Red Lobster’s Endless Crab Disaster

Red Lobster is an American restaurant chain. Founded in Florida in 1968, Red Lobster is, as the name suggests, primarily a seafood restaurant, although it also serves other dishes. The chain has been successful and expanded (using the franchise model) to the extent that today it has over 700 locations, mostly in the USA and Canada, but there are also branches in Mexico, Japan and the Middle East. On its own website Red Lobster describes itself as the “world’s largest and most-loved seafood restaurant company.”

A Red Lobster restaurant in Yonkers, New York.

In 2003 Red Lobster offered an Endless Crab all-you-can-eat special which cost the chain millions of dollars and is today seen as a textbook example of a badly thought-out promotion which ends up costing the company money. The incident also highlighted how issues in the supply chain and wholesale price of seafood can adversely affect seafood retailers, and also led to questions being asked about the impact which all-you-can-eat seafood special offers have on wild stocks.

In the summer of 2003, Red Lobster announced its Endless Crab special offer at the 679 restaurants it had at the time. Endless Crab was meant entirely literally – customers could order as many plates of the popular snow crab dish as they wanted for the set price of $22.99. The company would make a profit if a customer ordered only one or two plates, but the offer became loss-making once a third plate was ordered. Red Lobster’s problems began when Endless Crab proved wildly successful (hardly surprising as crab was one of the chain’s most popular dishes) and the vast majority of customers ordered significantly more than three plates of crab.

Snow Crab Fishing
Commercial fishing for snow crab is highly regulated and fishermen must observe strict quotas.

To make matters worse the promotion had inexplicably been scheduled at a time when snow crab quotas were relatively low and wholesale prices were correspondingly high, with the newspaper USA Today reporting that wholesale prices were already at an expensive $4 per pound when the offer started and increased as it continued. A further issue was that crab legs are difficult and time-consuming to eat, with customers having to crack open the shells to get to the meat inside. This led to customers spending much longer than usual inside Red Lobster restaurants while they ordered loss-making plate after loss-making plate of crab, causing queues of frustrated customers to build up in many Red Lobster restaurants and preventing the chain from selling its other profit-making dishes.

With the tightly regulated US and Canadian crabbing industry unable to increase catches to supply the growing demand and bring down the wholesale price of snow crab, Red Lobster had to take action to try to turn the situation around. Franchise owners were permitted to increase the price from $22.99, but when this failed to stop losses the Endless Crab campaign was ended early. In that time the company had lost $3.3 million and the debacle was blamed for triggering a sell-off of shares in Red Lobster’s then-parent company Darden Restaurants, which saw its stock value fall by $405.9 million in the wake of the Endless Crab promotion. The blame for the failed offer fell on the chain’s president Edna Morris. She had joined Red Lobster from a popular steakhouse chain two years earlier, and many claimed that she failed to understand that the type of all-you-can-eat offers which are successful with large and filling steak and meat dishes would not work with smaller, higher value seafood such as crab. She left the company a short time after the Endless Crab promotion.

Red Lobster Meal
A crab meal at a Red Lobster restaurant.

While Endless Crab was a disaster for Red Lobster it underlined how seafood, being wild caught rather than farmed, is much more unpredictable in its availability and therefore also in price. Had snow crab quotas been at the same level as they were a few years previously, the wholesale cost of snow crab would have been much lower, and the Endless Crab offer may well have turned out to be a success. However, with low crab quotas, the wholesale price of snow crab was high, and Red Lobster was powerless to do anything about this. There are also issues regarding the responsibility of offering customers a limitless amount of a wild-caught animal which was (as it still is) being fished under strict quotas in order to preserve stocks for future generations. Indeed, other seafood retailers and restaurants in the US and Canada criticised Red Lobster for using so much of the available and limited snow crab quota to supply customers with Endless Crab and pushing the wholesale price higher for the rest of the market.

Today Red Lobster – as the biggest single seafood purchaser in the USA – has improved the sustainability of the seafood it sells. They are committed “to serve only Traceable, Sustainable and Responsibly-sourced seafood” and in 2018 partnered with the Monterey Bay Aquarium Seafood Watch® programme with current Red Lobster CEO Kim Lopdrup stating that they would “drive positive change in the industry and lead the way in sustainable and responsible seafood sourcing.”

The Endless Crab fiasco, however, lives long in the memory. It is often featured in top ten lists of the worst business and marketing decisions ever made and is used as an example of how a poorly planned promotion can backfire on a company. Clearly, the legal issues encountered by the Sea Captain and his Frying Dutchman restaurant in an episode of the Simpsons (which aired more than a decade before the Endless Crab promotion) should have acted as a warning to Red Lobster, who have yet to repeat any special offer involving unlimited crab.

Red Lobster
Red Lobster’s Ultimate Endless Shrimp offer ended in the same result as the Endless Crab promotion.

Update – 2023 Endless Shrimp Offer and 2024 Financial Issues: Twenty years after the Endless Crab disaster, Red Lobster again tried a similar promotion – with the same results. Red Lobster offered Ultimate Endless Shrimp for $20 as a limited-time promotion over the previous years, with the offer successfully attracting new customers. But in 2023 Ultimate Endless Shrimp was made permanently available. Like the Endless Crab promotion, this proved significantly more popular than Red Lobster predicted. While visitors increased by 4 per cent over the year, Red Lobster’s new parent company, the Thailand-based Thai Union, said that Red Lobster suffered “higher losses from operations than expected” in 2023. The company fell to an operating loss of $20 million over the year, with Ultimate Endless Shrimp being blamed for the majority of this loss. Soon after this was announced Red Lobster increased the price of the offer to $25 and removed it as a permanent fixture on the menu. However, in 2024 American news outlets such as Bloomberg and ABC reported that Red Lobster’s owners were attempting to renegotiate leases, cancel short-term contracts and may be considering filing for Chapter 11 bankruptcy to restructure its debts. The Ultimate Endless Shrimp offer was seen as a major contributing factor to this development. In May 2024, Red Lobster officially filed for bankruptcy.