Promises of unlimited or endless anything at a restaurant chain can seem like a good deal for customers.
But for restaurants, maybe not.
For the seafood chain Red Lobster, an unlimited deal actually cost the company millions because it was too popular.
For over 18 years, Red Lobster has offered its famous “Endless Shrimp” deal — for $20, patrons can eat as much of its various styles of shrimp as they want during a limited-time, once-a-year promotion.
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This year, the chain (which is owned by parent company, Thai Union Group) decided to make the promotion a menu mainstay and offer the deal all day, every day, regardless of the month or date.
The result? A nearly $11 million profit loss in Q3 2023.
“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.
The plan was to increase foot traffic during Q3 and Q4, which grew 4% year over year, but profits fell as the majority of those customers coming into eat were opting in for the cheaper deal.
“Something, which was different from our expectations, is the proportion of the people selecting this promotion was much higher compared to expectation,” Garnier said. “It’s one of the iconic promotions for Red Lobster, so we want to keep it in the menu but, of course, 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.”
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It’s noted that the price of the endless deal was raised from $20 to $22, and now is being offered for $25.
Garnier cited the promotion as a “key reason” for Red Lobster’s net loss in Q3 and the company is now looking at an estimated $20 million loss in total for 2023.
Thai Union Group was down just over 14% year over year.
