Apparently, when Red Lobster promoted its Ultimate Endless Shrimp deal, the company had severely underestimated how much people love shrimp—and it cost the seafood restaurant a giant $11 million in quarterly operating losses.
According to the New York Times, Red Lobster’s “irresistible” all-you-can-eat shrimp promotion was a little too irresistible, so much so that the company was forced to raise the price to $25 from $20 after the popular promotion caused a drop in the restaurant chain’s third-quarter profit—which is generally the opposite of what a popular promotional offer is designed to do.
From the Times:
Thai Union Group, which owns a large stake in the chain, said in a third-quarter earnings call this month that the deal was in part to blame for an $11 million operating loss.
Red Lobster hoped the promotion would bolster traffic at its U.S. locations through fall and winter, when its restaurants tend to be the emptiest.
Ultimate Endless Shrimp had already been a Red Lobster “guest-favorite” staple for over 18 years. But the restaurant took it a step further this summer, offering the previously seasonal deal “all day, every day” instead of just on Mondays.
Obviously, Red Lobster learned nothing from that one episode of The Simpsons.
Ludovic Garnier, the chief financial officer of Thai Union Group, indicated that the corporation was taken completely by surprise by the fact that offering people an unlimited amount of seafood for $20 negatively affected the profits of a restaurant that primarily sells seafood. (*Googles educational credentials needed to become a chief financial advisor*)
“But something which was different from our expectations is the proportion of the people selecting this promotion was much higher compared to expectation,” Garnier told investors earlier this month.
As for the future of the way-too-generous promotion, Garnier indicated that the company hasn’t decided to do away with it completely.
“It’s one of the iconic promotions for Red Lobster, so we want to keep it on the menu,” he said. “But, of course, we need to be much more careful regarding what is the entry point and what is the price point.”
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