Red Lobster's Ultimate Endless Shrimp Came Back To Bite It On The Tail
It turns out that endless shrimp is — believe it or not — just too much shrimp. In a way, Red Lobster conducted an interesting, on-the-pulse, drawn-out social experiment with its iconic Ultimate Endless Shrimp promotion. Earlier this year in June, Red Lobster added endless shrimp to its permanent menu. Before, the promotion had periodically graced the restaurant chain as a limited-time offering during the fall. This time around, the goal was to stimulate foot traffic, and the shrimp strategy was successful. Year-over-year traffic increased by 4%, reports Restaurant Business, all thanks to a flat fee of $20 for all-you-can-eat shrimp.
But, if it seems like too good of a deal to be true, that's because it is. Red Lobster succeeded in drawing more foot traffic, but practically giving away pounds of shrimp ended up (surprise) costing the chain more money than it earned — as in more than $11 million in operating losses. The restaurant chain's overall economic performance is actually worse off now than before. The solution? Endless Shrimp is staying on the daily menu, but now it costs $25. (Shrimp fans can relax.)
Everybody wins with a happy medium
Sky-high inflation has threatened the businesses' bottom lines and price-conscious customers' discretionary spending budgets. Red Lobster already shuttered eight low-performing locations in late 2022-early 2023. According to parent company Thai Union, Red Lobster took a hit of roughly $12.4 million in losses in Q3 2022, $7.8 million higher than the chain's losses in Q3 2021. Ultimate Endless Shrimp was part of a larger plan to recover from the COVID-19 pandemic by focusing on value deals.
Budget-friendly deals and higher menu prices have been two popular (yet seemingly diametrically opposed) strategies utilized by many restaurants to protect revenue. Price hikes have worked so far for Texas Roadhouse. However, these strategies aren't always successful in achieving desired business results. Chipotle saw same-store sales dip to 5.6% in Q4 2022 after a series of menu price hikes left even loyal customers weary. In February, the chain seemed ready to cool its jets on the price increases in 2023. Still, notably, it didn't seem anybody was complaining that Red Lobster's endless shrimp deal was "too expensive." On the contrary, raising the promotion price by $5 may be just the middle ground necessary to keep this beloved deal rolling.
The longevity of the promotion is also likely affected by global seafood economics. The shrimping industry has recently been experiencing a shortage of workers and high shrimp prices, which were projected to stay that way for part of 2023.