Red Lobster’s popular endless shrimp deal has hurt its bottom line
Red Lobster’s “irresistible” ad for unlimited shrimp is indeed hard to resist.
The Ultimate endless shrimp The deal was so popular that the restaurant chain suffered a decline in profits in the third quarter, forcing it to raise the price from $20 to $25.
Thai Union Group, which owns a major stake in the chain, said in a third-quarter earnings call this month that the deal was partly responsible for an operating loss of $11 million.
Red Lobster hoped the move would boost foot traffic at its U.S. locations in the fall and winter, when restaurants are typically emptiest.
Ultimate Endless Shrimp has been a Red Lobster guest favorite for over 18 years. But the restaurant took it a step further this summer, offering its previously seasonal offer “all day, every day” instead of just on Mondays.
Customers could choose two shrimp dishes from a menu that included shrimp Alfredo, served on a bed of linguine and a grilled shrimp skewer over rice.
“And when they’re ready for more,” according to an announcement for the promotion, “they can order additional shrimp until their cravings are fully satisfied.”
The offer did indeed create a small speed bump compared to last year, said Ludovic Garnier, Thai Union Group’s chief financial officer.
“But something that was different from our expectations is that the proportion of people who selected for this promotion was much higher than expected,” Mr Garnier told investors this month.
He said Ultimate Endless Shrimp was one of the “key reasons” for Red Lobster’s operating losses in the third quarter.
The miscalculation, which was first reported by the trade magazine Restaurant Businessled the company to raise the price from $20 to $22, and eventually 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 what the entry point is and what the price is.”
Still, he attributed the updated offering to the increase in guests, although, he explained, the company expected more benefits.
They hoped that the guests lured to their local Red Lobster by the deal would also be enticed by other menu items.
But too many were loyal to the endless shrimp.
“And that was completely unexpected, very different from any numbers we’ve seen before,” Mr Garnier said.
Perhaps too many people have heeded the advice contained in Red Lobster’s own promotional materials: “Insider Tip: Don’t get the extra biscuit, leaving room for endless amounts of shrimp.”
Susan Beachy research contributed.