

“It’s been a painful period in bankruptcy, and the closures have affected a lot of people,” he said as couples and families began trickling into the remodeled — but largely nondescript — Red Lobster in a Long Island, New York, outlet mall, complete with a tank of lobsters at the entrance, a bar and friendly waitstaff.

Adamolekun, born in Nigeria to a neurologist and a pharmacist, was raised in Zimbabwe and the Netherlands before moving to Springfield, Ill., when he was nine. Red Lobster was one of the first chain restaurants he visited in the United States, and it became a “staple” for his family.

In Springfield, he first ate at a Red Lobster with his parents and two siblings after church one Sunday. Red Lobster was where he, like millions of Americans, experienced eating lobster and cracking crab legs for the first time.

Adamolekun wanted to lead Red Lobster’s turnaround because of its history as the “first really successful casual dining chain in America at scale.” Bill Darden, a pioneer of the casual dining revolution in America, opened Red Lobster in 1968. The chain grew rapidly during the 1970s and 1980s under General Mills’ ownership.

He was also drawn to Red Lobster because of its “cultural impact.” Celebrities such as Chris Rock and Nicki Minaj worked there before they became famous. Beyoncé sang about taking a romantic partner to Red Lobster in her 2016 hit song “Formation.”

After Red Lobster filed for bankruptcy, Flava Flav ordered the whole menu to try to save the company.

“Mr. Flav has done a lot,” Adamolekun said. “We’re very appreciative of him.”

Improving service and menus

Red Lobster emerged from bankruptcy last month under new ownership, led by one of its lenders, Fortress Investment Group. Fortress has initially committed US$60 million to revitalize the chain.

Adamolekun’s plan for the business does not call for a massive overhaul. Instead, it is one of “incremental changes.”

Red Lobster is done closing restaurants, he said, and he will focus on improving table service, tightening the menu to simplify kitchen operations and sprucing up dining rooms.

The chain must hold onto Red Lobster’s customer base of Baby Boomers — around 40 per cent are older than 55, a demographic Red Lobster calls “quality traditionalists” — while also drawing in a new generation of diners.

So flounder is staying on the menu because it’s popular with older customers, he said. But Adamolekun wants to improve the atmosphere to appeal to younger customers, who are more loyal to casual dining rivals like Olive Garden.

That means dishes that sizzle when they drop on a hot stone plate at the table and cakes that arrive with sparklers on customers’ birthdays. It was a similar playbook he ran while CEO of P.F. Chang’s, one he called “theater at the table.”

Red Lobster has also struggled to consistently attract middle-income consumers with more disposable income, said Clarence Otis Jr., the former CEO of Darden Restaurants from 2004 to 2014, when Darden owned Red Lobster.

Some analysts say Adamolekun needs a bolder strategy to grow Red Lobster.

“It can be incremental change to start, but he has to build it into something more sustainable,” said RJ Hottovy, an analyst at analytics firm Placer.ai. Hottovy believes that Red Lobster will close more restaurants in the future, despite Adamolekun’s pledges.

“In five years, I bet it’s smaller in terms of unit count, but probably in a more stable position with a slightly more upscale image,” Hottovy said.

‘A lot of chaos’

Adamolekun will inherit a chain that has slipped for more than a decade, but whose decline accelerated under seafood conglomerate Thai Union Group.

In 2020, Thai Union, a longtime shrimp supplier to Red Lobster, gained 49 per cent control of the chain, becoming its majority shareholder. Former Red Lobster employees previously described to CNN a toxic and demoralizing environment under Thai Union. As Thai Union installed executives at the chain, dozens of veteran Red Lobster leaders were fired or resigned in rapid succession.

“I have to believe (Thai Union) wanted to do as well as they could. The fundamental problem is they’re not restaurant operators. They’re vendors for shrimp,” Adamolekun said.

Last year, Red Lobster made US$20 endless shrimp a permanent menu item for the first time. It had been a limited-time offer for nearly two decades.

When Adamolekun saw the US$20 endless shrimp deal, he thought, “that’s a very expensive product to give away endlessly.”

The move backfired spectacularly for Red Lobster. Customers sat at tables for long stretches of time, eating course after course of unlimited shrimp. Service slowed and wait times grew. Red Lobster lost US$11 million in the quarter following the deal, and Thai Union divested from the chain this year, taking a US$530 million loss on its investment. Thai Union’s CEO vowed to stop eating lobster.

“You stress out the kitchen. You stress out the servers. You stress out the host. People can’t get a table,” Adamolekun said. “It creates a lot of chaos operationally.”

Thai Union did not respond to CNN’s request for comment.

Taking over P.F. Chang’s in crisis

Adamolekun’s family moved to Columbia, Maryland, before he was in high school. He played free safety on the football team and then at Brown University.

After graduating from Harvard Business School in in 2017, Adamolekun joined Paulson & Co., the investment firm founded by hedge-fund billionaire John Paulson.

While he worked at Paulson, P.F. Chang’s owner put the Chinese restaurant chain up for sale.

Adamolekun saw an opportunity to grow P.F. Chang’s small delivery business, and he pitched the investment idea to John Paulson. The company took a controlling stake in P.F. Chang’s in 2019, and Adamolekun took a seat on the chain’s board of directors.

Over the next year, Adamolekun traveled every week from New York City to P.F. Chang’s headquarters in Scottsdale, Arizona. He became P.F. Chang’s chief strategy officer, developing its mobile app and delivery business.

Then the Covid-19 pandemic hit in March of 2020, and P.F. Chang’s CEO stepped aside a month later. John Paulson asked the 30-year-old who had never been a chief executive to take over.

Under Adamolekun, P.F. Chang’s was able to hang on during the pandemic. Bolstered by its strong takeout and delivery business, it survived even as dozens of other restaurant chains filed for bankruptcy.

Adamolekun stepped down as CEO last year. John Paulson and P.F. Chang’s thanked him for steering the chain through the crisis.

His radar soon shifted to Red Lobster.

Reviving Red Lobster

In March, as Red Lobster slipped toward bankruptcy, he began doing consulting work on the chain for Fortress, said the firm’s managing director Morgan McClure. In August, Fortress named him Red Lobster’s CEO.

“We wanted someone who was dynamic,” McClure said. Adamolekun “can inject some energy into (Red Lobster) and is willing to roll up his sleeves and dig into the nitty gritty of it.”

Red Lobster has suffered from a noticeable lack of investment. It has not kept up with technology that helps hosts determine wait times for customers at tables or manage inventory in kitchens. Customers have also complained about staffing levels. To save money, Red Lobster stopped using a bartender or a host at certain times.

“Those are the most glaring issues — when there’s something really missing from a staffing position,” he said. “Everybody notices.”

Red Lobster is working on a “brand refresh program” to try to make the restaurants more exciting with new layouts, décor, lighting, music and waiter uniforms. The challenge will be to change the environment without turning off Red Lobster traditionalists.

The endless shrimp deal alienated traditional customers, he said, who were used to coming in for a quiet lunch. Instead, they found themselves sitting next to large groups stuffing their faces with shrimp and filming on TikTok.

Adamolekun did not rule out bringing back an endless shrimp promotion in the future but promised it would not overwhelm staff and disrupt restaurants.

“I never want to say never, but certainly not the way that it was done,” he said. “We won’t have it in a way that’s losing money in that fashion and isn’t managed.”