Why Is There No Red Lobster In Massachusetts?
Editorial credit: George Sheldon / Shutterstock.com
Although Massachusetts is not the Lobster State, it is still very much associated with lobster, like the rest of New England. With the abundance of lobster and other edible marine life in the coastal waters of Massachusetts, it may surprise you that Red Lobster doesn’t operate here. But why is there no Red Lobster in Massachusetts?
There is no Red Lobster in Massachusetts due to the company pulling out of most of New England, a region where the company was always only marginally profitable, in the wake of two financial disasters, in 2003 and 2013. Local preference for small seafood joints has kept them from reopening here.
Although various factors play a role in keeping this famous seafood chain out of Massachusetts and New England as a whole, the most important is the abundance of fresh seafood options at small local restaurants offering traditional regional fare, which is stiff competition. Let’s examine these factors.
The Reason You Won’t Find Red Lobster In Massachusetts
Red Lobster is a famous and beloved seafood chain across much of the US and other parts of the world, with over 700 locations worldwide as of 2020. In the US, you will find Red Lobster locations in 44 states across the lower 48 and Hawaii.
However, despite New England being practically synonymous with fresh seafood, the chain has no presence in Vermont, New Hampshire, Maine, Massachusetts, or Rhode Island. You will only find it in New England at four locations in Connecticut. But why should this be the case?
The answer to why you don’t find Red Lobster in Massachusetts is the Endless Crab debacle, which was nearly a death blow for the chain.
The Endless Crab Disaster That Almost Finished Red Lobster
Since Bill Darden and Charley Woodsby founded Red Lobster at a single location in Lakeland, Florida, in 1968, the company has flourished, expanding across most of the US and many Canadian provinces. General Mills acquired the company in 1970, and in 1995 it became part of Darden Restaurants, along with Olive Garden and other chains.
For a long time, the company was financially sound and earned a lot from people’s demand for good seafood, particularly in inland locations. However, they never attempted to enter British Columbia, Alaska, or Maine, due to the quality of fresh fish and lobster in these areas giving competitors an edge.
Red Lobster exited Quebec in 1997 due to financial losses, presumably from local competitors outperforming them. This pullout gives some insight into their reasons for pulling out of Massachusetts and other New England states but is not the whole story.
Along their growth path from a single restaurant to an industry-dominating behemoth, Red Lobster has introduced events such as their periodical lobster promotional event, Lobsterfest, and a limited all-you-can-eat buffet of the cheapest seafood items.
It wouldn’t be viable to put an expensive seafood item on such a buffet and let people gorge themselves sick. But this is precisely the mistake that Red Lobster made in 2003 with their Endless Crab promotion, which offered all-you-can-eat snow crab legs.
Snow crabs are slow-growing and are difficult or impossible to farm. As a result, the company sources them from fishing vessels in the Bering Sea off Alaska, which makes them costly.
However, then-CEO Edna Morris, whose background was in steakhouses, calculated that a $22.99 all-you-can-eat buffet on snow crab legs (as opposed to the standard $14.99 for such a buffet) would be profitable, even if customers ate two plates of crab legs.
However, customers ended up skipping every other menu item and gorging themselves on three, even four, plates of crab legs. They also had to take a long time to crack them open, which resulted in customer capacity per hour slowing down too much, resulting in diminished profits.
Because snow crab is wild caught, the US government regulates how much fishermen may harvest to prevent over-harvesting. Demand increased as people ate more crab legs, and the government lowered the catch quota to protect the wild populations, leading to lower supply. High demand and low supply led to prices rising.
Red Lobster had to carry on buying snow crab at increasingly exorbitant prices, all while people were consuming large quantities. As a result, the company’s balance sheet soon looked highly unhealthy.
In one trading session, the company shed $405.9 million in stock and experienced a $3.3 million loss in the third quarter. Because profit margins are low in the restaurant industry, such losses were terrible. Wall Streets analysts downgraded the stock, leading to a mass selloff of shares, and the company lost $400 million in stock value in a single week.
After seven disastrous weeks, the company shelved the promotion. Edna Morris was forced to step down as CEO, and Red Lobster nearly went bankrupt. The holding company, Darden Restaurants, survived thanks to the sister chain Olive Garden still going strong.
However, Red Lobster had to find ways to trim costs to survive. One way they did it was by closing operations in locations with already marginal profits.
More recently, in 2013, Red Lobster overspent on a digital platform and again ran into financial difficulties. These monetary woes led to Darden Restaurants selling the chain to Golden Gate Capital in 2014 and further closing some locations.
Why Red Lobster Pulled Out Of New England Locations
Red Lobster specifically pulled out of New England because their profit margin was always slimmer in this region. This narrow margin was thanks to competition from small local restaurants offering authentic New England seafood fare and regional chains such as Papa Gino’s and Legals Seafood.
These competitors all source their seafood locally, with the lobster, mollusks, and fish coming from the fishing vessels to the docks and only being transported a short distance to the restaurants where it is served.
Red Lobster Ships Seafood Long Distances For Processing
Red Lobster, a giant chain servicing many locations across the US, most of which are inland, has centralized its seafood processing operations at a facility in Ohio.
As a result, fish, crabs, and mollusks caught fresh in coastal New England waters (and other places such as Alaska) must be frozen and transported long distances to the Ohio processing plant. For the record, lobsters from the various locations that Red Lobster sources are shipped live and placed into tanks in their restaurants to be boiled upon your order.
These long transport distances for fish, crabs, and mollusks impact the quality and freshness of the seafood. Consequently, Red Lobster cannot compete in excellence with the local restaurants and regional chains, and the locals favor these when dining out on seafood.
When they were forced to extreme measures to salvage the company from potential bankruptcy, they chose to pull out of marginal locations such as Massachusetts.
So, in summary, Red Lobster was always operating on marginal profits in New England, and the snow crab debacle and later overspending on a digital platform caused financial woes. As a result, they pulled out of locations where they weren’t very competitive, which included Massachusetts.