Company loses roughly $11M in third quarter
NEW YORK -- It was a simple plan. Business tends to slow down at Red Lobster locations during the third and fourth quarters, so its parent company, Thai Union, launched a new promotion.
For $20, customers could eat as much shrimp as they wanted. The promotion has been a tradition at the chain for more than 18 years, but in June the company announced that endless shrimp would become a permanent fixture on the menu.
"We knew the price was cheap. But the idea was to bring more traffic in the restaurants," Thai Union CFO Ludovic Garnier said in an earnings call earlier this month.
Turns out the plan turned out a little too well, the company said in its third quarter earnings. More customers took advantage of the seafood chain's "Ultimate Endless Shrimp" than expected - the key reason for the chain's roughly $11 million loss in the third quarter of 2023.
For $20, guests could choose two shrimps to start off with, and keep ordering from there. The options ranged from coconut shrimp, linguini alfredo to grilled shrimp skewers.
Red Lobster saw a traffic increase of 2% compared to last quarter, and 4% compared to the previous year. But the company didn't expect the proportion of customers choosing to participate in the deal to be as high.
"On this promotion, we don't earn a lot of money. At $22 we don't. The idea was to bring some traffic," Garnier said on the call.
It's become one of the most iconic promotions at Red Lobster, Garnier said, but to keep it on the menu there has to be some changes.
Red Lobster has been increasing its prices incrementally on the deal, first from $20 to $22, and now settling at $25.
"We need to be much more careful regarding, what is the entry point? And what is the price point we're offering for this promotion," Garnier said.
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